Question 65 Chapter 2 of +2-A
65. Piya and Bina are partners in firm sharing profits and losses in the ratio of 3 : 2. Following
| Liabilities | Assets | |||
| Capitals: | Sundry Assets | 1,20,000 | ||
| Piya | 80,000 | |||
| Bina | 40,000 | 1,20,000 | ||
| 1,20,000 | 1,20,000 |
The profits 30,000 for the year ended 31st March 2016 were divided between the partners without allowing interest on capital @ 12% p.a. salary to Piya @ 1,000 per month. During the year Piya withdrew 8,000 and Bina withdrew 4,000. Showing your working notes clearly, pass the necessary rectifying entry.
The solution of Question 65 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| Bina’s Capital A/c | Dr | 5,856 | |||
| To Piya’s Capital A/c | 5,856 | ||||
| (Being adjustment of Interest on partners′ capital made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
||
| Particulars | Amount of Mohan’s Capital |
Amount of Vijay’s Capital |
| Capital at the end | 80,000 | 40,000 |
| Less: Profit already Distributed (1:1:1) |
18,000 | 12,000 |
| Add: Drawings During the year | 8,000 | 4,000 |
| Capital at the beginning | 70,000 | 32,000 |
| Statement Showing Adjustment of Profit required |
|||
| Particulars | Piya |
Bina |
Total |
| Actual Amount of Interest on Capital @12% p.a. | 8,400 | 3,840 | 12,240 |
| Add: – Salary 1000 X 12months | 12,000 | – | 12,000 |
| Actual Amount to be credited | 20,400 | 3,840 | 24,240 |
| Less: wrongly Amount credited in Profit sharing ratio i.e. 3:2 | 14,544 | 9,696 | 24,240 |
| 5,856 | – 5,856 | – | |
|
Piya get less amount, so we have to credit his capital a/c with difference amount |
Bina get extra so we have to debit his capital a/c with difference amount
|
||
Calculation of Actual Amount of Interest on Piya’s & Bina’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Piya’s Capital | = | 70,000 | X | 12 |
| 100 |
Interest on Piya’s Capital = 8,400/-
| Interest on Bina’s Capital | = | 32,000 | X | 12 |
| 100 |
Interest on Bina’s Capital = 3,840/-
Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
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