Question

Anju, Manju and Mamta are partners whose fixed capitals were Rs 10,000, Rs 8,000 and Rs 6,000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during there years remained as follows:

Year	Anju	Manju	Mamta
2014	4	3	5
2015	3	2	1
2016	1	1	1

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan. 2017.

Answer 1

Interest on Capital

Anuj = 10,000 ×	5	= Rs 500
	100

Manju = 8,000 ×	5	= Rs 400
	100

Mamta = 6,000 ×	5	= Rs 30
	100

Adjustment of profit

Year 2014

	Anuj		Manju		Mamta	=	Total
Interest on Capital	500		400		300		1,200
Wrong distribution of Rs 1,200 (4:3:5)	(400)		(300)		(500)	=	(1,200)
	100		100		(200)		NIL

Year 2015

	Anuj		Manju		Mamta	=	Total
Interest on Capital	500		400		300		1,200
Wrong distribution of Rs 1,200 (3:2:1)	(600)		(400)		(200)	=	(1,200)
	(100)		NIL		100		NIL

Year 2016

	Anuj		Manju		Mamta	=	Total
Interest on Capital	500		400		300		1,200
Wrong distribution of Rs 1,200 (1:1:1)	(400)		(400)		(400)	=	(1,200)
	100		NIL		(100)		NIL

Final Adjustment

	Anuj		Manju		Mamta
2014	100		100		(200)
2015	(100)		NIL		100
2016	100		NIL		(100)
	100		100		(200)

Adjusting Journal Entry

Date	Particulars		L.F	Debit Amount Rs	Credit Amount Rs
Jan. 2017
	Mamta's Capital A/c	Dr.		200
	To Anuj’s Capital A/c				100
	To Manju Capital A/c				100
	(Adjustment of profit made)