Question : Hari and Kavi are partners sharing profits and losses in the ratio of 3: 2. They admit Ravi as a partner who contributes Rs. 30,000 as his capital for 1/5th share in the profits of the firm. It is decided that after Ravi's admission, the capitals of the Hari and Kavi will be adjusted on the basis of Ravi's share of capital in the business, and any surplus or deficiency to be adjusted through current accounts. Before any adjustments were made, the capitals of Hari and Kavi were: Rs. 59,000 and Rs. 35,000 respectively. At the time of Ravi's admission : (a) The firm's goodwill was valued at Rs. 40,000. (b) General Reserve was Rs.25,000. (c) Loss on revaluation of assets and liabilities was Rs.4,000. CHOOSE: The correct Journal entry for surplus and shortage
Option 1: Crediting Hari's current account by Rs 4,400 and debiting Kavi's current account Rs 1,400
Option 2: Debiting Hari's current account by Rs 4,400 and crediting Kavi's current account Rs 1,400
Option 3: Debiting Hari's current account Rs 4,400 and debiting Kavis current account Rs 1,400
Option 4: Crediting Hari's Current account Rs 4,400 and Crediting Kavi's current account Rs 1,400
Correct Answer: Crediting Hari's current account by Rs 4,400 and debiting Kavi's current account Rs 1,400
Solution : Answer = Crediting Hari's current account by Rs 4,400 and debiting Kavi's current account Rs 1,400
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Let total capital of the new firm be = 1
Ravi's share = 1/5
1/5 = 30,000
1= 30,000 x 5 = 150,000
Hari = 3/5 x 4/5 = 12/25 x 1,50,000 = 72,000
Kavi = 2/5 x 4/5 = 8/25 x 1,50,000 = 48,000
Ravi = 1/5 x 5/5 = 5/25 x 1,50,000 = 30,000 Hence, the correct option is 1.
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