Question

The net profit of X, Y and Z for the year ended March 31, 2016 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 transactions were not recorded in the books :

(i)	Interest on Capital @ 5% p.a.
(ii)	Interest on drawings amounting to X Rs 700, Y Rs 500 and Z Rs 300.
(iii)	Partner’s Salary : X Rs 1000, Y Rs 1500 p.a.

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

Past Adjustment

	X	Y	Z		Total
Interest on Capital	5,000	4,000	3,000	=	12,000
Less: Interest on Drawings	(700)	(500)	(300)	=	(1,500)
Add: Partner’s Salaries	1,000	1,500	NIL	=	2,500
Right distribution of Rs 13,000	5,300	5,000	2,700	=	13,000
Less: Wrong distribution of Rs 13,000 (3:1:1)	(7,800)	(2,600)	(2,600)	=	(13,000)
	(2,500) Dr.	2,400 Cr	100 Cr	=	NIL

Explanation:

Capital have credit balance if it deducted will be debited and if it is added it will be credited.

Here X wrongly taken excess Rs 2,500 hence Rs 2,500 will be deducted from X capital Account on the other hand Y and Z taken less amount as they should have been taken, hence capital account of Y and Z will be added.

Date	Particulars			L.F	Debit Amount Rs	Credit Amount Rs
	X’s Capital A/c		Dr.		2,500
		To Y’s Capital A/c				2,400
		To Z’s Capital A/c				100
	(Profit adjusted among partners)