Question

. The partners of a firm distributed the profits for the year ended 31st March, 2013

Rs.60,000 in the ratio of 3:2:1 without providing for the following adjustments:

(i) A & B entitled to a salary of Rs.1,500 p.a.

(ii) B was entitled to a commission of Rs.4,500

(iii)B & C had guaranteed a minimum profit of Rs.25,000 p.a. to A

(iv)Profits were to be shared in the ratio of 3:3:2

Pass necessary adjustment entry in the books of the firm.​

Answer 1

Answer:

Adjustment required can be calculated as follows:

Particulars Partner A Partner B Partner C Firm

Profits wrongly distributed 45,000 (Dr) 30,000 (Dr) 15,000 (Dr) 90,000(Cr)

Salary to be provided 1,500 (Cr) 4,500 (Cr) 1,500 (Cr) 7,500 (Dr)

Actual Profit which needs to be distributed in 3:3:2 is (90,000−7,500)=RS. 82,500 30,937.50 (Cr) 30,937.50 (Cr) 20,625 (Cr) 82,500 (Dr)

Since Guaranteed Profit to A is Rs 35,000, so difference of Rs. 4062.5 would be shared by B & C in their profit sharing ratio i.e 3:2 4062.50 (Cr) 2437.50 (Dr) 1625 (Dr) NIL

Net Adjustment 8,500 (Dr) 3,000 (Cr) 5,500 (Cr) NIL

So, the adjustment entry would be as follows:

Journal

Particulars L.F. Debit

Amount

(Rs) Credit

Amount

(Rs)

A's Capital A/c Dr. 8,500

To B's Capital A/c 3,000

To C's Capital A/c 5,500

.

.

.

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