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Mona, Nisha and Priyanka Are Partners in a Firm. They Contributed Rs 50,000 Each as Capital Three Years Ago You Are Required to Make Necessary Corrections in the Books of Accounts of Mona, Nisha and Priyanka by Passing an Adjustment Entry. Identify the Value Which Was Not Practiced by Priyanka While Distributing Profits - CBSE (Arts) Class 12 - Accountancy

Question

Mona, Nisha and Priyanka are partners in a firm. They contributed Rs 50,000 each as capital three years ago. At that time Priyanka agreed to look after the business as Mona and Nisha were busy. The profits for the past three years were Rs 15,000, Rs 25,000 and Rs 50,000 respectively. While going through the books of accounts Mona noticed that the profit had been distributed in the ratio of 1:1:2. When the enquired from Priyanka about this, Priyanka answered that since she looked after the business she should get more profit. Mona disagreed and it was decided to distribute profit equally retrospectively for the last three years.

1) You are required to make necessary corrections in the books of accounts of Mona, Nisha and Priyanka by passing an adjustment entry.

2) Identify the value which was not practiced by Priyanka while distributing profits

Solution

1)

 Journal Date Particulars L.F. Dr. Rs Cr. Rs Priyanka Capital A/c         Dr.        To Mona's Capital A/c        To Nisha's Capital A/c (Being profit distributed in the wrong ratio now rectified) 15,000 7,500 7,500

Total Profit (past 3 years) = 15,000 + 25,000 + 50,000 = 90,000

 Adjustment Table Particulars Mona Nisha Priyanka Total Wrong Distribution of Profits (1:1:2) written Back  Dr. 22,500 22,500 45,000 90,000 Right Distribution of Profits (1:1:1)    Cr. (30,000) (30,000) (30,000) (90,000) Net Effect (7,5000)Cr. (7,500)Cr 15,000Dr. -

2) The values which were not practiced by Priyanka are as follows:

• Mutual trust and understanding
• Honesty and loyalty towards her co-parnters
Is there an error in this question or solution?

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Solution Mona, Nisha and Priyanka Are Partners in a Firm. They Contributed Rs 50,000 Each as Capital Three Years Ago You Are Required to Make Necessary Corrections in the Books of Accounts of Mona, Nisha and Priyanka by Passing an Adjustment Entry. Identify the Value Which Was Not Practiced by Priyanka While Distributing Profits Concept: Admission of a Partner - Adjustment of Capitals.
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