Question

Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs 30,000, Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for the year ended March 31, 2007 amounting to Rs 24,000 had been credited to partners in the proportion in which they shared profits. During the year their drawings for Mohan, Vijay and Anil were Rs 5,000, Rs 4,000 and Rs 3,000 respectively. Subsequently, the following omissions were noticed

(a) Interest on Capital, at the rate of 10% pa, was not charged.

(b) Interest on Drawings Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded in the books.

Record necessary corrections through journal entries.

Answer 1

Calculation of Opening Capital

$\begin{array}{cccc}\text{Particulars}& \text{Mohan}& \text{Vijay}& \text{Anil}\\ \text{Capital as on 31 March, 2007}& 30,000& 25,000& 20,000\\ \text{(+) Drawings}& 5,000& 4,000& 3,000\\ \text{(-) Profits (24,000 in 1:1:1)}& (8,000)& (8,000)& (8,000)\\ \text{Capital as on 1 April, 2006}& \underset{–}{\underset{–}{\overline{27,000}}}& \underset{–}{\underset{–}{\overline{21,000}}}& \underset{–}{\underset{–}{\overline{15,000}}}\end{array}$

Interest on Capital @ 10% 2,700 2,100 1,500

$\begin{array}{ccccc}\text{Statement for Adjustment}& & \text{Mohan}& \text{Vijay}& \text{Anil}\\ \text{Amount Already Credited}& & & & \\ \text{(Profit 24,000 in 1:1:1)}& \text{A}& \underset{–}{8,000}& \underset{–}{8,000}& \underset{–}{8,000}\\ \text{Amount to be Credited}\text{Interest on Capital}& & 2,700& 2,100& 1,500\\ \text{(-) Interest on Drawings}& & \left(250\right)& \left(200\right)& \left(150\right)\\ \text{Profit (24,000 + 600 - 6,300)}& & 6,100& 6,100& 6,100\\ & \text{B}& \overline{\underset{–}{8,550}}& \overline{\underset{–}{8,000}}& \overline{\underset{–}{7,450}}\\ \text{Difference}& \text{(B-A)}& 550& & \left(550\right)\\ & & \text{Cr}& & \text{Dr}\end{array}$

Journal Entry

$\begin{array}{ccccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& & \text{Amt. (Cr)}\\ & \text{Anil's Capital A/c}& \text{Dr}& & 550& & \\ & \text{To Mohan's Capital A/c}& & & & & \\ & \text{(Being profit adjusted among all partners)}& & & & & 550\end{array}$