The Balance Sheet of Mohit, Neeraj and Sohan who are partners in a firm sharing profits according to their capitals shows the capital balance of Rs. 80,000, Rs 40,000 and Rs. 40,000 respectively as on March 31, 2025. On this date, Neeraj decided to retire from the firm and was paid for his share in the firm and it was decided that the new capital of the firm would be fixed at Rs. 1,20,000. The capital account of Mohit and Sohan after all the necessary adjustments showed the credit balance of Rs. 82,000 and Rs. 41,000 respectively. How much capital Sohan needs to bring in or withdraw so as to keep the capital balance as per the requirement of the newly constituted firm ?

Sohan will withdraw Rs 1,000.

Correct answer: Option (3) → Sohan will withdraw Rs 1,000.

Concept: When the continuing partners fix the total capital of the reconstituted firm, each partner’s required capital is found from the new ratio, and the surplus is withdrawn / the deficit brought in – per Reconstitution of a Partnership Firm – Retirement/Death of a Partner.

Partners share profits in their capital ratio; after Neeraj retires, Mohit : Sohan = 80,000 : 40,000 = 2 : 1.
New total capital = Rs 1,20,000, so Sohan’s required capital = 1,20,000 × 1/3 = Rs 40,000.
Sohan’s adjusted balance = Rs 41,000.
Surplus = 41,000 – 40,000 = Rs 1,000, which Sohan will withdraw.