A and B are partners in a firm sharing profits in the ratio 2 : 1. C is admitted into the firm with 1/4 share in profits. He will bring in ₹30,000 as capital and capitals of A and B are to be adjusted in the profit sharing ratio. The balance sheet of A and B as on March 31, 2017 (before C's admission ) was as under :
Balance Sheet of A and B as at March 31,2017
| Liabilities | Amount (Rs) | Assets | Amount (Rs) |
| Creditors | 8,000 | Cash in hand | 2,000 |
| Bills payable | 4,000 | Cash at Bank | 10,000 |
| General Reserve | 6,000 | Sundry Debtors | 8,000 |
| Capital : A 50000 B 32000 |
82,000 | Stock | 10,000 |
| Furniture | 5,000 | ||
| Machinery | 25,000 | ||
| Building | 40,000 | ||
| 1,00,000 | 1,00,000 |
Other terms of agreement are as under :
1. C will bring in ₹12,000 as his share of goodwill.
2. Building was valued at ₹45,000 and Machinery at ₹23,000
3. A provision for bad debts is to be created @6% in debtors.
4. The capital accounts A and B are to be adjusted by opening current accounts.
Calculate the current account balances of A and B respectively.
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹3,680 and ₹8,840.
CAPITAL ACCOUNT OF PARTNERS
| PARTICULARS | A | B | C | PARTICULARS | A | B | C |
| To current A/c (bal fig) |
3,680 | 8,840 | By bal b/d | 50,000 | 32,000 | ||
| To bal c/d | 60,000 | 30,000 | 30,000 | By general reserve | 4,000 | 2,000 | |
| By profit on revaluation | 1,680 | 840 | |||||
| By cash | 30,000 | ||||||
| By premium of goodwill | 8,000 | 4,000 | |||||
| 63,680 | 38,840 | 30,000 | 63,680 | 38,840 | 30,000 |
C's SHARE =1/4
Total capital of the firm on C's share basis = 30,000 x 4
= 1,20,000
New ratio = 2:1:1
A's new capital = 1,20,000 x 2/4
= 60,000
B's new capital = 1,20,000 x 1/4
= 30,000