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.

Answer 1

$\begin{array}{ccccc}& X\left(Rs\right)& Y\left(Rs\right)& Z\left(Rs\right)& \text{Total Rs}\\ \text{Commission to Y}(Cr.)& & 12,000& & 12,000\\ \text{Salary to X}(Cr.)& 14,400& & & 14,400\\ \text{Interest on Capital}(Cr.)& 48,000& 32,000& 16,000& 96,000\\ \text{Profit remaining after allowing commission,}& & & & \\ \text{salary and interest on capital will be Rs 4,22,400}& & & & \\ -Rs12,000-Rs14,400-Rs96,000=Rs3,00,000.& & & & \\ \text{It will be divided in their profit sharing ratio,}& \underset{–}{1,50,000}& \underset{–}{1,00,000}& \underset{–}{50,000}& \underset{–}{3,00,000}\\ i.e.,3:2:1.& & & & \\ \text{Net amount which sholud have been}& & & & \\ \text{received}(Cr.)& 2,12,400& 1,44,000& 66,000& 4,22,400\\ \text{Less: Profit already distributed equally}(Dr.)& \underset{–}{1,40,800}& \underset{–}{1,40,800}& \underset{–}{1,40,800}& \underset{–}{4,22,400}\\ & 71,600& 3,200& 74,800& -\\ & \underset{–}{(Cr.)}& \underset{–}{(Cr.)}& \underset{–}{(Dr.)}& \underset{–}{\overline{}}\end{array}$

ADJUSTMENT ENTRY

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& L.F& Dr.\left(Rs\right)& Cr.\left(Rs\right)\\ 2017& & & & \\ \text{March 31}& \text{Z's Capital A/c}Dr.& & 74,800& \\ & \text{To X's Capital A/c}& & & 71,600\\ & \text{To Y's Capital A/c}& & & 3,200\\ & \text{(Adjustment for commission, salary, interest}& & & \\ & \text{on capital and wrong distribution of profit)}& & & \end{array}$