Rajeev, Sanjeev and Jatin were partners in a firm manufacturing blanket. They were sharing profits in the ratio of 5 : 3: 2. Their capitals on 1st April, 2012 were Rs 1,00,000, Rs 2,00,000 and Rs 4,00,000 respectively. After the flood in Uttarakhand, all partners decided to help the flood victims personally.
For this, Rajeev withdrew Rs 10,000 from the firm on 1st October 2012. Sanjeev instead of withdrawing cash from the firm took blankets amounting to Rs 14,000 from the firm and distributed those to the flood victims. On the other hand, Jatin withdrew Rs 1,50,000 from his capital on 31st December 2012 and set up a centre to provide medical facilities in the flood affected area.
The partnership deed provides for charging interest on drawings @ 6% p.a. After the final accounts were prepared it was discovered that interest on drawings had not been charged. Give the necessary adjusting journal entry and show the working notes clearly. Also, state any two values which the partners wanted to communicate to the society.
Jatin’s Capital A/c Dr.
To Rajeev’s Capital A/c
To Sanjeev’s Capital A/c
(Being interest in drawings has been changed, now adjusted)
|Interest on Drawings||300||420||2,250||2,970|
|Profit of Rs 2,970 shared in Ratio 5:3:2(Cr.||1,485||891||594||2,970|
|Difference||1,185 (Cr.)||471 (Cr.)||1,656 (Dr.)||Nil|
Calculation of Interest Drawings:
Interest on Rajeev's Drawings = `10000 xx 6/100 xx 6/12 = 300`
Interest on Sanjeev's Drawings =`14000 xx 6/100 xx 6/12 = 420`
Interest on Jatin's Drawings = `150000 xx 6/100 xx 3/12 = 2250`
Values Based in the above scenario are as follows:
1) Duty for Nation
2) Upliftment of Victims