Question

Mudit, Sudhir and Uday are partners in a firm sharing profits in the ratio of 3 : 1 : 1. Their fixed capital balances are ₹ 4,00,000, ₹ 1,60,000 and ₹ 1,20,000 respectively. Net profit for the year ended 31st March, 2018 distributed amongst the partners was ₹ 1,00,000, without taking into account the following adjustments:
(a) Interest on capitals @ 2.5% p.a.;
(b) Salary to Mudit ₹ 18,000 p.a. and commission to Uday ₹ 12,000.
(c) Mudit was allowed a commission of 6% of divisible profit after charging such commission.
Pass a rectifying Journal entry in the books of the firm. Show workings clearly.

Answer 1

In the books of Mudit, Sudhir and Uday Journal
Date	Particulars				L.F.	Debit Amount (₹)	Credit Amount (₹)
2018
March 31	Sudhir’s Current A/c			Dr.		6,000
	To Mudit’s Current A/c						1,000
	To Uday’s Current A/c						5,000
	(Being adjustment entry passed for rectification of errors)

Working Notes:

Table Showing Adjustment
Particulars	Mudit’s Current A/c		Sudhir’s Current A/c		Uday’s Current A/c		Firm
	Dr.( ₹)	Cr.( ₹)	Dr.( ₹)	Cr.( ₹)	Dr.( ₹)	Cr.( ₹)	Dr.( ₹)	Cr.( ₹)
Profits wrongly Distributed (Dr.)	60,000		20,000		20,000			1,00,000
Interest on Capital to be
Provided (Cr.)		10,000		4,000		3,000	17,000
Salary to be provided (Cr.)		18,000					18,000
Commission to be provided (Cr.)		3,000				12,000	15,000
Profit correctly distributed (Cr.)		30,000		10,000		10,000	50,000
Balance to be adjusted	1,000(Cr.)		6,000(Dr.)		5,000(Cr.)		NIL

Divisible Profits	=	Profits before appropriation – (Interest on Capital + Salary + Uday’s Commission)
	=	₹ 1,00,000 – (17,000 + 18,000 + 12,000) = ₹ 53,000
Mudit’s Commission	=	(Divisible Profit × Rate/ 100 + Rate)
	=	₹ (53,000 × 6/106) = ₹ 3,000