Question

Anne, Allyn and Anita are partners sharing profits and losses in 5: 3: 2 ratio. Anita retires from the business. On Anita’s retirement, the respective capitals of Anne and Allyn are Rs. 38,000 and Rs. 24,000 after making all adjustments. The new profit sharing ratio between Anne and Allyn will be equal. It was decided that the capital of the new rm will be Rs. 70,000 and it will be in the new profit sharing ratio. The partners will bring in additional capital or withdraw the excess capital as the case may be. Calculate the amount of capital to be brought in or withdrawn by Anne and Allyn and also draw the necessary journal entries for the same.

Answer 1

Total capital of the new firm = Rs. 70,000 

New ratio = 1: 1 

New Capital of Anne = 70,000 x \(\frac{1}{2}\) = 35,000 

New capital of Allyn = 70,000 x \(\frac{1}{2}\) = 35,000

Required capital of Anne = 35000 

Balance existing in account = 38000 

Surplus capital withdraw by Anne = +3000 

Required capital of Allyn = 35000 

Balance existing in account = 24000 

Amount to be brought in by Allyn = -11000

Journal