On 31st March, 2018 the balance in the Capital Accounts of Abhir, Bobby and Vineet, after making adjustments for profits and drawings were 4,00,000 respectively.
800000600000 and 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 - of each month, Bobby - 20,000 drawn at the end 50,000 drawn at the beginning of every half year and Vineet - 1,00,000 withdrawn on 31st October, 2017. The net profit for the year ended 31st March, 2018 was sharing ratio was 2:2:1. 1,50,000. The profit
Pass necessary adjusting entry for the above adjustments in the books of the firm. Also, show your workings clearly.
Answers
The adjusting entry will be -
Bobby's Capital A/c Dr. 14,402
To Abhir's Capital A/c 10,112
To Vineet's Capital A/c 4290
( Being past adjustments made)
Working -
Past Adjustments
Abhir = Reversal profits + Drawings - IOC
= 60,000 + 6,000 - 76,712
= 10,112
Bobby = Reversal profits + Drawings - IOC
= 60,000 + 4,500 - 50,098
= 14,402
Vineet = Reversal profits + Drawings - IOC
= 30,000 + 2,500 - 36,790
= 4,290
Working Notes
Opening Capital -
Abhir
= Closing Capital - Profit Distributed + Drawings
= 8,00,000 - 60,000 + 2,40,000
= 9,80,000
Bobby
= Closing Capital - Profit Distributed + Drawings
= 6,00,000 - 60,000 + 1,00,000
= 6,40,000
Vineet
= Closing Capital - Profit Distributed + Drawings
= 4,00,000 - 30,000 + 1,40,000
= 4,70,000
Interest on Capital -
Abhir = 9,80,000 x 10/100 = 98000
Bobby = 6,40,000 x 10/100 = 64000
Vineet = 4,70,000 x 10/100 = 47000