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Question

X, Y and Z were partners in a firm. On 1st April, 2016 their capitals stood at Rs 6,00,000, Rs 4,00,000 and Rs 2,00,000 respectively. As per provisions of the partnership deed :

(i) Y was entitled for commission of Rs 12,000 p.a.

(ii) X was entitled for a salary of Rs 1,200 per month.

(iii) Partners were entitled to interest on Capital at 8% p.a.

(iv) Profits were to be shared in the ratio of Capitals.

Net profit for the year ended 31.03.2017 was Rs 4,22,400 which was distributed equally, without taking into consideration the above provisions. Showing your workings clearly, pass necessary adjustment entry for the above.


Solution

X(Rs)Y(Rs)Z(Rs)Total RsCommission to Y                                               (Cr.)12,00012,000Salary to X                                                      (Cr.)14,40014,400Interest on Capital                                          (Cr.)48,00032,00016,00096,000Profit remaining after allowing commission,salary and interest on capital will be Rs 4,22,400Rs 12,000Rs 14,400Rs 96,000=Rs 3,00,000.It will be divided in their profit sharing ratio,1,50,000––––––––1,00,000––––––––50,000––––––3,00,000––––––––i.e.,3:2:1.Net amount which sholud have beenreceived                                                                 (Cr.)2,12,4001,44,00066,0004,22,400Less: Profit already distributed equally              (Dr.)1,40,800––––––––1,40,800––––––––1,40,800––––––––4,22,400––––––––71,6003,20074,800(Cr.)––––(Cr.)––––(Dr.)–––––¯¯¯¯¯¯¯¯¯¯       –––

                                                     ADJUSTMENT ENTRY

DateParticularsL.FDr.(Rs)Cr.(Rs)2017March 31Z's Capital A/c                                            Dr.74,800    To X's Capital A/c71,600    To Y's Capital A/c3,200(Adjustment for commission, salary, intereston capital and wrong distribution of profit)

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