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Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner?
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Creditors Payment by Partner on Admission of a Partner
When a new partner is admitted to an existing partnership firm, certain adjustments are required to be made in the accounts of the firm. One such adjustment is the payment made by a partner to the creditors of the firm for which she is not to be reimbursed. Let's understand this adjustment in detail.
Explanation
- When a partner pays off the creditors of the firm, she is essentially reducing the liabilities of the firm. This will have an impact on the capital of the partners.
- If the partner is not to be reimbursed for this payment, it means that this payment is treated as her capital contribution to the firm.
- Therefore, on admission of a new partner, this payment made by the existing partner is added to the total capital of the firm.
- The new partner will then contribute her share of capital to the firm based on the agreed upon profit sharing ratio.
- Once the new partner's capital contribution is added to the total capital of the firm, the profit sharing ratio of all the partners will be adjusted accordingly.
- This adjustment is necessary to ensure that the new partner's share of profits and losses is in proportion to her capital contribution.
Example
Let's take an example to understand this adjustment:
- Existing partners A and B have a capital of ₹ 50,000 and ₹ 75,000 respectively. The firm has creditors of ₹ 8,000.
- Partner A pays off the creditors of the firm for which she is not to be reimbursed.
- Now, on admission of a new partner C with a capital of ₹ 1,00,000, the adjustment will be as follows:
- Partner A's capital will be increased by ₹ 8,000 to reflect her payment to the creditors.
- The total capital of the firm will now be ₹ 1,33,000 (50,000 + 75,000 + 8,000).
- Partner C will contribute ₹ 1,00,000 to the firm, bringing the total capital to ₹ 2,33,000.
- The profit sharing ratio of the partners will be adjusted to reflect their new capital contributions.
Thus, the adjustment for payment made by a partner to the creditors of the firm for which she is not to be reimbursed is a simple adjustment that needs to be made on admission of a new partner to ensure that the capital contributions and profit sharing ratios of all partners are adjusted accordingly.
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Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner?
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Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner?.
Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Creditors of ₹ 8000 were paid by partner for which she is not to be reimbursed.on admission of a partner?.
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