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A new partner brings ₹70,000 capital for a \(1/4\) share in the firm. Assuming the capital is contributed in proportion to the profit-sharing ratio, what is the estimated total capital of the firm?

Answer and explanation

Correct answer: ₹2,80,000

The new partner’s capital represents \(1/4\) of the firm’s estimated total capital. Therefore, total capital = ₹70,000 ÷ \(1/4\) = ₹2,80,000. Multiplying ₹70,000 by \(1/4\) would give ₹17,500, which is not the total capital. Exam tip: To find the whole amount when a partner’s capital for a specific share is given, divide that capital by the share.

Related tags

Estimated CapitalHidden GoodwillPartner AdmissionNumerical AccountingGoodwill AccountingReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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