1- A, B and C are partners with capitals Rs. 50,000, Rs. 30,000 and Rs. 20,000 respectively.
According to partnership deed, interest on capital will be allowed @ 6% p.a. and interest on
drawings will be charged @ 9% p.a. Partners divide profit in the ratio of 3:2:1. C will be
given Rs. 5,000 as salary each year. During the year 2017-18, each partner withdrew in cash
Rs. 6,000, Rs. 5,000 and Rs. 6,000 respectively and B withdrew goods costing Rs. 2,000
which was not entered in the books. Trading profit for the year 2017-18 was Rs. 60,000 before
recording of salary, interest on capital and withdrawal of goods.
"repare Profit and Loss Appropriation Account for the year ended 31st March, 2018.
Answers
Answer:
Calculation of Interest on capital
A = 30000*5% = 1500
B= 20000*5% = 1000
C= 10000*5% = 500
Salary to B = 500*12=6000
Calculation of C's commission = 30000-3000 = 27000*5/100= 1350
Profits to be distributed= 30000-3000-6000-1350 = 19,650
The adjustment entry to be passed is as follows:-
A's Capital A/c Dr. 3675
To B's capital A/c 2895
To C's capital A/c 780
(Being adjustment entry passed)
Table Showing Adjustment To be Made
A B C
Interest on capital 1500 1000 500
Salary 6000
Commission 1350
Profits to be distributed( 19650) 9825 5895 3930
Total 11325 12895 5780
Less: profits wrongly allocated (15000) (10000) (5000)
Adjustments (3675) 2895 780