Question

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

Year Anju Manju Mamta

2004 4 3 5

2005 3 2 1

2006 1 1 1

Make necessary adjustment entry at the beginning of the fourth year i.e., Jan 2007.

Answer 1

Interest on Capital

$\text{Anju}\Rightarrow 10,000\times \frac{5}{100}=Rs500;$ $\text{Manju}\Rightarrow 8,000\times \frac{5}{100}=Rs400;$

$\text{Mamta}\Rightarrow 6,000\times \frac{5}{100}=Rs300;$

Total interest of partners = Rs 1,200 for a year

$\begin{array}{ccccc}\text{Particulars}& & \text{Anju}& \text{Manju}& \text{Mamta}\\ \text{Amount Already Created by Way of Profits}& & 400& 300& 500\\ \text{In 2004}(1,200in4:3:5)& & & & \\ \text{In 2005 (1,200 in 3 : 2 : 1)}& & 600& 400& 200\\ \text{In 2006 (1,200 in 1 : 1 : 1)}& & 400& 400& 400\\ \text{Total Amount Credited}& \text{A}& 1,400& 1,100& 1,100\\ \text{Amount to be Credited}& & & & \\ \text{Interest on Capital for 3 years}& & 1,500& 1,200& 900\\ & \text{B}& \overline{\underset{–}{1,500}}& \overline{\underset{–}{1,200}}& \overline{\underset{–}{900}}\\ & \text{(B-A)}& 100& 100& \left(200\right)\\ \text{Difference}& & \text{Cr}& \text{Cr}& \text{Dr}\end{array}$

Journal Entry

$\begin{array}{ccccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& & \text{Amt. (Cr)}\\ & \text{Mamta's Capital A/c}& \text{Dr}& & 200& & \\ & \text{To Anju's Capital A/c}& & & & & 100\\ & \text{To Manju's Capital A/c}& & & & & 100\\ & \text{(Being profit adjusted among all partners)}& & & & & \end{array}$