Please describe of current a/c at second point in this question
Dear Student
In the second point, it has been given that the capital accounts of the partners are to be adjusted as per the profit sharing ratio by opening current account of partners. This simply means that the balances in capital accounts of the partners shall be in profit sharing ratio ,
Adjustment would be done as follows :
From the above table we can see the amount to be transferred to current account of the partners and as a result C and D would have debit balance in their current account and A and B has Credit balance in their capital account.
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In the second point, it has been given that the capital accounts of the partners are to be adjusted as per the profit sharing ratio by opening current account of partners. This simply means that the balances in capital accounts of the partners shall be in profit sharing ratio ,
Adjustment would be done as follows :
| Total Capital of the firm | 1,010,000 |
| New PSR (A:B:C:D) | 4:3:2:1 |
| A's New Capital (1010000*4/10) | 404,000 |
| B's New Capital (1010000*3/10) | 303,000 |
| C's New Capital (1010000*2/10) | 202,000 |
| D's New Capital (1010000*1/10) | 101,000 |
| Adjustment of Capital A/c | New Capital | Old Capital | Transferred to Current A/c |
| A's Capital A/c | 404,000 | 200,000 | 204,000 |
| B's Capital A/c | 303,000 | 250,000 | 53,000 |
| C's Capital A/c | 202,000 | 250,000 | (48,000) |
| D's Capital A/c | 101,000 | 310,000 | (209,000) |
From the above table we can see the amount to be transferred to current account of the partners and as a result C and D would have debit balance in their current account and A and B has Credit balance in their capital account.
Hope this helps, Please get back to us if you have any query.
Keep posting
Regards