Question 71 Chapter 2 of Class 12 Part - 1 VK Publication

Question 71 Chapter 2 of Class 12 Part – 1

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The solution of Question 71 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

71. The capital accounts of Akhil and Nikhil stood at Rs. 42,000 and Rs. 32,000 respectively after the necessary adjustments in respect of the drawings and the net profit for the year. It was subsequently ascertained that interest on capital and on drawings @5% p.a. were not taken into account in arriving at the net profit. The drawings of partners had been: Akhil Rs. 1,200 drawn at the end of each quarter and Nikhil Rs. 1,800 drawn at the end of each half year.
The profit for year ended 31st March, 2017 as adjusted amounted to Rs. 22,000. The partners share profits in proportion of Akhil 3/5 and Nikhil 2/3. You are required to pass necessary journal entry and to show the adjusted capital accounts of the partners.

The solution of Question 71 Chapter 2 of Class 12 Part – 1: –

For the calculation of interest on capital, opening capitals of the partnershave to be calculated.

Statement Showing calculation of opening capital

Particulars	M Rs.	N Rs.
Capital at the end	42,000	32,000
Add: Drawings made during the year	4,800	3,600
Less: Share of Profit	(13,200)	(8,800)
Opening capitals	33,600	26,800

Interest on Capitals:
Akhil = 33,600 ×5/100= Rs. 1,680
Nikhil = 26,800 ×5/100= Rs. 1,340
Interest on Akhil’s Drawings by Product Method:

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Product Method

Date	Rs.	Product months	Product ₹ (Amount X months)
At end of 3 months	1,200	9	10,800
At end of 6 months	1,200	6	7,200
At end of 9 months	1,200	3	3,600
At end of 12 months	1,200	0	0
Total of Products			21,600

Interest on Drawings = Total Drawings×Rate/100×1/12
= 21,600 ×5/100×1/12 = Rs. 90
Interest on Akhil’s Drawings by Product Method:

Product Method

Date	Rs.	Product months	Product ₹ (Amount X months)
At end of 6 months	1,800	6	10,800
At end of 12 months	1,800	0	0
Total of Products			10,800

Interest on Drawings = Total Drawings×Rate/100×1/12
= 10,800 ×5/100×1/12 = Rs. 45

Table Adjustment

Particulars	Akhil Rs.	Nikhil Rs.	Total Rs.
Interest on Capital A/c	1,680	1,340	3,020
Less: Interest on Drawings	90	45	135
(Cr.) (A)	1,590	1,295	2,885
Less: Net loss of the firm ( Rs. 2,885 in the ratio of 3:2) (Dr.) (B)	1,731	1,154	2,885
Net Effect (A-B)	( Dr.) 141	(Cr.) 141	NIL

Adjustment Journal Entry

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Date	Particular		L . F	Dr. ₹	Cr. ₹
	Akhil’s Capital A/c	Dr.		141
	To Nikhil’s Capital A/c				141
	(Being partners’ capital account adjusted for interest on capital and drawings )

Partners Adjusted Capital Account

Particular	Akhil	Nikhil	Particular	Akhil	Nikhil
To Nikhil’s Capital A/c	141	–	By Balance b/d	42,000	32,000
To Balance c/d	41,859	32,141	By Akhil’s Capital A/c	–	141