Question

Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3 : 2. Following is the balance sheet of the firm as on March 31, 2017.

			Amount				Amount
Liabilities			Rs	Assets			Rs
Mannu’s Capital		30,000		Drawings :
Shristhi’s Capital		10,000	40,000	Mannu		4,000
				Shristhi		2,000	6,000
				Other Assets			34,000
			40,000				40,000

Profit for the year ended March 31, 2017 was Rs 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.

Answer 1

Adjustment of Profit

	Mannu’s	Shrishti		Total
Interest on Capital	1,500	500	=	2,000
Less: Interest on Drawings	(120)	(60)	=	(180)
Right distribution of Rs 1,820	1,380	440	=	1,820
Less: Wrong distribution of Rs 1,820 (3 : 2)	(1,092)	(728)	=	(1,820)
Adjusted Profit	288	(288)	=	NIL

Adjusting Journal Entry

Date	Particulars		L.F	Debit Amount Rs	Credit Amount Rs
	Shrishti's Capital A/c	Dr.		288
	To Mannu's Capital A/c				288
	(Adjustment of profit made)