Question

R and M were partners in a firm sharing profits in the ratio of 7:5. Their respective fixed capitals were R Rs 10,00,000 and M Rs 7,00,000. The partnership deed provided for the following :

(i) Interest on capital @ 12% p.a.

(ii) R's salary Rs 6,000 per month and M's salary Rs 60,000 per year. The profit for the year ended 31-03-2007 was Rs 5,04,000 which was distributed in 3:2 without providing for the above. Pass an Adjustment entry.

Answer 1

JOURNAL
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debt}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{R's Current A/c}& \text{Dr}.& & 12,400& \\ & \text{To M's Current A/c}& & & & 12,400\\ & \text{(Being adjustment of appropriation done)}& & & & \end{array}$
TABLE SHOWING ADJUSTMENT
$\begin{array}{ccccc}\text{Particulars}& & R& M& \text{Total}\\ & & \text{(Rs)}& \text{(Rs)}& \text{(Rs)}\\ \text{Interest on Capital}& \text{Cr.}& 1,20,000& 84,000& 2,04,000\\ \text{Salary}& \text{Cr.}& 72,000& 60,000& 1,32,000\\ \text{Total Appropriation}& \text{Cr.}& 1,92,000& 1,44,000& 3,36.000\\ \text{Remaining Profit to be distributed in (7:5)}& \text{Cr.}& 98,000& 70,000& 1,68,000\\ \text{Total}& \text{Cr.}& 2,90,000& 2,14,000& 5,04,000\\ \text{Profit already distibuted (3:2)}& \text{Cr.}& \underset{–}{3,02,400}& \underset{–}{2,01,600}& \underset{–}{5,04,000}\\ \text{Net Effect}& & 12,400\text{Dr.}& 12,400\text{Cr.}& \end{array}$