Question 72 Chapter 2 of +2-A
72. On 31st March 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after
making adjustments for profits and drawings, etc., were 80,000, 60,000, 40,000
respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted.
- The profit for the year ended 31st March 2014 was 80,000.
- During the year Saroj and Mahinder each withdrew a sum of 24,000 in equal instalments at the end of each month and Umar withdrew 36,000.
- The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.
- The profit-sharing ratio among partners was 4 : 3: 1.
Showing your workings clearly, pass the necessary rectifying entry.
The solution of Question 72 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| Saroj’s Capital A/c | Dr | 2,350 | |||
| Mahinder’s Capital A/c | Dr | 1,300 | |||
| To Umar’s Capital A/c | 3,650 | ||||
| (Being adjustment made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
|||
| Particulars | Amount of Saroj’s Capital |
Amount of Mahinder’s Capital |
Amount of Umar’s Capital |
| Capital at the end | 80,000 | 60,000 | 40,000 |
| Less: Profit already Distributed (4:3:1) |
40,000 | 30,000 | 10,000 |
| Add: Drawings During the year | 24,000 | 24,000 | 36,000 |
| Capital at the beginning | 64,000 | 54,000 | 66,000 |
| Statement Showing Adjustment of Profit required |
||||
| Particulars | Piya | Mahinder | Umar | Total |
| Actual Amount of Interest on Capital @6% p.a. *2 | 6,400 | 5,400 | 6,600 | 18, 400 |
| Less: – Interest on Drawing | – 550 | – 550 | – 900 | – 2,000 |
| Actual Amount to be credited | 5,850 | 4,850 | 5,700 | 21,950 |
| Less: wrongly Amount credited in Profit sharing ratio i.e. 4:3:1 | 8,200 | 6,150 | 2,050 | 21,950 |
| – 2,350 | -1,300 | 3,650 | – | |
|
Saroj get extra so we have to debit his capital a/c with difference amount |
Mahinder get extra so we have to debit his capital a/c with difference amount
|
Umar get less amount, so we have to credit 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 Saroj’s Capital | = | 64,000 | X | 10 |
| 100 |
Interest on Saroj’s Capital = 6,400/-
| Interest on Mahinder’s Capital | = | 54,000 | X | 10 |
| 100 |
Interest on Mahinder’s Capital = 5,400/-
| Interest on Umar’s Capital | = | 66,000 | X | 10 |
| 100 |
Interest on Umar’s Capital = 6,600/-
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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