Question

Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3 : 2. Following is the balance sheet of the firm as on March 31, 2017. Amount Amount Liabilities Rs Assets Rs Mannu’s Capital 30,000 Drawings : Shristhi’s Capital 10,000 40,000 Mannu 4,000 Shristhi 2,000 6,000 Other Assets 34,000 40,000 40,000 Profit for the year ended March 31, 2017 was Rs 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.

Answer 1

Answer:

Explanation:

Rectification entry as follows:

Shrishti capital A/c    Rs.     288

    To Mannu's capital                          288

( Being adjustment entry passed)

Calculation of opening capital

                                                           Mannu                              Shrishti        

Closing capital                                   30000                              10000

Less : profits                                         (3000)                                  (2000)

opening capital                                    27000                                   8000

interest on capital                                     1350                                   400

Adjustments to be made

Particulars                                  Mannu                               Shrishti                

Interest on capital (cr)                 1350                                      400

Interest on drawing (dr)                (120)                                    (60)

Profits to be credited                  2058                                    1372

Profit wrongly credited               ( 3000)                                (2000)

Net effect                                      288                                         (288)