Q. NO.10
The capital accounts of Niaz and Nazar partners for the year
ending December 31, 2007 showed as follows:-
Apr. 1 Withdrawn
Niaz's Capital
24,000 Jan. 1 Balance
1,20,000
54,000
Sep.1 Investment
Nazar's Capital
Mar. 1 Withdrawn
60,000
7,500 Jan. 1 Balance
37,500
Nov.1 Investment
On December 31, 2007 the expense and revenue summary
showed a credit balance of Rs.50,000.
REQUIRED:
Determine the share of each partner in the net profit and give
the Journal entries recording the distribution of profit under each of
the following cases separately:-
Case-1 Profit is divided in the ratio of beginning capitals.
Case-2 Profit is divided in the ratio of ending capitals.
Case-3 Profit is divided in the ratio of average capitals.
Case-4 Partners receive a salary of Rs.3,000 and Rs.2,000 per
month. Interest on ending capital at 15% and the balance
divided by 7:3.
Answers
Explanation:
ACCOUNTANCY
On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were Rs. 80;000,Rs. 60,000 and Rs. 40,000 respectively. Subsequently it was discovered that the Interest on capital and drawings has been omitted. (a) The profit for the year ended 31st March, 2014 was Rs. 80,000;
(b) During the year Saroj and Mahinder each withdraw a sum of Rs. 24,000 in equal instalments in the end of each month and Umar withdrew Rs. 36,000.
(c) The interest on drawings was to be charged @ 5% pa. and interest on capital was to be allowed @ 10% p.a.
(d) The profit-sharing ratio among partners was 4 : 3 :1.
Showing your workings clearly, pass the necessary rectifying entry.
MEDIUM
Share
Study later
ANSWER
Calculation of opening capital
Saroj Mahinder Umar
Closing capital 80000 60000 40000
Add:drawings 24000 24000 36000
Less:profits (40000) (30000) (10000)
Opening capital 64000 54000 66000
Interest on capital@10% 6400 5400 6600
Interest on drawings@5%
(Total drawings*5%*5.5/12) 550 550 900
Notes: As date of drawings for Umar is not given we have assumed an average of 6 months.
36000*5%*6/12= 900
The adjusting entry is:-
Saroj's Capital A/c Dr. 2350
Mahinder's Capital A/c Dr. 1300
To Umar's Capital A/c 3650
(Being adjustment entry passed)
Table showing adjustments
Particulars Saroj Mahinder Umar
Interest on capital 6400 5400 6600
Interest on drawings (550) (550) (900)
Profits to be distributed 31800 23850 7950
Total 37650 28700 13650
Less:profits wrongly distributed (40000) (30000) (10000)
Adjustments (2350) (1300) 3650
How satisfied are you with the answer?
This will help us to improve better
More Questions by difficulty
EASY
MEDIUM
HARD