On 31 Dec. 20x1 after the close of the account the Capital account of X, Y
and Z stood in the books of the firm at Rs 24,000, R$ 18,000 and Rs. 12,000
respectively. Subsequently it was discovered that interest on Capital @5% pa
had been omitted. The profit for the year ended 20xlamounted to Rs 36,000and
the partners' drawings had been x Rs. 6.000, Y Rs 4 500 and Z Rs. 2,700. The
profit sharing ratio of X, Y and Z was 3.2.1 Give the necessary adjusting entry.
Answers
Answer:
Subsequently, it was discovered that interest on capital @ 5% p.a. had been omitted. The profit- sharing ratio was 2 : 2 : 1.
Calculation of capital at the beginning
P Q R
Capital at the end 40000 30000 20000
Add;- drawings 10000 7500 4500
Less;profits (30000) (20000) (10000)
Capital at the beginning 20000 17500 14500
Interest on capital @ 5% 1000 875 725
The following adjustment entry needs to be passed:-
P's capital A/c Dr 1300
Q's capital A/c Dr. 867
R's capital A/c Dr 433
To Profit and loss Appropriation A/c 2600
(Profits to be reversed)
Table showing Adjustments to be made
Partners Profits to be written back Profits to be distributed
(60000-2600) Adjustements
P -30000 28700 -1300
Q -20000 19133 -867
R -10000 9567 -433