Sometimes, after the admission of the new partner, all the partners may decide to make their capital proportionate to the new profit sharing ratio or any other ratio. In this case, the base capital determined at first and the adjustments are done accordingly.
If the new partner's capital is taken as the base, the other old partners' capitals are calculated and due adjustments (withdrawals/introduction) of capital are done.
Again if the combined capital of old partners is taken as the base, firstly, the total capital of the new firm is calculated as per profit sharing ratio and then only the new partner's capital to be brought in is determined.
Journal entries are as follows:
In case of deficiency of capital:
Cash A/C....................Dr.
To partner's capital A/C
(Being shortage of capital brought in by........in cash)
In case of excess over new capital:
Partners' capital A/C..................Dr.
To Cash A/C
or
Partners' current/loan A/C
( Being excess capital withdrawn by..../transferred to current/loan A/C)
Note: In the absence of any agreement, deficiency or surplus should be adjusted in cash, not by transferring current account.