Page No 2.95
Question 71;
On 31st March, 2018 the balance in the Capital Accounts of Abhir, Bobby and Vineet, after making adjustments for profits and drawings were `8,00,000, `6,00,000 and `4,00,000 respectively.
Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 10% p.a. and were to be charged interest on drawings @ 6% pa. The drawings during the year were: Abhir- `20,000 drawn at the end of each month, Bobby- `50,000 drawn at the beginning of every half year and Vineet- `1,00,000 withdrawn on 31st October, 2017.The net profit for the year ended 31st March, 2018 was `1,50,000.The profit-sharing ratio was 2 :2 : 1.
Pass necessary adjusting entry for the
above adjustments in the books of the firm. Also, show your workings
clearly. (CBSE
2019)
Answer;
|
Date |
Particulars |
|
L.F. |
Dr. ` |
Cr. ` |
|
31 March |
Bobby’s
Capital A/c To Abhir’s Capital
A/c To Vineet’s Capital
A/c (Being omission of salary , wrong interest on
capital credited , now profit corrected) |
|
Dr. |
14,402 |
10,112 4,290 |
|
|
Total |
|
|
24,660 |
24,660 |
Working
note;
Calculation
of opening Capital ;
|
Particulars |
Abhir |
Bobby |
Vineet |
|
Closing capital Add; drawings Less; Profit |
8,00,000 2,40,000 60,000 |
6,00,000 1,00,000 60,000 |
4,00,000 1,00,000 30,000 |
|
Opening capital |
9,80,000 |
6,40,000 |
4,70,000 |
|
Interest on Capital @10p.a. |
98,000 |
64,000 |
47,000 |
Total
Interest on Capital= 98,000+64,000+47,000=2,09,000
Calculation
of opening Drawings;
Abhir= 20,000×12×6/100×5.5/12=6,600
Bobby= 50,000×2×6/100×9/12=4,500
Vineet = 1,00,000×6/100×5/12=2,500
Total interest on Drawing=13,600
Total profit after Interest on drawing=1,50,000+13,600=1,63,600
Interest on Drawing is `1,63,600 which is less than 2,09,000
therefore, Interest on capital can be given up to the
extent of Profit In the ratio of Interest on Capital
Ratio of Interest on capital is 98,000:64,000:4,7000=98:64:47
Abhir= 1,63,600×98/209 = 76,712
Bobby= 1,63,600×64/209 = 50,098
Vineet = 1,63,600×47/209 = 36,790
|
Statement
Adjustment |
|||
|
Particulars |
Abhir |
Bobby |
Vineet |
|
Interest on capital omitted Interest on Drawing omitted |
76,712 6,600 |
50,098 4,500 |
36,790 2,500 |
|
Net amount to be Credited Net loss of above omission |
70,112 60,000 |
45,598 60,000 |
34,290 30,000 |
|
Net effect |
10,112 |
14,402 |
4,290 |
|
Cr, |
Dr, |
Cr. |
|
Page No 2.95
Question 72:
On 31st March,
2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after
making adjustments for profits and drawings, etc., were ` 80,000, ` 60,000, ` 40,000 respectively.
Subsequently, it was discovered that the interest on capital and drawings has
been omitted.
(a) The profit for the year ended 31st March, 2014 was ` 80,000.
(b) During the year Saroj and Mahinder each withdrew a sum of ` 24,000 in equal
instalments in the end of each month and Umar withdrew ` 36,000.
(c) The interest on drawings was to be charged @ 5% p.a. and interest on
capital was to be allowed @ 10% p.a.
(d) The profit-sharing ratio among partners was 4 : 3 : 1.
Showing your workings clearly, pass the necessary rectifying entry.
(Delhi 2015)
Answer:
|
Journal |
||||
|
Particular |
L.F. |
Debit Amount |
Credit Amount |
|
|
Saroj’s Capital A/c |
Dr. |
|
2,350 |
|
|
Mahinder’s Capital A/c |
Dr. |
|
1,300 |
|
|
To Umar’s Capital A/c |
|
|
3,650 |
|
|
(Adjustment made) |
|
|
|
|
|
|
|
|
|
|
Working Notes:
|
Particular |
Saroj |
Mahinder |
Umar |
|
Closing
Capitals |
80,000 |
60,000 |
40,000 |
|
Add:
Drawings |
24,000 |
24,000 |
36,000 |
|
Less:
Profit Share |
40,000 |
30,000 |
10,000 |
|
Opening
Capital |
64,000 |
54,000 |
66,000 |
|
Particular |
Saroj |
Mahinder |
Umar |
Total |
|
Interest
on Capital @ 10% p.a. |
6,400 |
5,400 |
6,600 |
(18,400) |
|
Interest
on Drawings@ 5% p.a. |
(550) |
(550) |
(900) |
2,000 |
|
Profit (80,000 – 18,400 +
2,000) |
31,800 |
23,850 |
7,950 |
(63,600) |
|
Right
Share |
37,650 |
28,700 |
13,650 |
(80,000) |
|
Wrong
Share |
(40,000) |
(30,000) |
(10,000) |
80,000 |
|
Net Effect |
2,350 (Dr.) |
1,300 (Dr.) |
3,650 (Cr.) |
Nil |
|
|
|
|
|
|
Page No 2.95
Question 73:
Capitals of kajal,
Neerav and Alisha as on 31st March, 2021 amounted to ` 90,000,
` 3,30,000 and ` 6,60,000
respectively. Profit of
`1,80,000 for the year ended 31st March, 2021 was
distributed in the ratio of 4 : 1 : 1 after allowing interest on Capital @ 10%
p.a. During the year, each partner withdrew `3,60,000. The
Partnership Deed was silent as to profit-sharing ratio but provided for
interest on capital @ 12%.
Pass the necessary adjustment entry showing the working clearly.
Answer:
|
In the books of kajal, Neerav and Alisha Journal |
||||||
|
Date |
Particulars |
|
|
L.F. |
Debit Amount ( `) |
Credit Amount |
|
2020 Mar.31 |
|
|
|
|
|
|
|
|
To Neerav’s Capital A/c |
|
|
|
|
30,000 |
|
|
To Alisha’s Capital A/c |
|
|
|
|
36,000 |
|
|
(Being adjustment made for interest on capital and profits) |
|
|
|
|
|
Note: Since, there is
no provision of interest on drawings in the partnership deed so we will not
provide it.
Calculation of Opening Capital of the Partners:
|
Particulars |
Kajal |
Neerav |
Alisha |
|
Opening Capital |
x |
y |
z |
|
Interest on Capital @10%=10/100=0.1 |
0.1x |
0.1y |
0.1z |
|
Add: Profit |
1,20,000 |
30,000 |
30,000 |
|
Less: Drawings |
3,60,000 |
3,60,000 |
3,60,000 |
|
Closing Capital |
90,000 |
3,30,000 |
6,60,000 |
Calculation of Opening Capital
|
Kajal |
= |
x+0.1x+1,20,000-3,60,000=90,000 |
|
x |
= |
90,000+3,60,000-1,20,000/1.1 |
|
x |
= |
3,00,000 |
|
|
|
|
|
Neerav |
= |
y+0.1y+30,000-3,60,000=3,30,000 |
|
y |
= |
3,30,000+3,60,000-30,000/1.1 |
|
y |
= |
6,00,000 |
|
|
|
|
|
Alisha |
= |
z+0.1z+30,000-3,60,000=6,60,000 |
|
z |
= |
6,60,000+3,60,000-30,000/1.1 |
|
z |
= |
9,00,000 |
Note: Interest on
Capital is always computed on the opening capitals.
Statement Showing Adjustment:
|
Particulars |
kajal’s Capital
A/c |
Neerav’s
Capital A/c |
Alisha’s
Capital A/c |
Firm |
||||
|
|
Dr. ( `) |
Cr. ( `) |
Dr. ( `) |
Cr. ( `) |
Dr. ( `) |
Cr. ( `) |
Dr. ( `) |
Cr. ( `) |
|
Profits wrongly credited
in the ratio 4:1:1(Dr.) |
1,20,000 |
|
30,000 |
|
30,000 |
|
|
1,80,000 |
|
Interest on Capital
wrongly credited @10% p.a. (Dr.) |
30,000 |
|
60,000 |
|
90,000 |
|
|
1,80,000 |
|
Interest on Capital to be
provided @12% p.a. (Cr.) |
|
36,000 |
|
72,000 |
|
1,08,000 |
2,16,000 |
|
|
Profits to be credited in
the ratio 1:1:1 (Cr.) |
|
48,000 |
|
48,000 |
|
48,000 |
1,44,000 |
|
|
|
1,50,000 |
84,000 |
90,000 |
1,20,000 |
1,20,000 |
1,56,000 |
3,60,000 |
3,60,000 |
|
Balance to be adjusted |
66,000 (Dr.) |
30,000 (Cr.) |
36,000 (Cr.) |
NIL |
||||
Page No 2.95
Question 74:
Capital Accounts
of A and B stood at ` 4,00,000 and ` 3,00,000
respectively after necessary adjustments in respect of the drawings and the net
profit for the year ended 31st March, 2021. It was subsequently noticed that 5%
p.a. interest on capital and also drawings were not taken into account in
arriving at the distributable profit. The drawings of the partners had been: A
– ` 12,000 drawn at the
end of each quarter and B – ` 18,000 drawn at the end of each half year.
The profit for the year as adjusted amounted to ` 2,00,000. The partners share profits in the ratio of 3 : 2. You are
required to pass Journal entries and show adjusted Capital Accounts of the
partners.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L. F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
2020 |
P&L
Adjustment A/c |
Dr. |
|
29,200 |
|
|
Mar.31 |
To A's Capital A/c |
|
|
|
16,400 |
|
|
To B's Capital A/c |
|
|
|
12,800 |
|
|
(Interest
on capital omitted, now provided) |
|
|
|
|
|
|
|
|
|
|
|
|
|
A's
Capital A/c |
Dr. |
|
900 |
|
|
|
B's
Capital A/c |
Dr. |
|
450 |
|
|
|
To P&L Adjustment A/c |
|
|
|
1,350 |
|
|
(Interest
on drawings omitted, now charged) |
|
|
|
|
|
|
|
|
|
|
|
|
|
A's
Capital A/c |
Dr. |
|
16,710 |
|
|
|
B's
Capital A/c |
Dr. |
|
11,140 |
|
|
|
To P&L Adjustment A/c (29,200
– 1,350) |
|
|
27,850 |
|
|
|
(Loss
on adjustment is distributed between the partner) |
|
|
|
|
|
|
|
|
|
|
|
|
Partners’
Capital Accounts |
|||||||
|
Dr. |
Cr. |
|
|||||
|
Particulars |
A |
B |
Particulars |
A |
B |
|
|
|
B’s Capital A/c |
1,210 |
- |
Balance b/d |
4,00,000 |
3,00,000 |
|
|
|
|
|
|
A’s Capital A/c |
– |
1,210 |
|
|
|
Balance c/d |
3,98,790 |
3,01,210 |
|
|
|
|
|
|
|
4,00,000 |
3,01,210 |
|
4,00,000 |
3,01,210 |
|
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of
Capital as on April 01, 2019 (Opening Capital)
|
Particulars |
A |
B |
Total |
|
Capital as on March 31,
2020 (Closing) |
4,00,000 |
3,00,000 |
7,00,000 |
|
Add: Drawings |
48,000 |
36,000 |
84,000 |
|
Less: Profit (3:2) |
(1,20,000) |
(80,000) |
(2,00,000) |
|
Capital as on April 01,
2019 (Opening) |
3,28,000 |
2,56,000 |
5,84,000 |
|
|
|
|
|
WN 2 Calculation on Interest on Capital
Interest on A’s capital=3,28,000×5/100=16,400
Interest
on B’s capital=2,56,000×5/100=12,800
WN 3 Calculation of Interest on Drawings
Interest on A’s Drawing =48,000×5/100×4.5/12=900
Interest
on B’s Drawing =36,000×5/100×3/12=450
If instead of all entries,
adjustment entry is asked in the question
|
Journal |
|||||
|
Date |
Particulars |
L. F. |
Debit Amount ( `) |
Credit Amount ( `) |
|
|
|
A’s Capital A/c |
Dr. |
|
1,210 |
|
|
|
To B’s Capital A/c |
|
|
1,210 |
|
|
|
(Amount of interest on
Capital and interest on drawings adjusted) |
|
|
|
|
|
|
|
|
|
|
|
Working Notes: Statement
Showing Adjustment
|
Statement
Showing Adjustment |
|||
|
Particulars |
A |
B |
Total |
|
Interest on Capital (to be
credited) |
16,400 |
12,800 |
29,200 |
|
Less: Interest on Drawings |
(900) |
(450) |
(1,350) |
|
Right distribution of ` 27,850 |
15,500 |
12,350 |
27,850 |
|
Less: Wrong Distribution of ` 27,850 (3 : 2) |
(16,710) |
(11,140) |
(27,850) |
|
Net Effect |
(1,210) |
1,210 |
NIL |
|
|
|
|
|
Page No 2.96
Question 75:
The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for same years. Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit-sharing ratio should come into effect retrospectively were for the three years. Harry and Porter have agreement on this account. The profits for the last three years were:
|
Year |
2019 |
2020 |
2021 |
|
Profit (
`) |
2,20,000 |
2,40,000 |
2,90,000 |
Show
adjustment of profits by means of a single adjustment Journal entry.
Answer:
Journal (Adjusting entry)
|
Date |
Particular |
L.F |
Debit Amount |
Credit Amount |
|
|
|
Harry's Capital A/c |
Dr. |
|
50,000 |
|
|
|
Porter's Capital A/c |
Dr. |
|
50,000 |
|
|
|
To Ali's Capital A/c |
|
|
|
1,00,000 |
|
|
(Profit
adjusted due to change in profit sharing ratio) |
|
|
|
|
Distribution of Profit
|
Old Ratio (2:2:1) |
Harry |
Porter |
Ali |
|
Total |
|
2015 – 16 |
(88,000) |
(88,000) |
(44,000) |
= |
(2,20,000) |
|
2016 – 17 |
(96,000) |
(96,000) |
(48,000) |
= |
(2,40,000) |
|
2017 – 18 |
(1,16,000) |
(1,16,000) |
(58,000) |
= |
(2,90,000) |
|
Total Profit of
3 years in old ratio |
(3,00,000) |
(3,00,000) |
(1,50,000) |
= |
(7,50,000) |
|
Distribution of
3 years profit in new Ratio (1 : 1 : 1) |
2,50,000 |
2,50,000 |
2,50,000 |
= |
7,50,000 |
|
Adjusted Profit |
(50,000) |
(50,000) |
1,00,000 |
|
NIL |
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