Avulan(Cr.). Capital Account
< 1,835)
13. Ashutosh Rana and Manoj Vajpayee are partners in a business sharing profits and losses
in the ratio of 3:2. Their capitals on 31st December, 2013 after the adjustment of net
profits and drawings amounted to 1,15,000 and 85,000 respectively. Later on, it was
discovered that interest on capital at 6% per annum, as provided for in the partnership
deed, had not been credited to the partner's capital accounts before the distribution of
profits. The year's net profit amounted to
18,000 each. Instead of altering the signed Balance Sheet, it was decided to make an
48,000 and the partners had withdrawn
adjustment entry at the beginning of the new year crediting or debiting the Partners
Accounts. Give the necessary journal entry and also a statement of details arriving at the
amount of adjusting entry.
TA
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Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner's personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business.
Explanation:
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