$P, Q$ and $R$ are partners in a firm. Their Capital Accounts stood at $R s . 3, 00, 000; R s . 1, 50, 000$ and $R s . 1, 50, 000$ respectively on 1st April, 2017.
AS per the provisions of the Deed:
(i) $R$ was to be allowed a remuneration of $R s . 36, 000$ per annum,
(ii) Interest @ $5 %$ p.a. was to be provided on capital and
(iii) Profits were to be distributed in the ratio of $2 : 2 : 1$ .
Ignoring the above terms, net profit of $R s . 1, 80, 000$ for the year ended 31st March, 2018 was distributed among the three partners equally.
Pass the Journal entries to rectify the above errors.

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Solution

The following rectifying journal entries needs to be passed:-
P's capital A/c Dr. 60,000
Q's capital A/c Dr. 60,000
R's capital A/c Dr. 60,000
To Profit and loss Appropriation A/c 1,80,000
(Being the share of profit wrongly distributed reversed)

Profit and Loss Adjustment A/c Dr. 36,000
To R's capital A/c 36,000
(Being remuneration credited)

Profit and loss Adjustment A/c Dr. 30,000
To P's capital A/c(3,00,0005%) 15,000
To Q's capital A/c(1,50,0005%) 7,500
To R's capital A/c(1,50,000*5%) 7,500
(Being interest on capital credited to partners)

Profit and loss Adjustment A/c Dr. 1,14,000
To P's capital A/c 45,600
To Q's capital A/c 45,600
To R's capital A/c 22,800
(Being the divisible profit credited to partners)

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