Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Admission of a Partner

Question:

Read the text and answer the question :

Suresh and Dinesh were partners in a fast-food corner sharing profits and losses in ratio 3:2. They sold fast food items across the counter and did home delivery too. Their initial fixed capital contribution was ₹1,20,000 and ₹80,000 respectively. At the end of first year their profit was ₹1,20,000 before allowing the remuneration of ₹3,000 per quarter to Suresh and ₹2,000 per half year to Dinesh. Such a promising performance for first year was encouraging, therefore, they decided to expand the area of operations. For this purpose, they needed a delivery van, a few Scooties and an additional person to support. Six months into the accounting year, they decided to admit Rajesh as a new partner and offered him 20% as a share of profits along with monthly remuneration of ₹2,500. Rajesh was asked to introduce ₹1,30,000 for capital and ₹70,000 for premium for goodwill. Besides this Rajesh was required to provide ₹1,00,000 as loan for two years.  Rajesh readily accepted the offer. The terms of the offer were duly executed and he was admitted as a partner.

Upon the admission of Rajesh, the sacrifice for providing his share of profits would be done by whom?

Options:

Suresh only

Suresh and Dinesh in the ratio of 2:3

Suresh and Dinesh equally

Suresh and Dinesh in the ratio of 3:2

Correct Answer:

Suresh and Dinesh in the ratio of 3:2

Explanation:

The correct answer is option 4- Suresh and Dinesh in the ratio of 3:2.

Share of Rajesh = 20% or 1/5th.
In the absence of any information, Suresh and Dinesh will sacrifice their share in the old profit sharing ratio.

Sacrifice of Suresh = 3/5 x 1/5
                             = 3/25

Sacrifice of Dinesh = 2/5 x 1/5
                             = 2/25

Therefore, sacrificing ratio is 3:2.