Reya, Mona and Nisha shared profits in the ratio of 3 : 2 : 1. The profits for the last three years was 1,40,000; 84,000 and 1,06,000 respectively. These profits were by mistake shared equally for all three years. It is now decided to correct the error. Give necessary Journal entry for the same.

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Solution

In the given question,we need to pass two journal entries. One for reversing the wrong credit and the other one is for giving the correct credit of profits.

Year 1 2 3

Reya's Capital A/c Dr. 46,667 28,000 35,333
Mona's Capital A/c Dr. 46,667 28,000 35,333
Nisha's Capital A/c Dr. 46,666 28,000 35,334

To Profit and Loss Appropriation A/c 1,40,000 84,000 1,06,000
(Being reverse entry passed for wrong credit of profits)

Profit and Loss Appropriation A/c Dr 1,40,000 84,000 1,06,000
To Reya's Capital A/c 70,000 42,000 53,000
To Mona's Capital A/c 46,667 28,000 34,667
To Nisha's Capital A/c 23,333 14,000 17,667
(Being rectification entry passed in the ratio of 3:2:1)

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