Question

On 315 March, 2018 the balance in the Capital Accounts of Abhir, Bobby and Vineet, after
making adjustments for profits and drawings were Rs.8,00,000, Rs.6, 00,000 & Rs.4,00,000 respectively.
Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The
partners were entitled to interest on capital @ 10% p.a., and were to be charged interest on drawings
@6% p.a. The drawings during the year were: Abhir -Rs.20,000 drawn at the end of each month, Bobby
-Rs 50,000 drawn at the beginning of every half year and Vineet -Rs. 1,00,000 withdrawn on
31stOctober, 2017. The net profit for the year ended 31st March, 2018 was Rs. 1,50,000. The profit
sharing ratio was 2:2:1.Pass necessary adjusting entry for the above adjustments in the books of
the firm. Also, show your 

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Answer 1

Calculation of Profit to be distributed among the partners

Explanation:

*Working notes:

1) Calculation of Opening Capital

Particulars                         Abhir          Bobby          Vineet

Closing Capital                8,00,000   6,00,000     4,00,000

Less:Profit Distributed    (60,000)     (60,000)        (30,000)

(2:2:1)

Add:Drawings                   2,40,000    1,00,000      1,00,000

                                                                                                         

Opening Capital             9,80,000      6,40,000     4,70,000    

2)Calculation of Interest on Drawings

Abhir = $20,000\times12\times\dfrac{6}{100}\times\dfrac{5.5}{12}$ = Rs.6,600

Bobby = $50,000\times2\times\dfrac{6}{100}\times\dfrac{9}{12}$ = Rs.4,500

Vineet = $1,00,000\times\dfrac{6}{100}\times\dfrac{5}{12}$ = Rs.2,500

3)Calculation of Interest on Capital

Abhir = $9,80,000\times\dfrac{10}{100}$ = Rs.98,000

Bobby = $6,40,000 \times \dfrac{10}{100}$ = Rs.64,000

Vineet = $4,70,000 \times \dfrac{10}{100}$ = Rs.47,000

Redistribution of Interest on Capital will have to be made as it has not been provided that the Interest on Capital is a charge against profit,and the profit after Interest on drawings is only Rs.1,63,000-

Abhir = $\dfrac{98000}{209000}\times163600$ = Rs.76,712

Bobby = $\dfrac{64000}{209000}\times163600$ = Rs.50098

Vineet = $\dfrac{47000}{209000}\times163600$= Rs.36790

                              In the Books of Abhir,Bobby and Vineet

Statement showing past adjustments:

Particulars                     Abhir                    Bobby                Vineet    

                                    Dr.          Cr.          Dr.         Cr.        Dr.           Cr.

Reversal of Profits    60,000     -           60,000     -        30,000      -

Interest on Drawings 6600                     4500                  2500

Interest on Capital                     76712                 50098                 36790

                                                                                                                     

Total                         66600      76712   64500   50098 32500    36790

                                                                                                                         

Net Effect                           10112(Cr.)             14402(Dr.)           4290(Cr.)

Journal:

1.4.18 Bobby Capital A/c       Dr. Rs.14,402

                         To Abhir Capital A/c     Rs.10,112

                         To Vineet A/c                Rs.4290

     (Being past adjustment made)

Answer 2

$\huge\mathtt{\fbox{\red{Answer}}}$

Calculation of Profit to be distributed among the partners

Explanation:

*Working notes:

1) Calculation of Opening Capital

Particulars                         Abhir          Bobby          Vineet

Closing Capital                8,00,000   6,00,000     4,00,000

Less:Profit Distributed    (60,000)     (60,000)        (30,000)

(2:2:1)

Add:Drawings                   2,40,000    1,00,000      1,00,000

                                                                                                         

Opening Capital             9,80,000      6,40,000     4,70,000    

2)Calculation of Interest on Drawings

Abhir = $20,000\times12\times\dfrac{6}{100}\times\dfrac{5.5}{12}$ = Rs.6,600

Bobby = $50,000\times2\times\dfrac{6}{100}\times\dfrac{9}{12}$ = Rs.4,500

Vineet = $1,00,000\times\dfrac{6}{100}\times\dfrac{5}{12}$ = Rs.2,500

3)Calculation of Interest on Capital

Abhir = $9,80,000\times\dfrac{10}{100}$ = Rs.98,000

Bobby = $6,40,000 \times \dfrac{10}{100}$ = Rs.64,000

Vineet = $4,70,000 \times \dfrac{10}{100}$ = Rs.47,000

Redistribution of Interest on Capital will have to be made as it has not been provided that the Interest on Capital is a charge against profit,and the profit after Interest on drawings is only Rs.1,63,000-

Abhir = $\dfrac{98000}{209000}\times163600$ = Rs.76,712

Bobby = $\dfrac{64000}{209000}\times163600$ = Rs.50098

Vineet = $\dfrac{47000}{209000}\times163600$= Rs.36790

In the Books of Abhir,Bobby and Vineet

Statement showing past adjustments:

Particulars                     Abhir                    Bobby                Vineet    

                                    Dr.          Cr.          Dr.         Cr.        Dr.           Cr.

Reversal of Profits    60,000     -           60,000     -        30,000      -

Interest on Drawings 6600                     4500                  2500

Interest on Capital                     76712                 50098                 36790

                                                                                                                     

Total                         66600      76712   64500   50098 32500    36790

                                                                                                                         

Net Effect                           10112(Cr.)             14402(Dr.)           4290(Cr.)

Journal:

1.4.18 Bobby Capital A/c       Dr. Rs.14,402

                         To Abhir Capital A/c     Rs.10,112

                         To Vineet A/c                Rs.4290

     (Being past adjustment made)