A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1 with Capitals of ₹ 70,000; ₹ 60,000 and ₹ 40,000 respectively. D is admitted in the firm for 1/4th share in profits, which he acquires 1/8th from A and 1/8th from B

A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1 with Capitals of ₹ 70,000; ₹ 60,000 and ₹ 40,000 respectively. D is admitted in the firm for 1/4th share in profits, which he acquires 1/8th from A and 1/8th from B. D bring in ₹ 60,000 as his capital and ₹ 32,000 for his share of goodwill in cash. 3/4th of the amount of goodwill was withdrawn by A and B. The Capitals of the partners in the new firm are to be adjusted in profit sharing ratio on the basis of D’s Capital and excess or deficit capital to be adjusted in cash.

Prepare necessary journal entries, Capital Accounts of the partner’s and Cash Account.

[Ans. New Profit Sharing Ratio 9 : 5 : 4 : 6. Final Capitals A ₹ 90,000; B ₹ 50,000; C ₹ 40,000 and D ₹ 60,000. A brings in ₹ 16,000 and B withdraws ₹ 14,000. Cash Balance ₹ 70,000.]