Question

On March 31, 2006 the balance in the capital accounts of Eluin, Monu and Ahmed, after making adjustments for profits, drawing, etc were Rs 80,000, Rs 60,000 and Rs 40,000 respectively. Subsequently, it was discovered that interest on capital and interest on drawings has been omitted.

The partners were entitled to interest on capital @ 5% pa. The drawings during the year Eluin Rs 20,000; Monu, Rs 15000 and Ahmed, Rs 9,000. Interest on drawings chargeable to partners were Eluin Rs 500, Monu Rs 360 and Ahmed Rs 200. The net profit during the year amounted to Rs 1,20,000. The profit sharing ratio was 3:2:1. Pass necessary adjustment entries.

Answer 1

Calculation of Opening Capital

$\begin{array}{cccc}\text{Particulars}& \text{Eluin}& \text{Monu}& \text{Ahmed}\\ \text{Capital as on 31 March, 2006}& 80,000& 60,000& 40,000\\ \text{(+) Drawings}& 20,000& 15,000& 9,000\\ \text{(-) Profits (1,20,000 in 3:2:1)}& \underset{–}{(60,000)}& \underset{–}{(40,000)}& \underset{–}{(20,000)}\\ \text{Capital as on 1 April, 2005}& \underset{–}{(40,000)}& \underset{–}{(35,000)}& \underset{–}{(29,000)}\end{array}$

$\begin{array}{ccccc}\text{Statement for Adjustment}& & \text{Eluin}& \text{Monu}& \text{Ahmed}\\ \text{Amount Already Credited}& & 60,000& 40,000& 20,000\\ & \text{A}& 60,000& 40,000& 20,000\\ \text{Amount to be Credited}& & & & \\ \text{(+) Interest on Capital}& & 2,000& 1,750& 1,450\\ \text{(-) Interest on Drawings Share of Profit}& & \left(500\right)& \left(360\right)& \left(200\right)\\ (1,20,000+1,060-5,200)in3:2:1& & \underset{–}{57,930}& \underset{–}{38,620}& \underset{–}{19,310}\\ & \text{B}& \underset{–}{59,430}& \underset{–}{40,010}& \underset{–}{20,560}\\ \text{Difference (B-A)}& & \left(570\right)& 10& 560\\ & & \text{Dr}& \text{Cr}& \text{Cr}\end{array}$

Note: Negative is Debit.

Journal Entry

$\begin{array}{ccccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& & \text{Amt. (Cr)}\\ & \text{Eliun's Capital A/c}& \text{Dr}& & 570& & \\ & \text{To Monu's Capital A/c}& & & & & 10\\ & \text{To Ahmed's Capital A/c}& & & & & 560\\ & \text{(Being profit adjusted among all partners)}& & & & & \end{array}$