Question

Adjustment before the closing of Accounts
Q-A, B, C are in partnership sharing profits and losses in the ratio of 2:1:1. Following particulars are available from their books :

Capital Accounts Ist April, 2008
A. B. C
20000, 15000, 10000

Current Accounts Ist April, 2008

A. B. C
1500, 2,500 , (Dr.) 2,000

Drawings
A. B. C
6000, 4000, 4000

Life Insurance Premium Ist October, 2008
A. B. C
2000. - -

Life Insurance Premium of A has been paid by the firm and has been charged to
General Expenses A/c. Partners are allowed 8% p.a. interest on their capitals and
charged at 10% p. a. on their drawings. Profits for the year ended 31st March, 2009
amounted to 20,800 before taking into account the interest on capitals and drawings.
While calculating profits, depreciation at the rate of 20% p. a. has been omitted on
building of the value of 20,000. Prepare Profit and Loss Appropriation Account and
Partners' Current Accounts for the year.




[Ans. Divisible Profits 16,000. Current A/cs A $2,700 (Cr.); B 3,500 (Cr.);
C 1,400 (Dr.)]


[Hints :

(1) If it is not clearly mentioned whether the balance of a Current Account is Debit or
Credit, it will be presumed that its balance is Credit.
(2) Interest on Drawings will be calculated for six months.]​

Answer 1

Answer:

In Partnership Accounting, past adjustments are an essential entry in the Net Profit section under Profit and Loss Appropriation A/C of a firm. The Net Profit A/C of a firm denotes the overall profit distribution among all firm owners.