Question

The net profit of X, Y and Z for the year ended March 31, 2006 was Rs 60,000 and the same was distributed among them in their agreed ratio of 3:1:1. It was subsequently discovered that the under mentioned transanctions were not recorded in the books

(i) Interest on Capital @ 5% pa.

(ii) Interest on drawings amounting to X Rs 700, Y Rs 500 and Z Rs 300.

(iii) Partner's Salary X Rs 1,000, Y Rs 1,500 pa.

The capital accounts of partners were fixed as X Rs 1,00,000, Y Rs 80,000 and Z Rs 60,000. Record the adjustment entry.

Answer 1

$\begin{array}{ccccc}\text{Particulars}& & \text{X}& \text{Y}& \text{Z}\\ \text{Amount Wrongly Credited}& & 36,000& 12,000& 12,000\\ & \text{A}& 36,000& 12,000& 12,000\\ \text{Amount to be Credited}& & & & \\ \text{Interest on Capital}@5\%& & 5,000& 4,000& 3,000\\ \text{Interest on Drawings}& & \left(700\right)& \left(500\right)& \left(300\right)\\ \text{Salary}& & 1,000& 1,500& \\ \text{Profit Share}[60,000-12,000-2,500+1,500]in3:1:1& & & & \\ & & 28,200& 9,400& 9,400\\ & \text{B}& \underset{–}{\overline{\underset{–}{33,500}}}& \underset{–}{\underset{–}{\overline{14,400}}}& \underset{–}{\overline{\underset{–}{12,100}}}\\ \text{Difference}& \text{(B-A)}& (2,500)& 2,400& 100\\ & & \text{Dr}& \text{Cr}& \text{Cr}\end{array}$

Note Negative figure is debit and positive figure is credit.

Journal Entry

$\begin{array}{ccccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& & \text{Amt. (Cr)}\\ & \text{X's Current A/c}& \text{Dr}& & 2,500& & \\ & \text{To Y's Current A/c}& & & & & 2,400\\ & \text{To Z's Current A/c}& & & & & 100\\ & \text{(Being profit adjusted among all partners)}& & & & & \end{array}$