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Question
A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1. The following was the balance sheet of the firm as at 31.3.2024.
| Liabilities | ₹ | Assets | ₹ |
| Capitals: | Sundry Assets | 10,00,000 | |
| A | 6,00,000 | ||
| B | 4,00,000 | ||
| 10,00,000 | 10,00,000 |
The profits of ₹ 4,50,000 for the year ended 31.3.2024 were divided between the partners without allowing interest on capital @ 9% p.a. and without charging interest on drawings @ 12% p.a. During the year A withdrew ₹ 1,00,000 and B ₹ 50,000.
Pass the necessary adjustment journal entry and show your working clearly.
Hint: Interest on drawings will be charged for 6 months.
Journal Entry
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Solution
| Journal Entry In the books of A and B |
||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 2024 | ||||
| March 31 | A’s Capital A/c ...Dr. | 6,000 | - | |
| To B’s Capital A/c | - | 6,000 | ||
| (Rectifying entry for omission of Interest on Capital and interest on drawings.) | ||||
Working Notes:
1. Calculation of opening capitals:
| Particulars | A (₹) | B (₹) |
| Closing Capitals | 6,00,000 | 4,00,000 |
| Add: Drawings | 1,00,000 | 50,000 |
| 7,00,000 | 4,50,000 | |
| Less: Profit (₹ 4,50,000 in 2 : 1) | 3,00,000 | 1,50,000 |
| Opening Capitals | 4,00,000 | 3,00,000 |
| Interest on Capitals @ 9% | 36,000 | 27,000 |
2. Past Adjustment Table:
| Particulars | A (₹) | B (₹) | Total (₹) |
| Omission of Interest on Capital (9%) (Cr.) | 36,000 | 27,000 | 63,000 |
| Omission of Interest on Drawings (12%) (Dr.) | 6,000 | 3,000 | 9,000 |
| (Cr.) | 42,000 | 30,000 | 72,000 |
| ₹ 72,000 divided in 2 : 1 (Dr.) | 48,000 | 24,000 | 72,000 |
| Net Effect | (Dr.) 6,000 | (Cr.) 6,000 |
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