Naresh, David and Aslam are partners sharing profits in the ratio of 5:3:7. On April 1st, 2012, Naresh gave a notice to retire from the firm. David and Aslam decided to share future profits in the ratio of 2:3. The adjusted capital accounts of David and Aslam show a balance of Rs. 33,000 and Rs. 70,500 respectively. The total amount to be paid to Naresh is Rs. 90,500. This amount is to be paid by David and Aslam in such a way that their capitals become proportionate to their new profit sharing ratio. Pass necessary journal entries for the above transactions in the books of the firm. Show your working clearly.
David’s Capital = 33,000
Aslam’s Capital = 70,500
Naresh to be paid = 90,500
Total Capital of new firm = 1, 94,000
David’s New Capital = 1,94,000 x 2/5 = 77,600
Aslam’s New Capital=` 1,94,000 x 3/5 = 1,16,400