A and B are partners. C is admitted with 1/5 share. C brings ₹1,20,000 as his share towards capital. What is the total net worth of the firm?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹6,00,000.
To find the total net worth of the firm, we need to understand that C's 1/5 share corresponds to the capital he brought in. This means that the ₹1,20,000 represents 1/5 of the total net worth of the firm.
So, the total net worth = Capital brought in by C x Reciprocal of his share
= 1,20,000 x 5/1
= 6,00,000
So, the total net worth of the firm is ₹6,00,000.