Kavita and Pradeep are partners, sharing profits in the ratio of 3 : 2. They employed Chandan as their manager, to whom they paid a salary of Rs 750 p.m. Chandan deposited Rs 20,000 on which interest is payable @ 9% p.a. At the end of 2017 (after the division of profit), it was decided that Chandan should be treated as partner w.e.f. Jan. 1, 2014 with 1/6 th share in profits. His deposit being considered as capital carrying interest @ 6% p.a. like capital of other partners. Firm’s profits after allowing interest on capital were as follows:
Rs
2014
Profit
59,000
2015
Profit
62,000
2016
Loss
(4,000)
2017
Profit
78,000
Record the necessary journal entries to give effect to the above.
Kavita and Pradeep are partners, sharing profits in the ratio of 3 : 2. They employed Chandan as their manager, to whom they paid a salary of Rs 750 p.m. Chandan deposited Rs 20,000 on which interest is payable @ 9% p.a. At the end of 2017 (after the division of profit), it was decided that Chandan should be treated as partner w.e.f. Jan. 1, 2014 with 1/6 th share in profits. His deposit being considered as capital carrying interest @ 6% p.a. like capital of other partners. Firm’s profits after allowing interest on capital were as follows:
|
|
|
Rs |
|
2014 |
Profit |
59,000 |
|
2015 |
Profit |
62,000 |
|
2016 |
Loss |
(4,000) |
|
2017 |
Profit |
78,000 |
Record the necessary journal entries to give effect to the above.
Interest on
Loan
+
Salary
=
Total
2014
59,000
+
1,800
+
9,000
=
69,800
2015
62,000
+
1,800
+
9,000
=
72,800
2016
(4,000)
+
1,800
+
9,000
=
6,800
2017
78,000
+
1,800
+
9,000
=
88,800
1,95,000
+
7,200
+
36,000
=
2,38,200
Chandan received as Manager = Interest on Loan + Salary = 7,200 + 36,000 = Rs 43,200
Total Profit of 4 years before interest on Chandan’s Loan and Salary = 2,38,200
Interest on Chandan’s Caiptal for 4 years ={20,000 × (6/100) = 1,200}
= 1,200 × 4 = Rs 4,800
Profit after interest on all partners Capital
= Total Profit of four years before interest on Chandan’s loan and Salary – Interest on Chandan’s Capital for four years
= 2,38,200 – 4,800
= Rs 2,33,400
Wrong Distribution – Distribution of 4 years
Profit when Chandan as a Manager
Kavita {1,95,000 × (3/5)}
=
1,17,000
Pradeep {1,95,000 × (2/5)}
=
78,000
Chandan received as manager = Interest on Loan + Salary
= 7,200 + 36,000
=
43,200
2,38,200
Right Distribution – Division of Profit when Chandan as Partner
Chandan Share of Profit {2,33,400 × (1/6)}
38,900
Interest on Capital
4,800
43,700
Kavita’s Share of Profit {(2,33,400 – 38,900) ×(3/5)} =
1,16,700
Pradeep’s share of Profit {(2,33,400 – 38,900) × (2/5)} =
77,800
Adjustment of Profit
Kavita
Pradeep
Chandan
=
Total
Distribution of profit when Chandan as partner
1,16,700
77,800
43,700
=
2,38,200
Less: Distribution of profit when Chandan as manager
(1,17,000)
(78,000)
(43,200)
=
(2,38,200)
Right distribution of Rs 4,140
(300)
(200)
(500)
=
NIL
Date
Particulars
L.F.
Debit Amount Rs
Credit Amount Rs
Kavita's Capital A/c
Dr.
300
Pradeep's Capital A/c
Dr.
200
To Chandan's Capital A/c
500
(Adjustment of profit made)
|
|
|
|
Interest on Loan |
+ |
Salary |
= |
Total |
|
2014 |
59,000 |
+ |
1,800 |
+ |
9,000 |
= |
69,800 |
|
2015 |
62,000 |
+ |
1,800 |
+ |
9,000 |
= |
72,800 |
|
2016 |
(4,000) |
+ |
1,800 |
+ |
9,000 |
= |
6,800 |
|
2017 |
78,000 |
+ |
1,800 |
+ |
9,000 |
= |
88,800 |
|
|
1,95,000 |
+ |
7,200 |
+ |
36,000 |
= |
2,38,200 |
Chandan received as Manager = Interest on Loan + Salary = 7,200 + 36,000 = Rs 43,200
Total Profit of 4 years before interest on Chandan’s Loan and Salary = 2,38,200
Interest on Chandan’s Caiptal for 4 years ={20,000 × (6/100) = 1,200}
= 1,200 × 4 = Rs 4,800
Profit after interest on all partners Capital
= Total Profit of four years before interest on Chandan’s loan and Salary – Interest on Chandan’s Capital for four years
= 2,38,200 – 4,800
= Rs 2,33,400
Wrong Distribution – Distribution of 4 years
Profit when Chandan as a Manager
|
|
Kavita {1,95,000 × (3/5)} |
= |
1,17,000 |
|
|
|
Pradeep {1,95,000 × (2/5)} |
= |
78,000 |
|
|
Chandan received as manager = Interest on Loan + Salary |
||||
|
|
= 7,200 + 36,000 |
= |
43,200 |
|
|
|
|
|
2,38,200 |
|
Right Distribution – Division of Profit when Chandan as Partner
|
Chandan Share of Profit {2,33,400 × (1/6)} |
38,900 |
|
Interest on Capital |
4,800 |
|
|
43,700 |
|
Kavita’s Share of Profit {(2,33,400 – 38,900) ×(3/5)} = |
1,16,700 |
|
Pradeep’s share of Profit {(2,33,400 – 38,900) × (2/5)} = |
77,800 |
Adjustment of Profit
|
|
Kavita |
|
Pradeep |
|
Chandan |
= |
Total |
|
Distribution of profit when Chandan as partner |
1,16,700 |
|
77,800 |
|
43,700 |
= |
2,38,200 |
|
Less: Distribution of profit when Chandan as manager |
(1,17,000) |
|
(78,000) |
|
(43,200) |
= |
(2,38,200) |
|
Right distribution of Rs 4,140 |
(300) |
|
(200) |
|
(500) |
= |
NIL |
|
Date |
Particulars
|
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Kavita's Capital A/c |
Dr. |
|
300 |
|
|
|
Pradeep's Capital A/c |
Dr. |
|
200 |
|
|
|
To Chandan's Capital A/c |
|
|
|
500 |
|
|
(Adjustment of profit made) |
|
|
|
|
|
|
|
|
|
|
|
