Madan and Mohan are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2023, they admitted Chintu for 1/5th share in the profits of the firm, who contributes ₹ 2,50,000 as capital for 1/5th share.
Madan and Mohan are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2023, they admitted Chintu for 1/5th share in the profits of the firm, who contributes ₹ 2,50,000 as capital for 1/5th share. The capital of Madan and Mohan after adjustment is ₹ 6,50,000 and ₹ 3,50,000 respectively. Capital accounts of old partners are to be adjusted on the basis of the proportion of Chintu’s capital to his share in the business.
Calculate the amount of cash to be paid or brought by the old partners for this purpose.
Anurag Pathak Changed status to publish July 18, 2023
Total capital of new firm = ₹ 2,50,000 × 5/1 = ₹ 12,50,000
Madan’s new capital = ₹ 12,50,000 × 12/25 = ₹ 6,00,000
Mohan’s new capital = ₹ 12,50,000 × 8/25 = ₹ 4,00,000
| Particulars | Madan (₹) | Mohan (₹) |
| a) New Capital | 6,00,000 | 4,00,000 |
| b) Adjusted old capital | 6,50,000 | 3,50,000 |
| c) Cash to be brought in (cash to be paid) | (50,000) | 50,000 |
Let the total share be 1
Chintu’s share = 1/5
Remaining share = 1 – 1/5 = 4/5
New Share of Madan = 4/5 × 3/5 = 12/25
New Share of Mohan = 4/5 × 2/5 = 8/25
New Profit sharing Ratio 12 : 8 : 5
Anurag Pathak Changed status to publish July 18, 2023
