A, B and C were partners in a firm. On 1st April 2012, their capitals stood at 500000 , 2,50,000 and
*2,50,000 respectively. As per the provisions of the partnership deed :
(i) C was entitled for a salary of 5,000 per month.
(ii) A was entitled for a commission of 80,000 p.a.
(ii) Partners were entitled to interest on capital at 6% p.a.
(iv) Partners will share profits in the ratio of their capitals.
Net profit for the year ended on 31.03.2013 was 3,00,000 which was divided equally, without providir
for the above provisions. Showing your workings clearly, pass necessary adjustment entry for the above.
Answers
Adjustment in accounts will be done because of wrong profit distribution and no consideration to salary and commission.
Given:
- A,B and C are 3 partners who share profit in capital contribution ratio
- Net profit of Rs.3,00,000 was divided equally
- Salary and Commission was not taken into consideration
To Find: Adjustment Entries through accounts
Solution:
Profit Sharing Ratio = 500000:250000:250000
= 2:1:1
JOURNAL
P & L Appropriation A/c Dr. 1,60,000
To A a/c Cr. 1,60,000
(Being Adjustment entry passed)
P & L Appropriation A/c Dr. 40,000
To B a/c Cr. 40,000
(Being Adjustment entry passed)
P & L Appropriation A/c Dr. 1,00,000
To C a/c Cr. 1,00,000
(Being Adjustment entry passed)
P & L Appropriation Account
Particulars Amount Particulars Amount
To C Salary 60,000 By Net Profit 3,00,000
To A Commission 80,000
To Interest on Capital
A (500000*6/100) 30,000
B (250000*6/100) 15,000
C (250000*6/100) 15,000
To Profit
A 50,000
B 25,000
C 25,000
Total 3,00,000 Total 3,00,000