Question

A, B and C are partners in a firm. Net profit of the firm for the year ended 31st march, 2018 is ₹ 30,000, which has been duly distributed among the partners, in their agreed ratio of 3 : 1 : 1 respectively. It is discovered on 10th April, 2018 that the undermentioned transactions were not passed through the books of account of the firm for the year ended 31st March, 2018.
(a) Interest on Capital @ 6% per annum, the capital of A, B and C being ₹ 50,000; ₹ 40,000 and ₹ 30,000 respectively.
(b) Interest on drawings: A ₹ 350; B ₹ 250; C ₹ 150.
(c) Partners’ Salaries: A ₹ 5,000; B ₹ 7,500.
(d) Commission due to A (for some special transaction) ₹ 3,000.
You are required to pass a Journal entry, which will not affect Profit and Loss Account of the firm and rectify the position of partners.

Answer 1

The journal and the adjustment entry has been calculated below:

Explanation:

Calculation of Interest on Capital

Interest on A's Capital

$=50,000 \times \frac{6}{100}=3,000$

Interest on B's Capital

$=40,000 \times \frac{6}{100}=2,400$

Interest on C's Capital

$=30,000 \times \frac{6}{100}=1,800$

Interest on drawings

For A- Rs.350

For B - Rs.250

For C - Rs.150

Salaries

To A - Rs.5,000, and

To B - Rs.7, 500

Commission to A

Commission to A is Rs. 3,000

Calculation of Profit share of each partner

Profit available for distribution

$=\mathrm{Rs} .30,000-\mathrm{Rs} .7,200+\mathrm{Rs} .750-\mathrm{Rs} .12,500-\mathrm{Rs} .3,000$

$=\mathrm{Rs} .8,050$

A's Profit Share

$=8,050 \times \frac{3}{5}=4,830$

B's Profit Share

$=8,050 \times \frac{1}{5}=1,610$

C's Profit Share

$=8,050 \times \frac{1}{5}=1,610$

Thus, as per the adjustment entry, an amount of Rs. 2520 and Rs. 2740 has been debited from A and C's capital account respectively and has been credited to B's capital account.