Question 68 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 68 Chapter 2 of +2-A

Question 68 Chapter 2 of +2-A

68. A B and C were partners. Their capitals were A– 30,000; B– 20,000 and C– 10,000 respectively. According to the Partnership Deed, they were entitled to interest on capital @ 5%p.a. In addition, B was also entitled to draw a salary of 500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the
salary payable to B. The net profit for the year were 30,000 distributed in the ratio of capitals without providing for any of the above adjustments. The profits were to be shared in the ratio
of 5 : 3: 2.
Pass necessary adjustment entry showing the workings clearly.

 

The solution of Question 68 Chapter 2 of +2-A

:

Date Particulars
L.F. Debit Credit
  A’s Capital A/c Dr   3,675  
  To B’s Capital A/c       2,895
  To C’s Capital A/c       780
  (Being adjustment made)        

 


Working Note: –

 

 

Statement Showing Adjustment of Profit required
Particulars A

B

C

Total
Actual Amount of Interest on Capital @12% p.a. *1 1,500 1,000 500 3,000
Add: – Salary (500 X 12months) 6,000 6,000
Add: – Commission *2 1,350 1,350
Actual Amount to be credited 1,500 7,000 1,850 10,350
Less: wrongly Amount credited in Profit sharing ratio i.e. 3:2:1 5,175 3,450 1,725 10,350
  – 3,675 3,550  125
 

A get less amount, so we have to credit his capital a/c with difference amount

B get extra so we have to debit his capital a/c with difference amount

 

C get extra so we have to debit his capital a/c with difference amount

 

*1 Calculation of Actual Amount of Interest on A’s, B’s, & C’s Capital
Interest on Capital = Opening Capital X Rate of Interest



Interest on A’s Capital 30,000 X 5
100

Interest on A’s Capital = 1,500/-

Interest on B’s Capital 20,000 X 5
100

Interest on B’s Capital = 1,000/-

Interest on C’s Capital 10,000 X 5
100

Interest on C’s Capital = 500/-

*2 Calculation of Commission to C

Commission to C = 5% on Net Profits after Interest on Capital
Net Profit after Interest on Capital = 30,000 – 3,000 = 27,000
Commission to C Net Profit X Rate
100

 

Interest on C’s Capital 27,000 X 5
100

Commission to C = 1,350/-

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)

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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 1 min - Question 68 Chapter 2 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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