Question

A Band Care partners with their fixed capitals as 30,000, 20,000 and 10,000 respectively. According to
the partnership deed, they are entitled to interest on capital a 5% pa.. B is entitled to a salary of 800 per
month. Cis entitled to a commission of 5% on the profits after charging interest on capital but before charging the salary payable to b the net profit for the year 30000 distributed in the ratio of capital. without providing any of the above adjustment the profit were to be shared in the ratio 5:3:2​

Answer 1

Step-by-step explanation:

Calculation of Interest on capital

A = 30000*5% = 1500

B= 20000*5% = 1000

C= 10000*5% = 500

Salary to B = 500*12

=6000

Calculation of C's commission = 30000-300

= 27000*5/100= 1350

Profits to be distributed

= 30000-3000-6000-1350 = 19,650

The adjustment entry to be passed is as follows:-

A's Capital A/c Dr. 3675

To B's capital A/c 2895

To C's capital A/c 780

(Being adjustment entry passed)

Table Showing Adjustment To be Made

A B C

Interest on 1500 1000 500

capital

Salary 6000

Commission 1350

Profits to be 9825 5895 3930

distributed

( 19650)

Total 11325 12895 5780

Less: profits

wrongly (15000) (10000) (5000)

allocated

Adjustments (3675) 2895 780