Naresh, Dhruv and Azeem are partners sharing profits in the ratio of 5 : 3 : 7. Naresh retires from the firm. Dhruv and Azeem decided to share profits in the ratio of 2 : 3. The adjusted capital accounts of Dhruv and Azeem at the time of Naresh’s retirement showed the balances of ₹ 33,000 and ₹ 70,500 respectively.

The total amount to be paid to Naresh is ₹ 90,500 which is paid in cash immediately by the firm, the cash being contributed by Dhruv and Azeem in such a way that their capitals become proportionate to their new profit sharing ratio and the firm maintains a minimum cash balance of ₹ 5,000 from its existing balance of ₹ 20,000.

You are required to pass Journal entries to record:

(a) Payment made to the retiring partner:

(b) Cash brought in by the remaining partners to pay off the retiring partner.

Anurag Pathak Changed status to publish March 3, 2024
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