A, B and C are partners in a firm with profit sharing ratio 5:3:2. The partners’ capital balances on 31st March 2020, after adjustments for net profit and drawings were: A 1,55,000; B 1,35,000 and C 1,15,000. The net profit of the firm was 60,000 equally distributed among the partners by mistake without providing interest on capital at 10% p.a. The partners’ drawings were: A 15,000; B 15,000 and C 10,000.
You are required to make necessary working notes and pass an adjustment entry to rectify the errors.
Answers
Answer:
Interest o capital provided on opening capital but in question closing capital is given so we have to calculate opening capital first
A. B. C
closing capital 155000. 135000. 115000
+ drawing. 15000. 15000. 10000
- profit. 20000. 20000. 20000
opening capital 150000. 130000. 105000
Table showing adjustment
A. B. C
interest in capital. 15000. 13000. 10500
(credit)
division of profit
*credit).
(60000-38500) 10750. 6450. 4300
total amount
payable (cred 25750. 19450. 14800
profit already
distributed. 20000. 20000. 20000
(debit).
difference. 5750. 550. 5200
(credit). (debit). (debit)
journal
B capital account. dr. 550
C capital account. dr 5200
To A capital account. 5750