Question 73 Chapter 2 of +2-A
73. Capitals of A, B and C as on 31st March, 2019 amounted to 90,000, 3,30,000 and 6,60,000
respectively. Profit of 1,80,000 for the year ended 31st March 2019 was distributed in the
ratio of 4: 1: 1 after allowing interest on Capital @ 10% p.a. During the year, each partner withdrew 3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for
interest on capital @ 12%.
Pass the necessary adjustment entry showing the working clearly.
The solution of Question 73 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| A’s Capital A/c | Dr | 66,600 | |||
| To B’s Capital A/c | 30,000 | ||||
| To C’s Capital A/c | 36,600 | ||||
| (Being adjustment made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
|||
| Particulars | Amount of A’s Capital |
Amount of B’s Capital |
Amount of C’s Capital |
| Capital at the end | 90,000 | 3,30,000 | 6,60,000 |
| Less: Profit already Distributed (4:1:1) |
1,20,000 | 30,000 | 30,000 |
| Add: Drawings During the year | 3,60,000 | 3,60,000 | 3,60,000 |
| Capital at the beginning | 3,30,000 | 6,60,000 | 9,90,000 |
| Statement Showing Adjustment of Profit required |
||||
| Particulars | A | B | C | Total |
| Actual Amount of Interest on Capital @6% p.a. *2 | 39,600 | 79,200 | 1,18,800 | 2,37,600 |
| Add: – Actual amount of Profit share to be credited 1:1:1 *3 | 46,800 | 46,800 | 46,800 | 1,40,400 |
| Less: – wrongly credited amount of interest on capital *4 | -33,000 | -66,000 | -99,000 | -1,98,000 |
| Less: – wrongly credited amount of share of profit 4:1:1 *5 | -1,20,000 | -30,000 | – 30,000 | -1,80,000 |
| – 66,600 | 30,000 | 36,600 | – | |
|
A get extra so we have to debit his capital a/c with difference amount |
B get less amount, so we have to credit his capital a/c with difference amount
|
C get extra so we have to debit 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 A’s Capital | = | 3,30,000 | X | 12 |
| 100 |
Interest on A’s Capital = 33,000/-
| Interest on B’s Capital | = | 6,60,000 | X | 12 |
| 100 |
Interest on B’s Capital = 66,000/-
| Interest on C’s Capital | = | 9,90,000 | X | 12 |
| 100 |
Interest on C’s Capital = 99,000/-
*3 Calculation of the Wrong 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 | = | 3,30,000 | X | 10 |
| 100 |
Interest on A’s Capital = 33,000/-
| Interest on B’s Capital | = | 6,60,000 | X | 10 |
| 100 |
Interest on B’s Capital = 66,000/-
| Interest on C’s Capital | = | 9,90,000 | X | 10 |
| 100 |
Interest on C’s Capital = 99,000/-
*4: -Actual distribution of the share of profit among the partners’
| Net Profit after Actual interest on capital | = | Net Profit + Wrong Int. on Cap. + actual Int. on Cap. |
| = | 1,80,000 + 1,98,000 – 2,37,600 | |
| = | 1,40,400 |
Distribution of profit in Ratio 1: 1: 1 (because the deed is silent amount profit sharing ratio.)
| Profit share of A | = | 1,40,400 X 1/3 |
| Profit share of A | = | 46,800/- |
| Profit share of B | = | 1,40,400 X 1/3 |
| Profit share of B | = | 46,800/- |
| Profit share of C | = | 1,40,400 X 1/3 |
| Profit share of C | = | 46,800/- |
*5: -Wrong distribution of the share of profit among the partners’
Net Profit after interest & Salary = 1,80,000
Distribution of profit in Ratio 4 : 1: 1
| Profit share of A | = | 1,80,000 X 4/6 |
| Profit share of A | = | 1,20,000/- |
| Profit share of B | = | 1,80,000 X 1/6 |
| Profit share of B | = | 30,000/- |
| Profit share of C | = | 1,80,000 X 1/6 |
| Profit share of C | = | 30,000/- |
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
