Question

A B and C were partners. They started business in one of the remote tribal areas of odisha. They were interested in the development of the tribal community by providing good education and health. On 31st march,2017, after making adjustments for profits and drawings their capitals were A rs. 4,00,000 , B rs. 3,00,000 , C rs. 2,00,000. The drawings of the partners were A rs. 4,000 per month, B rs. 3000, per month, and C rs. 2000, per month. The profit of the firm for the year ended 31st march, 2017 was rs. 6,00,000. Subsequently it was found that the interest on capital @6% per annum due, had been omitted.

Showing your workings notes clearly, pass necessary adjustment entry for the above. Also, identify any two values highlighted in the above question.

Answer 1

$\textbf{Adjusting Journal Entry}$

$\begin{tabular}{|c|c|c|c|c|}\cline{1-5}\bf Date & \bf Particulars&\bf Lf & \bf Dr. Amt&\bf Cr. Amt\\\cline{1-5}&C's Capital A/c Cr&&6720&\\&To A's Capital A/c&&&6720\\&(Being the necessary &&&\\& adjustment entry passed)&&&\\\cline{1-5}\end{array}$

$\textbf{Working Note}$

$\textbf{Adjustment Table}$

$\begin{tabular}{|c|c|c|c|c|}\cline{1-5}\bf Particulars&\bf A (Rs.)&\bf B (Rs.)&\bf C (Rs.)&\bf Total\\\cline{1-5}&&&&\\\sf I. Amount to be credited &&&&\\\sf Interest on capital @6\%&14880&8160&1440&24480\\\cline{2-5}&&&&\\\sf II. Amount to be debited&&&&\\\sf Rs. 24480 in profit sharing&&&&\\\sf ratio i.e., 1:1:1&8160&8160&8160&24480\\\cline{1-5}&&&&\\\sf Net Effect (I - II)&\bf 6720 (\sf Cr.)&-&\bf 6720 (\sf Dr.)&-\\\cline{1-5}\end{tabular}$

$\textbf{Calculation of \rm \bf Op en ing Capitals and Interests}$


Opening capital = Closing capital + Drawings - Share of profits

Accordingly, opening capital of

A = 4,00,000 + (4000×12) -6,00,000×1/3 = Rs. 2,48,000

B = 3,00,000 + (3000×12) - 6,00,000×1/3= Rs. 1,36,000

C = 2,00,000 + (2000×12)-6,00,000×1/3= Rs. 24,000

Interest on Capital

A = 2,48,000 × 6/100 = Rs. 14,880

B = 1,36,000 × 6/100 = Rs. 8,160

C = 24,000 × 6/100 = Rs. 1,440

$\textbf{Values highlighted in the above question are-}$

1. Development of remote tribal area, by providing employment opportunities.

2. Equity, even though capital contributions are unequal, still the partners are sharing profits equally, thereby promoting harmony and brotherhood.

Answer 2

Answer:

Adjusting Journal Entry

\textbf{Working Note}Working Note

\textbf{Adjustment Table}Adjustment Table

\textbf{Calculation of $\rm \bf Op en$ing Capitals and Interests}Calculation of Opening Capitals and Interests

Opening capital = Closing capital + Drawings - Share of profits

Accordingly, opening capital of

A = 4,00,000 + (4000×12) -6,00,000×1/3 = Rs. 2,48,000

B = 3,00,000 + (3000×12) - 6,00,000×1/3= Rs. 1,36,000

C = 2,00,000 + (2000×12)-6,00,000×1/3= Rs. 24,000

Interest on Capital

A = 2,48,000 × 6/100 = Rs. 14,880

B = 1,36,000 × 6/100 = Rs. 8,160

C = 24,000 × 6/100 = Rs. 1,440

\textbf{Values highlighted in the above question are-}Values highlighted in the above question are-

1. Development of remote tribal area, by providing employment opportunities.

2. Equity, even though capital contributions are unequal, still the partners are sharing profits equally, thereby promoting harmony and brotherhood.

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