Question

On March 31, 2019, the balance in the capital accounts of Kapil, Vineeth and Ahmed,
after making adjustments for profits, drawing, etc., were Rs. 1,60,000/-,
Rs. 1,20,000/- and Rs. 80,000/- 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 Kapil
Rs. 40,000/- Vineeth, Rs. 30,000/- and Ahmed, Rs. 18,000/-. Interest on drawings
chargeable to partners were Kapil Rs. 1000/-, Vineeth Rs. 720/- and Ahmed Rs. 400/-.
The net profit during the year amounted to Rs. 2,40,000/-. The profit-sharing ratio was
3: 2: 1. Pass necessary adjustment entries
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Accountancy

Reconstitution of a Partnership Firm - Retirement / Death of a Partner

Gaining Ratio of the Remaining Partners

On 31st March, 2014, balanc...

ACCOUNTANCY

On 31st March, 2014, balances in the Capital Accounts of Eleen, Monu and Ahmad after making adjustments for profits and drawings were Rs.1,60,000,Rs.1,20,000 and Rs.80,000 respectively. Subsequently, it was discovered that the interest on capital and drawings had been omitted.

(i) The profit for the year ended 31st March, 2014 was Rs.40,000.

(ii) During the year, Eleen and Monu each withdrew a total sum of Rs.24,000 in equal instalments in the beginning of each month and Ahmad withdrew a total sum of Rs.48,000 in equal instalments at the end of each month.

(iii) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.

(iv) The profit-sharing ratio among the partners was 2:1:1. Showing your working notes clearly, pass the necessary rectifying entry.

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ANSWER

Rectification entry is as follows :-

Eleen's capital A/c Dr. 3850

To Monu's capital A/c 2950

To Ahmad's capital A/c 900

(Being adjustment entry passed)

Calculation of Opening Capital Eleen Monu Ahmad

Closing capital 1,60,000 1,20,000 80,000

Add:Drawings 24,000 24,000 48,000

Less:Profits credited (20,000) (10,000) (10000)

Opening Capital 1,64,000 1,34,000 1,18,000

Interest on Capital @10% 16,400 13,400 11,800

Calculation of Interest on Drawings Eleen Monu Ahmad

Interest on Drawings (24,000*5%*6.5/12) (24,000*5%*6.5/12) (48,000*5%*5.5/12)

= 650 650 =1100

Table Showing Adjustments To Be Made

Particulars Eleen Monu Ahmad

Interest on capital 16,400 13,400 11,800

Interest on Drawings (650) (650) (1100)

Profit to be credited 400 200 200

Profit wrongly credited (20000) (10000) (10000)

Net Effect (3850) 2950 900

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