Question 63 Chapter 2 of Class 12 Part - 1 VK Publication

Question 63 Chapter 2 of Class 12 Part – 1

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The solution of Question 63 Chapter 2 of Class 12 Part – 1: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

63. On 31st March, 2014, the balances in the Capital Accounts of Esha, Manav and Daman after making adjustments for profits and drawings were Rs. 3,20,000, Rs. 2,40,000 and Rs. 1,60,000 respectively. Subsequently it was discovered that interest on capital and drawings had been omitted.
(i) The profit of the year ended 31st March, 2014 was Rs. 90,000.
(ii) During the year, Esha and Manav each withdrew a sum of Rs. 48,000 in equal installments in the middle of every month and Daman withdrew Rs. 60,000.
(iii) The interest on drawings was to be charged @5% pa. and interest on capital was to be allowed @ 10% pa.
(iv) The profit-sharing ratio among the partners was 3: 2:1
Showing your workings clearly, pass the necessary rectifying entry,

The solution of Question 63 Chapter 2 of Class 12 Part – 1: –

Rectifying Entry

Date	Particulars		L . F	Dr. ₹	Cr. ₹
	Esha’s Capital A/c	Dr.		6,250
	Manav’s Capital A/c			300
	To Daman’s Capital A/c
	(Being the interest on capital and interest on drawings omitted, now aduated) (WN)

Working Notes:
1. Calculation of Interest on Capital: For the calculation of interest on capital, Opening Capital has to be ascertained:

Table Adjustment

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Particulars	Esha Rs.	Manav Rs.	Daman Rs.
Closing Capital	3,20,000	2,40,000	1,60,000
Add: Drawings already debited	48,000	48,000	60,000
	3,68,000	2,88,000	2,20,000
Less: Profit already credited	45,000	30,000	15,000
Opening Capital	3,23,000	2,58,000	2,05,000
Interest on Capital @10% pa.	3,23,000 x 10/100= 32,300	2,58,000 x 10/100 = 25,800	2,05,000 x 10/100 = 20,500

Total Interest on Capital = 32,300+ 25,800+ 20,500 = Rs. 78,600
2. Interest on Drawings: During the year, Esha and Manav each withdrew a sum of Rs. 48,000 in equal instalments in the middle of every month. We will calculate interest on Drawings by Average Period Method, r., for 6 months. Rs. 48,000 x 6/12 x 5/100 = Rs. 1,200 for each.
Interest on Daman’s Drawings = Rs. 60,000 x 5/100 x 6*/12 = Rs. 1,500
Total Interest on Drawings = 1,200+ 1,200+1,500 = Rs. 3,900
*Date of drawings is not given, so interest will be charged for 6 months.
3. Statement Showing Required Adjustment

Particulars	Esha ₹		Manav ₹		Daman ₹		Firm ₹
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
For Interest on Drawings	1,200	….	1,200	…	1,500	…	….	3,900
For Interest on Capital	….	32,300	…	25,800	…	20,500	78,600	…
For Profit to be Shared [Rs. 15,300 (i.e., Rs. 90,000- Rs. 78,600- Rs. 3,900) in the Ratio of 3:2:1]	….	7,650	…	5,100	…	2,550	15,300	…
Profit of Rs. 90,000 already distributed in the ratio of 3:21 now reversed	45,000	…	30,000	…	15,000	…	…	90,000
	46,200	39,950	31,200	30,900	16,500	23,050	93,900	93,900
Net Effect (Dr./Cr.)	6,250(Dr.)		300 (Dr.)		6,550 (Dr.)		…