Nandan,John and Rosa are partners sharing profits inthe ratio of 4:3:2. On 1st April 2012,John gave a notice to retire from the firm. Nandan and Rosa decided to share future profits in the ratio of 1:1. The capital of Nandan and Rosa after all adjustments showed a balance of Rs 43,000 and Rs 80,500 respectively.

The total amount to be paid to John was Rs 95,500. This amount was to be paid by Nandan and Rosa in such a way that their capital become propor tionate to their new profit sharing ratio. Pass necessary journal entries in the books of the firm for the above transactions. Show your working notes clearly.

  Journal Entry
Date Particulars L.F. Debit Amount
Credit Amount
  Bank A/c Dr.   95,500  
    To Nandan’s Capital A/c       66,500
    To Rosa’s Capital A/c       29,000
  (Cash brought in by Nnadan and Rosa to pay the John, retiring partner)        

Working Notes:
Capital of the Firm after John's Retirement = Rs 1,23,500 (Nandan-Rs 43,000+Rosa-Rs 80,500)
New Ratio = 1:1
Shortage of Cash to be brought in by Nandan and Rosa in order to pay cash to John = Rs 2,19,000 (Rs 1,23,000+Rs95,500)
New Capital of Nandan = Rs 1,09,500 (Rs 2.19,000*1/2)
New Capital of Rosa = Rs 1,09,500 (Rs 2.19,000*1/2)
Calculation of Cash to be brought  in by Nandan = Rs 66,500 (Rs 1,09,500-Rs 43,000)
Calculation of Cash to be brought in by Rosa = Rs 29,000 (Rs 1,09,500-Rs 80,500)

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