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Question
A and B are partners in a firm sharing profits and losses in the ratio of 2 : 3. The following was the balance sheet of the firm as at 31.3.2024.
| Liabilities | ₹ | ₹ | Assets | ₹ |
| Capitals: | 7,90,000 | 7,90,000 | ||
| A | 4,90,000 | |||
| B | 3,00,000 | |||
| 7,90,000 | 7,90,000 |
Profits ₹ 2,00,000 for the year ended 31.3.2024 were divided between the partners without allowing interest on capital @ 6% p.a., interest on drawings @ 10% p.a. and salary to B @ ₹ 5,000 per month. During the year A withdrew ₹ 40,000 and B withdrew ₹ 20,000.
Showing your working notes clearly, pass the necessary rectifying entry.
Journal Entry
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Solution
| Rectifying Entry In the books of A and B |
||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 2024 | ||||
| March 31 | A’s Capital A/c ...Dr. | 13,400 | - | |
| To B’s Capital A/c | - | 13,400 | ||
| (Rectifying entry for omission of interest on capital, interest on drawings and salary to B.) | ||||
Working Notes:
1. Calculation of opening capitals:
| Particulars | A (₹) | B (₹) |
| Closing Capitals | 4,90,000 | 3,00,000 |
| Add: Drawings | 40,000 | 20,000 |
| 5,30,000 | 3,20,000 | |
| Less: Profit (₹ 2,00,000 in 2 : 3) | 80,000 | 1,20,000 |
| Opening Capitals | 4,50,000 | 2,00,000 |
| Interest on Capitals @ 6% | 27,000 | 12,000 |
2. Past Adjustment Table:
| Particulars | A (₹) |
B (₹) |
Total (₹) |
|||
| Dr. | Cr. | Dr. | Cr. | Dr. | Cr. | |
| Omission of Interest on Capital (10%) (Cr.) | 27,000 | 12,000 | 39,000 | |||
| Omission of Interest on Drawings (10%) (Dr.) | 2,000 | 1,000 | 3,000 | |||
| Omission of Salary to B (Cr.) | 60,000 | 60,000 | ||||
| ₹ 96,000 divided in 2 : 3 (Dr.) | 38,400 | 57,600 | 96,000 | |||
| ₹ 96,000 divided in 2 : 3 (Dr.) | 38,400 | 27,000 | 58,600 | 72,000 | 99,000 | 99,000 |
| Net Effect | (Dr.) 13,400 | (Cr.) 13,400 | - | |||
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