A, B and C are partners with a profit sharing ratio of 4:1:1 Their capitals stood in the books of the firm at 30,000: 20,000 and 10,000 respectively. Subsequently, it was discovered that Interest on Capital @ 10% p.a. had been omitted. The profit earned during the year amounted R36,000. Give the necessary adjusting entry, if the partners drew 3,000, 72,250 and R1,350 respectively.
Answers
Answer:
calculation of opening capital
A. B. .C
closing capital 30000. 20000. 10000
+ drawings. 3000. 2250. 1350
- profit. 24000. 6000. 6000
opening capital 9000. 16250 5350
Table showing adjustment
A. B. C
interest on
capital. (cr). 900. 1625. 535
division of
loss. (dr).
3060 in 4:1:1. 2040 510. 510
difference. 1140. 1115. 25
(dr). (cr). (cr)
rectify entry
A'capital. account. dr. 1140
To B'capital account. 1115
To C'capital account. 25
Explanation:
Opening capital is calculated because interest on capital is calculated on opening capital