Question

A,B&C are the partners of the firm sharing profit&loss in the ratio 5:3:2.Their capitals were Rs30000,20000&10000 respectively.according to the partnership deed, they were entitled to an interest on capital at 5%p.a.In addition B was entitled to draw a salary of Rs500pm.C was entitled to get commission of5% on the profit after charging interest on capital but before charging B's salary.The net profit Rs30000 were distributed in the ratio of capital without providing for the above adjustments.Pass the necessary adjusting entry by showing your workings clearly.

Answer 1

A = 30,000
B = 20,000
C = 10,000
Total = 60,000
Ratio based on capital is A = 30/60 or 50% ; B = 20/60 or 33% ; C = 10/60 or 17%

30,000 distributed on the ratio of their capital.
A = 30,000 * 50% = 15,000
B = 30,000 * 33% =   9,900
C = 30,000 * 17% =   5,100

Should be: 30,000
a) interest of 5% on capital
b) C commission og 5% on profit after charging interest on capital but before charging B's Salary
c.)B entitled to draw a salary of 500

a)
A = 30,000 * 5% = 1,500
B = 20,000 * 5% = 1,000
C = 10,000 * 5% =   500 

b.) 30,000 - 1,500 - 1,000 - 500 = 27,000 * 5% = 1,350 to C.
c.) 500 to B.

30,000 - 3,000 - 1,350 - 500 = 25,150 to be distributed according to P&L ratio

A = 25,150 * 5/10 = 12,575
B = 25,150 * 3/10 =   7,545
C = 25,150 * 2/10 =   5,030

Should be distribution of the profit 30,000

A = 1,500 + 12,575 = 14,075
B = 1,000 + 500 + 7,545 = 9,045
C = 500 + 1,350 + 5,030 = 6,880