On 1st January 2013, Arun and Anil entered into a partnership contributing 20,000
and * 30,000 respectively and sharing profits in the ratio of 1:2. Arun is to be allowed a
salary of 6,000 per year. Interest on capital is to be allowed at 5% per annum. Anil is
entitled to receive a commission of 2,000. During the year, Anil withdrew 2,000 and
Arun 2,500; interest on the same being * 40 and 50 respectively. Profit in 2013 before
the above mentioned adjustments was 15,000.
You are required to pass the necessary journal entries relating to appropriation of
profit and prepare the Profit and Loss Appropriation Account and the Partners' Capital
Answers
Answer:
ANSWER
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 = 30000-3000 = 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 capital 1500 1000 500
Salary 6000
Commission 1350
Profits to be distributed( 19650) 9825 5895 3930
Total 11325 12895 5780
Less: profits wrongly allocated (15000) (10000) (5000)
Adjustments (3675) 2895 780
Explanation:
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