Question

Piya and Bina are partners in a firm sharing profits and losses in the ratio of 3 : 2. Following was the Balance Sheet of the firm as on 31st March, 2016:
The profits ₹ 30,000 for the year ended 31st March, 2016 were divided between the partners without allowing interest on capital @ 12% p.a. salary to Piya @ ₹ 1,000 per month. During the year Piya withdrew ₹ 8,000 and Bina withdrew ₹ 4,000. Showing your working notes clearly, pass the necessary rectifying entry.

Answer 1

The journal entry and the adjusting table are calculated below:

Explanation:

Given,

Piya and Bina sharing profits and losses in the ratio of 3 : 2

Piya withdrew ₹ 8,000 and Bina withdrew ₹ 4,000.

The profit for the year ended is Rs. 30,000

Calculation of Interest on Capital

Interest on Piya's Capital:

$=16,000 \times \frac{12}{100}=1,920$

Interest on Bina's Capital:

$=4,000 \times \frac{12}{100}=480$

Thus, as per the journal entry given below, an amount of Rs. 5856 has been debited from Bina's Capital account and has been credited to Piya's Capital account.