Question 70 Chapter 2 of +2-A
70. Mudit, Sudhir and Uday are partners in firm sharing profits in the ratio of 3: 1: 1. Their
fixed capital balances are 4,00,000, 1,60,000 and 1,20,000 respectively. Net profit for the
year ended 31st March 2018 distributed amongst the partners was 1,00,000, without taking into account the following adjustments:
- Interest on capitals @ 2.5% p.a.;
- Salary to Mudit 18,000 p.a. and commission to Uday 12,000.
- Mudit was allowed a commission of 6% of divisible profit after charging such commission.
Pass a rectifying Journal entry in the books of the firm. Show workings clearly.
The solution of Question 70 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| Sudhir’s Current A/c | Dr | 6,000 | |||
| To Mudit’s Current A/c | 1,000 | ||||
| To Uday’s Current A/c | 5,000 | ||||
| (Being adjustment made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
||||
| Particulars | Mudit |
Sudhir |
Uday |
Total |
| Actual Amount of Interest on Capital @2.5% p.a. *2 | 10,000 | 4,000 | 3,000 | 17,000 |
| Add: – Salary | 18,000 | – | – | 18,000 |
| Add: – Commission *3 | 3,000 | – | 12,000 | 15,000 |
| Actual Amount to be credited | 31,000 | 4,000 | 15,000 | 50,000 |
| Less: wrongly Amount credited in Profit sharing ratio i.e. 3:2:1 | 30,000 | 10,000 | 10,000 | 50,000 |
| 1,000 | – 6,000 | 5,0000 | – | |
|
Mudit get less amount, so we have to credit his capital a/c with difference amount |
Sudhir get extra so we have to debit his capital a/c with difference amount
|
Uday gets less amount, so we have to credit his capital a/c with difference amount |
||
*2 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 Mudit’s Capital | = | 4,00,000 | X | 2.5 |
| 100 |
Interest on Mudit’s Capital = 10,000/-
| Interest on Sudhir’s Capital | = | 1,60,000 | X | 2.5 |
| 100 |
Interest on Sudhir’s Capital = 4,000/-
| Interest on Uday’sCapital | = | 1,20,000 | X | 2.5 |
| 100 |
Interest on Uday’sCapital = 3,000/-
*3 Calculation of Commission to C
| Commission to Mudit | = | 5% on Net Profits after Interest on Capital & Salary |
| Net Profit after Interest on Capital & Salary | = | 1,00,000 – 17, 000 + 18, 000 + 12, 000 = 53,000 |
| Commission to Mudit | = | Net Profit | X | Rate |
| 100 + Rate |
| Commission to Mudit | = | 53,000 | X | 6 |
| 100+6 |
Commission to Mudit = 3,000/-
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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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
