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Question 73 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question No.73 - Chapter No.2 - T.S. Grewal +2 Book 2019-Solution

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Question 73 Chapter 2 of +2-A

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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:

DateParticulars
L.F.DebitCredit
 A’s Capital A/cDr 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
ParticularsAmount of A’s Capital

Amount of B’s Capital

Amount of C’s Capital

Capital at the end90,0003,30,0006,60,000
Less: Profit already
Distributed (4:1:1)
1,20,00030,00030,000
Add: Drawings During the year3,60,0003,60,0003,60,000
Capital at the beginning3,30,0006,60,0009,90,000

 

Statement Showing Adjustment of Profit required
ParticularsABCTotal
Actual Amount of Interest on Capital @6% p.a. *239,60079,2001,18,8002,37,600
Add: – Actual amount of Profit share to be credited 1:1:1 *346,80046,80046,8001,40,400
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
 – 66,60030,00036,600
 

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

 

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*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 Capital3,30,000X12
100

Interest on A’s Capital = 33,000/-

Interest on B’s Capital6,60,000X12
100

Interest on B’s Capital = 66,000/-

Interest on C’s Capital9,90,000X12
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 Capital3,30,000X10
100

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Interest on A’s Capital = 33,000/-

Interest on B’s Capital6,60,000X10
100

Interest on B’s Capital = 66,000/-

Interest on C’s Capital9,90,000X10
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/-

 

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*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)

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
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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