Question

shiv and Shanker were partners in a firm sharing profits in 3 : 2 ratio. Their fixed capital were Rs. 1,70,000 and Rs. 2,10,000 respectively. The Partnership Deed provide the following: (a) Interest on Capital @ 12% p.a. (b) Interest on Drawings @ 18% p.a. Shiv withdrew Rs 12,000 on 30th June, 2009 and Shanker withdrew Rs 18,000 on 30th September 2009. The profit for the year ended 31st March, 2010 was Rs 97,000, which was distributed among the partners without providing for the above adjustments. Pass the adjustment​

Answer 1

Answer:

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Explanation:

Answer 2

Concept:

Past Adjustment Entries-

• The adjustments can be made with regard to  interest on drawings interest on capital,  and partner remuneration, so on.
• Omissions or errors are occasionally discovered after the preparation of financial statements and the distribution of profits among partners in accordance with the profit sharing ratio established in the company.
• Because the existing entries are not changed in such cases, a new adjustment entry is passed to evaluate the errors.

Given:

• Profits in 3 : 2 ratio
• Shiv and Shankar's fixed capital were Rs. 1,70,000 and Rs. 2,10,000 respectively
• Interest on Capital @ 12% p.a.
• Interest on Drawings @ 18% p.a.
• Shiv withdrew Rs 12,000 on 30th June, 2009
• Shanker withdrew Rs 18,000 on 30th September 2009.
• Profit for 2010 = rs 97,000

Find:

Pass Adjustment Entry

Solution:

The adjustment entry will be-

Shiv Current A/c Dr.   6960

         To Shankar Current A/c  6960

(being adjustment entry made.)

Working Notes-

Particulars                                                     Shiv                   Shankar

IOC                                                               20400                 25200

Profit                                                             30840                 20560

Amount to be credited                                51240                 45760

Actual Amount Credited                             58200               38800

difference                                                      6960 (dr.)          6960(cr.)

Hence, we can conclude that Shiv had received 6960 more in his credit while Shankar received 6960 less. So , Shiv will compensate Shankar with the same amount.

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