The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended31 March, 2017, Rs 80,000 in the ratio of 3:3:2 without providing for the following adjustments:usoAlia and Chand were entitled to a salary of Rs 1,500 each p.m.Bhanu was entitled for a salary of Rs 4,000 p.a.Pass the necessary Journal entry for the above adjustments in the books of the firm. Showworkings clearly.
Answers
Answer:
Following entries would be journalized:
Salary A/C Dr. 40,000
To Alia's Capital A/C 18000
To Bhanu's Capital A/C 4000
To Chand's Capital A/C 18000
(Being Salary payable to partners recorded)
Alia and Chand's salary for the period = 1500 × 12 months = Rs 18000 per annum
Chand's salary = Rs 4000 per annum
Alia's Capital A/C Dr. 18000
Bhanu's Capital A/C Dr. 4000
Chand's Capital A/C Dr. 18000
To Bank A/C 40,000
(Being salary paid to partners recorded)
Profit and Loss A/C Dr. 40,000
To Profit and Loss Appropriation A/C 40,000
(Being credit balance of profit transferred to Profit and loss appropriation account)
Profit and Loss Appropriation A/C Dr. 40,000
To Alia's Capital A/C 15,000
To Bhanu's Capital A/C 15,000
To Chand's Capital A/C 10,000
(Being profits distributed to partners in the ratio of 3:3:2 after appropriating salaries paid, being recorded)
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Where there is no provision in the partnership Deed regarding the dissolution of partnership, the firm is
known as .......
(a) Indefinite partnership (b) Partnership at will
(c) General partnership (d) Contingent partnership
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Types of partnership and explain the partnership
Answer:
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Explanation:
Date Particulars
L.F. Debit Credit
Chand’s Capital A/c *1 Dr 21,000
Bhanu’s Capital A/c *1 Dr 2,000
To Alia’s Capital A/c 23,000
(Being adjustment made for deficiency of R’s Capital)
Statement Showing Adjustment of Profit required
Particulars Alia’s Bhanu’s Chand’s Total
Salary to be paid 18,000 – 18,000 36,000
Add: Commission to be paid – 4,000 – 4,000
Add: Profit to be Credited 35,000 5,000 – 40,000
Total Amount to be credited 53,000 9,000 18,000 80,000
Less: Profit Already credited (2:2:1) 30,000 30,000 20,000 80,000
23,000 – 21,000 – 2,000 –
Alia’s get less amount, so we have to credit his capital a/c with difference amount
Bhanu’s get extra so we have to debit his capital a/c with difference amount.
Chand’s get extra so we have to debit his capital a/c with difference amount
Profit Already credited
Profit of the year =40,000
Profit-sharing Ratio =3 : 3 : 2
Alia’s Share of Profit 40,000 X 3
8
Alia’s Share of Profit = 15,000
Bhanu’s Share of Profit 40,000 X 3
8
Bhanu’s Share of Profit = 15,000
Chand’s Share of Profit 40,000 X 2
8
Chand’s Share of Profit = 10,000
Alia’s Minimum Guaranteed Profit = Rs 35,000
Alia’s Actual Profit Share i.e. 15,000 is less than his Minimum Guaranteed Profit i.e. 35,000
Deficiency in Alia’s Profit Share = 35,000 − 15,000 = Rs 20,000
This deficiency of Rs 20,000 is to be borne by Bhanu and Chand in the ratio of 1: 1
Bhanu’s Share of Profit 20,000 X 1
2
Bhanu’s Share of Profit= 10,000
Chand’s Share of Profit 20,000 X 1
2
Chand’s Share of Profit = 10,000
Now, Final distributed among the partners
Alia’s Share of Profit = 15,000 + 20,000 =35,000
Bhanu’s Share of Profit = 15,000 – 10,000 =5,000
Chand’s Share of Profit = 10,000 – 10,000 =Nil