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Question
A and B are in partnership sharing profits and losses as 3 : 2. C is admitted for 1/4th share. Afterwards D enters for 20 paise in the rupee. Compute profit-sharing ratio of A, B, C and D after D's admission.
Solution
Old Ratio = A : B = 3 : 2
C’s admitted for `1/4` share of profit
Let the combined share of profit of all partners be = 1
Combined share of A and B after C’s admission = 1 − C’s share
= 1 - `1/4 = 3/4`
New Ratio = Old Ratio × Combined share of A and B
A's = `3/5 xx 3/4 = 9/20`
B's = `2/5 xx 3/4 = 6/20`
New Profit Sharing Ratio after C's admission = A : B : C
= `9/20 : 6/20 : 1/4`
= `[9 : 6 : 5]/20` = 9 : 6 : 5.
Profit sharing ratio after C’s admission will become old ratio to determine the ratio after D’s admission
Ratio before D's admission = A : B : C = 9 : 6 : 5
D is admitted for `20/100` share of profit
Let combined share of all partners after D’s admission = 1
Combined share of A, B and C after D’s admission = 1 − D’s share
= 1 - `20/100`
=`80/100`
New Ratio = Old Ratio × Combined share of A, B, and C
A's = `9/20 xx 80/100 = 72/200`
B's = `6/20 xx 80/100 = 48/200`
C's = `5/20 xx 80/100 = 40/200`
New Profit Sharing ratio after C's admission = A : B : C : D
= `72/200 : 48/200 : 40/200 : 20/100`
= `[72 : 48 : 40 : 40]/200`
= 9 : 6 : 5 : 5.
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Balance Sheet of A and B as on March 31, 2016 |
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Liabilites |
Amount (Rs) |
Assets |
Amount (Rs) |
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Sundry creditors |
41,500 |
Cash at Bank |
26,500 |
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Reserve fund |
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Capital Accounts |
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Land & Building |
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91,500 |
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Liabilites |
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||
|
Creditors |
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9,000 |
Land and Buildings |
24,000 |
|
|
Bills Payable |
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3,000 |
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Capital Accounts |
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Stock |
14,000 |
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Arun |
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Cash |
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55,000 |
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