A, B and C were partners in a firm. Their capitals were A Rs 1,00,000, B Rs 2,00,000 and C Rs 3,00,000 respectively on 1st April, 2013. According to the partnership deed they were entitled to an interest on capital @ 5% p.a. In addition A was also entitled to draw a salary of Rs 5,000 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital but before charging the salary payable to A. The net profits for the year ending 31st March, 2014 were Rs 3,60,000 distributed in the ratio of their capitals without providing for any of the above adjustments. The profits were to be shared in the ratio 2 : 3 : 5. Pass the necessary adjustment entry showing the workings clearly.
Dear Student,
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| Journal | ||||
| Particulars | L.F. | Debit Rs |
Credit Rs |
|
| B’s Capital A/c | Dr. | 33,950 | ||
| C’s Capital A/c Dr. | 21,750 | |||
| To A’s Capital A/c | 55,700 | |||
| (Adjustment entry made) | ||||
| Particulars | A | B | C | Total |
| Interest on capital | 5,000 | 10,000 | 15,000 | 30,000 |
| Salary | 60,000 | 60,000 | ||
| Commission (3, 60,000-30,000=3, 30,000 5%) | 16,500 | 16,500 | ||
| Profit(3,60,000-30,000-60,000-16,500) in 2:3:5 | 50,700 | 76,050 | 1,26,750 | 2,53,500 |
| Amount should be credited | 1,15,700 | 86,050 | 1,58,250 | 3,60,000 |
| Amount credited ( Rs.3,60,000 in 1:2:3) | 60,000 | 1,20,000 | 1,80,000 | 3,60,000 |
| Net Effect | 55,700 (Cr) | 33,950 (Dr) | 21,750 (Dr) | NIL |
Regards