Question

Mohan, Vijay and Anil are partners, the balances of their Capital Accounts being ₹ 30,000, ₹ 25,000 and ₹ 20,000 respectively. In arriving at these figures, the profits for the year ended 31st March, 2016, ₹ 24,000 had already been credited to partners in the proportion in which they shared profits. Their drawings were ₹ 5,000 (Mohan), ₹ 4,000 (Anil) during the year. Subsequently, the following omissions were noticed and it was decided to bring them into account:
(a) Interest on capital @ 10% p.a.
(b) Interest on drawings: Mohan ₹ 250, Vijay ₹ 200 and Anil ₹ 150.
Make necessary corrections through a Journal entry and show your workings clearly.

Answer 1

The Journal entry and Adjustment statement are calculated below:

Explanation:

Calculation of Capital at the beginning is given below.

Calculation of Interest on Capital

Interest on Mohan's Capital

$=27,000 \times \frac{10}{100}=2,700$

Interest on Vijay's Capital

$=21,000 \times \frac{10}{100}=2,100$

Interest on Anil's Capital

$=25,000 \times \frac{10}{100}=1,500$

Calculation of Final Share of Profits

Total Corrected Profit Available for Distribution  =Profit - Interest On Capital + Interest on Drawings

$=\mathrm{Rs} .24 .000-\mathrm{Rs} .6 .300+\mathrm{Rs} .600$

$=\mathrm{Rs} .18 .300$

So, Connected profit share of Mohan, Vijay and Anil

$=18,300 \times \frac{1}{3}=6,100$

Thus, each get a profit share of Rs. 6100.

As per the journal given below, an amount of Rs. 550 has been debited from Anil's Capital account and has been credited to Mohan's Capital account.