59 :- Balance sheet of J and K who share profits in the ratio of 3:2 is as follows :
M joins the firm from 1st April, 2024 for half share in the future profits. He is to pay Rs 1,00,000 as goodwill and Rs 3,00,000 for capital. Draft the Journal entries and prepare Balance Sheet in each of the following cases:
(a) If M gets his share of profits in the profit-sharing ratio of the old partners.
(b) If M gets his share of profits in equal proportion from the old partners.
(c) If M gets his share of profits in the ratio of 3 : 1 from the old partners, determine the future profit sharing ratio of the partners in each case.
Solution :-
WORKING NOTES :-
Calculation of new profit sharing ratio
Let the total share be 1
M was admitted for 1/2
Remaining share 1/2
J’s new share = 3/5 – (1/2 x 3/5) = 3/5 – 3/10 = 3/10
K’s new share = 2/5 – (1/2 x 2/5) = 2/5 – 2/10 = 2/10
M’s share = 1/2 x 5/5 = 5/10
New PSR = 3:2:5
Sacrificing ratio = 3:2
