Question 91 Chapter 2 of +2-A
91. The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March 2017, 80,000 in the ratio of 3 : 3: 2 without providing for the following adjustments:
a Alia and Chand were entitled to a salary of 1,500 each p.a.
b Bhanu was entitled for a commission of 4,000.
c Bhanu and Chand had guaranteed a minimum profit of 35,000 p.a. to Alia any deficiency to borne equally by Bhanu and Chand.
Pass the necessary journal entry for the above adjustments in the books of the firm. Show workings clearly.
The solution of Question 91 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| Chand’s Capital A/c *1 | Dr | 21,000 | |||
| Bhanu’s Capital A/c *1 | Dr | 2,000 | |||
| To Alia’s Capital A/c | 23,000 | ||||
| (Being adjustment made for deficiency of R’s Capital) | |||||
| Statement Showing Adjustment of Profit required |
||||
| Particulars | Alia’s | Bhanu’s | Chand’s | Total |
| Salary to be paid | 18,000 | – | 18,000 | 36,000 |
| Add: Commission to be paid | – | 4,000 | – | 4,000 |
| Add: Profit to be Credited | 35,000 | 5,000 | – | 40,000 |
| Total Amount to be credited | 53,000 | 9,000 | 18,000 | 80,000 |
| Less: Profit Already credited (2:2:1) | 30,000 | 30,000 | 20,000 | 80,000 |
| 23,000 | – 21,000 | – 2,000 | – | |
|
Alia’s get less amount, so we have to credit his capital a/c with difference amount |
Bhanu’s get extra so we have to debit his capital a/c with difference amount
|
Chand’s get extra so we have to debit his capital a/c with difference amount |
||
Profit Already credited
Profit of the year =40,000
Profit-sharing Ratio =3 : 3 : 2
| Alia’s Share of Profit | 40,000 | X | 3 |
| 8 |
Alia’s Share of Profit = 15,000
| Bhanu’s Share of Profit | 40,000 | X | 3 |
| 8 |
Bhanu’s Share of Profit = 15,000
| Chand’s Share of Profit | 40,000 | X | 2 |
| 8 | |||
Chand’s Share of Profit = 10,000
Alia’s Minimum Guaranteed Profit = Rs 35,000
Alia’s Actual Profit Share i.e. 15,000 is less than his Minimum Guaranteed Profit i.e. 35,000
Deficiency in Alia’s Profit Share = 35,000 − 15,000 = Rs 20,000
This deficiency of Rs 20,000 is to be borne by Bhanu and Chand in the ratio of 1: 1
| Bhanu’s Share of Profit | 20,000 | X | 1 |
| 2 |
Bhanu’s Share of Profit= 10,000
| Chand’s Share of Profit | 20,000 | X | 1 |
| 2 |
Chand’s Share of Profit = 10,000
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Now, Final distributed among the partners
| Alia’s Share of Profit | = | 15,000 | + | 20,000 | =35,000 |
| Bhanu’s Share of Profit | = | 15,000 | – | 10,000 | =5,000 |
| Chand’s Share of Profit | = | 10,000 | – | 10,000 | =Nil |
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
