On March 31, 2017 the balance in the capital accounts of Eluin, Monu and Ahmed, after making adjustments for profits, drawing, etc; were Rs 80,000, Rs 60,000 and Rs 40,000 respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin Rs 20,000; Monu, Rs 15,000 and Ahmed, Rs 9,000. Interest on drawings chargeable to partners were Eluin Rs 500, Monu Rs 360 and Ahmed Rs 200. The net profit during the year amounted to Rs 1,20,000. The profit sharing ratio was 3 : 2 : 1. Pass necessary adjustment entries.
Answers
Answer:
According to Data Adjustment will be made:
ADJUSTMENT ENTRIES:
Eluin capital a/c DR. 570
TO monu capital a/c CR. 10
TO ahmed capital a/c CR 560
( being the adjustment of profit on partners account created)
Explanation:
Eluin, monu and ahmed are partner having profit sharing ratio is 3:2:1. and the partners are entiteld to receive interest on capital @ 5% p.a.
calculation of total capital of partners.
particulars Eluin Monu Ahmed
capital on 31st march 2017 80,000 60,000 40,000
ADD: drawing 20,000 15,000 9,000
LESS: profit of partners (60,000) (40,000) (20,000)
( as per profit sharing ratio)
Total capital on april 1st 2017 40,000 35,000 29,000
ADJUSTMENTS OF CAPITAL
Particulars Eluin Monu Ahmed
interest on capital 2,000 1,750 1,450
LESS: interest on drawing (500) (360) (200)
PROFIT DISTRIBUTED 1,500 1390 1250
distributed in profit sharing ratio (2,070) (1,380) (690)
ADJUSTED CAPITAL (570) 10 560
ADJUSTMENT ENTRIES:
Eluin capital a/c DR. 570
TO monu capital a/c CR. 10
TO ahmed capital a/c CR 560
( being the adjustment of profit on partners account created)