Partnership

Retirement/Death

Medium

common

Lalit, Pankaj and Rahul are partners sharing profits in the ratio of 4 : 3 : 3. After all adjustments, on Lalit's retirement with respect to general reserve, goodwill and revaluation etc., the balances in their capital accounts stood at Rs. 70,000, Rs. 60,000 and Rs. 50,000 respectively. It was decided that the amount payable to Lalit will be brought by Pankaj and Rahul in such a way as to make their capitals proportionate to their profit sharing ratio. After Lalit's retirement, the new profit sharing ratio between Pankaj and Rahul is 1:1. New Capital of the firm will be-

Rs. 1,80,000

Rs. 1,10,000

Rs. 90,000

Rs. 1,70,000

✅ Correct Option: 1

After all adjustments, the capital balances are:

Lalit: Rs. 70,000
Pankaj: Rs. 60,000
Rahul: Rs. 50,000

Lalit retires and needs to be paid Rs. 70,000. This amount will be brought in by Pankaj and Rahul.

Since the new profit sharing ratio is 1:1, Pankaj and Rahul's capitals must be equal after bringing in the required amount.

Let Pankaj bring Rs. $x$ and Rahul bring Rs. $y$

After bringing money:

Pankaj's capital = Rs. $(60,000 + x)$
Rahul's capital = Rs. $(50,000 + y)$

Condition 1: Total amount brought in must equal Lalit's dues

$x + y = 70,000$ ...(i)

Condition 2: Their capitals must be equal (ratio 1:1)

$60,000 + x = 50,000 + y$

$x - y = -10,000$

$y = x + 10,000$ ...(ii)

Substituting (ii) in (i):

$x + (x + 10,000) = 70,000$

$2x = 60,000$

$x = 30,000$

Therefore: $y = 40,000$

After bringing in capital:

Pankaj's capital = Rs. 60,000 + Rs. 30,000 = Rs. 90,000
Rahul's capital = Rs. 50,000 + Rs. 40,000 = Rs. 90,000

New Capital of the firm = Rs. 90,000 + Rs. 90,000 = Rs. 1,80,000

The capitals are now equal (in ratio 1:1) and the total amount brought in (Rs. 70,000) equals Lalit's payment.

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