A and B are partners sharing profits in the ratio of 2:1. C is admitted into the firm for 1/4 share of profits. C brings in Rs. 20,000 in respect of his capital. The capitals of old partners A and B, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 45,000 and Rs. 15,000 respectively. It is agreed that partners' capitals should be according to the new profit sharing ratio. A's Capital in the new firm will be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 40,000
When the capitals are to be in the new profit sharing ratio and the new partner’s capital is given, his capital is the base: it tells us the capital of the whole firm, and each partner’s capital is his share of that total.
C takes 1/4; the remaining 3/4 is shared by A and B in 2:1
A’s new share = 3/4 × 2/3 = 6/12 = 2/4; B’s new share = 3/4 × 1/3 = 3/12 = 1/4
New ratio A : B : C = 2 : 1 : 1
Total capital of the new firm = Rs. 20,000 × 4/1 = Rs. 80,000
A’s capital = Rs. 80,000 × 2/4 = Rs. 40,000
A’s present capital of Rs. 45,000 is therefore Rs. 5,000 more than required, and B (Rs. 15,000 against Rs. 20,000 required) must bring in Rs. 5,000.
NCERT (2026-27 edition):
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