Question

On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were ₹ 80,000, ₹ 60,000, ₹ 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted.
(a) The profit for the year ended 31st March, 2014 was ₹ 80,000.
(b) During the year Saroj and Mahinder each withdrew a sum of ₹ 24,000 in equal instalments in the end of each month and Umar withdrew ₹ 36,000.
(c) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.
(d) The profit-sharing ratio among partners was 4 : 3 : 1.
Showing your workings clearly, pass the necessary rectifying entry.

Answer 1

Journal
Particular		L.F.	Debit Amount (₹)	Credit Amount (₹)
Saroj’s Capital A/c	Dr.		2,350
Mahinder’s Capital A/c	Dr.		1,300
To Umar’s Capital A/c				3,650
(Adjustment made)

Working Notes:

Particular	Saroj	Mahinder	Umar
Closing Capitals	80,000	60,000	40,000
Add: Drawings	24,000	24,000	36,000
Less: Profit Share	40,000	30,000	10,000
Opening Capital	64,000	54,000	66,000

Particular	Saroj	Mahinder	Umar	Total
Interest on Capital @ 10% p.a.	6,400	5,400	6,600	(18,400)
Interest on Drawings@ 5% p.a.	(550)	(550)	(900)	2,000
Profit (80,000 – 18,400 + 2,000)	31,800	23,850	7,950	(63,600)
Right Share	37,650	28,700	13,650	(80,000)
Wrong Share	(40,000)	(30,000)	(10,000)	80,000
Net Effect	2,350 (Dr.)	1,300 (Dr.)	3,650 (Cr.)	Nil