Question

Ram, Shyam, Jadu and Madhu were partners in a firm sharing profits and losses in the ratio
of 4:3:2:1. The balances of their capital accounts on 30th June, 2005 maintained under
fixed capital method were * 40,000, 30,000,
30000 and 20,000 respectively. After
closing and finalising the accounts, it was discovered that interest on capital @ 10%
p.a., salaries of Ram 5,000 and Shyam * 2,000 and commission of Jadu * 2,000 and
Madhu 4,000 were charged though there were no provisions for such matters.
You are required to make adjustment entries under the following methods :
(a) Two entries for writing back and correct appropriation of such amount of profit; and
(b) Single journal entry, through current accounts of the partners.

Answer 1

$\huge{ \tt{ \underline{Solution :}}}$

→ As the partners capital are fixed,we have to pass entry for additional 1% through current Account.

→ The following entries should be passes :

→ Profit and Loss Appropriation A/c 6000

→ To Interest on Capital A/c 6000

→ (Interest of additional 1% debited to P&L Appropriation Account)

→ Interest On capital A/c Dr. 6000

To Ram's Current A/c 3000

To Shyam's Current A/c 1000

To Mohan's Current A/c 2000

→ (Being interest credited to Current account of partners)

→ Profit and Loss Appropriation A/c Dr (Notes) 1,90,000

• To Ram's Current A/c 76,000
• To Shyam's Current A/c 38,000
• To Mohan's Current A/c 76,000

→ (Being profits distributed to partners)

→ Profit before Interest = 2,50.000

→ Less Interest on Capital = 60,000

→ Profit after interest = 1,90,000