Question

The net profit of a firm for the year ended 31st March 2017, was Rs 30,000, which has been duly distributed amongst its three partners A, B and C in their agreed proportions of 3:1:1 respectively. It was discovered on 10th April 2017 that the undermentioned transactions were not passed through the books of accounts of the firm for the year ended 31st March 2017, which stood duly closed on that date:

(a) Interest on capital at 10% p.a.

(b) Interest on drawings : A Rs 350; B Rs 250; C Rs 150.

(c) Salary of Rs 5,000 to A and Rs 7,500 to B.

(d) Commission due to A on a special transaction, Rs 3,000.

The capital accounts of the partners on 1st April, 2016 were : A Rs 25,000; B Rs 20,000; C Rs 15,000.

You are required to suggest a journal entry to be passed on 10th April, 2017 which will not affect the Profit and Loss Appropriation Account of the firm for the year ended 31st March, 2017 and at the same time will rectify the position of the partners.

Answer 1

$\begin{array}{ccccc}& A\left(Rs\right)& B\left(Rs\right)& C\left(Rs\right)& \text{Total (Rs)}\\ \text{Interest on Capital}(Cr.)& 2,500& 2,000& 1,500& 6,000\\ Salary(Cr.)& 5,000& 7,500& -& 12,500\\ Commission(Cr.)& \underset{–}{3,000}& \underset{–}{-}& \underset{–}{-}& \underset{–}{3,000}\\ & 10,500& 9,500& 1,500& 21,500\\ Less:InterestonDrawings(Dr.)& 350& 250& 150& 750\\ & \overline{10,150}& \overline{9,250}& \overline{1,350}& \overline{20,750}\\ \text{Less: Division of Firm's Loss of}& & & & \\ Rs20,750in3:1:1(Dr.)& \underset{–}{12,450}& \underset{–}{4,150}& \underset{–}{4,150}& \underset{–}{}\\ \text{Net Effect}& (Dr.)2,300& (Cr.)5,100& (Dr.)2,800& -\end{array}$

Adjustment Entry:

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Dr.Rs}& \text{Cr. Rs}\\ 2017& & & & \\ \text{April 10}& \text{A's Capital A/c}Dr.& & 2,300& \\ & \text{C's Capital A/c}Dr.& & 2,800& \\ & \text{To B's Capital A/c}& & & 5,100\\ & \text{(Adjustment for omissions)}& & & \end{array}$