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Appropriation of Profits

On March 31, ...

Question

On March 31, 2017 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 had been omitted. The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin Rs 20,000; Monu, Rs 15,000 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.

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Solution

In this question interest on capital shall be calculated on opening capital

Eluin

Monu

Ahmed

Capital on 31 Mar. 2017 (Closing Capital)

80,000

60,000

40,000

Add: Drawings

20,000

15,000

9,000

Less: Profit Rs 120,000 (3:2:1)

(60,000)

(40,000)

(20,000)

Capital on April 01, 2016 (Opening Capital)

40,000

35,000

29,000

Adjustment of Profit

Eluin

Monu

Ahmed

Total

Interest on Capital (on Opening Capital)

2,000

1,750

1,450

=

5,200

Less: Interest on Drawings

(500)

(360)

(200)

=

(1,060)

Right distribution of Rs 4,140

1,500

1,390

1,250

=

4,140

Less: Wrong distribution of Rs 4,140 (in the ratio 3:2:1)

(2,070)

(1,380)

(690)

=

(4,140)

(570)

10

560

=

NIL

Adjusting Journal Entry

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount Rs

Eluin's Capital A/c

Dr.

570

To Monu's Capital A/c

10

To Ahmed's Capital A/c

560

(Adjustment of Profit made)

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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.

On March 31, 2014 the capital accounts of Elvin, Monu and Ahmed after making adjustments for profits, drawings, etc. were as, Elvin - Rs 80,000; Monu - Rs 60,000; and Ahmed - Rs 40,000. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital at 5% p.a. The drawings during the year were : Elvin - Rs 20,000; Monu - Rs 15,000; and Ahmed - Rs 9,000. Interest on drawings chargeable to the partners was Elvin - Rs 500; Monu - Rs 360 and Ahmed - Rs 200. The net profit for the year ended 31st March, 2014 amounted to Rs 1,20,000. The profit sharing ratio of the partners was 3:2:1.

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Q. On 31st March, 2018, Capital Accounts of

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Q. On 31st March, 2014, balances in the Capital Accounts of Eleen, Monu and Ahmad after making adjustments for profits and drawings were

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R s . 80, 000

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R s . 24, 000

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R s . 48, 000

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10 %

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Q. On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were Rs. 80;000,Rs. 60,000 and Rs. 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 Rs. 80,000;

(b) During the year Saroj and Mahinder each withdraw a sum of Rs. 24,000 in equal instalments in the end of each month and Umar withdrew Rs. 36,000.
(c) The interest on drawings was to be charged @ 5% pa. 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.

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	Eluin	Monu	Ahmed
Capital on 31 Mar. 2017 (Closing Capital)	80,000	60,000	40,000
Add: Drawings	20,000	15,000	9,000
Less: Profit Rs 120,000 (3:2:1)	(60,000)	(40,000)	(20,000)
Capital on April 01, 2016 (Opening Capital)	40,000	35,000	29,000

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Eluin's Capital A/c	Dr.		570
	To Monu's Capital A/c				10
	To Ahmed's Capital A/c				560
	(Adjustment of Profit made)