Naveen, Seerat and Hina 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.2,00,000; Rs.3,00,000 and Rs.6,00,000 respectively. After the floods in Uttaranchal, all partners decided to help the flood victims personally. For this Naveen withdrew Rs.10,000 from the firm on 1st September; 2012. Seerat, instead of withdrawing cash from the firm took blankets amounting to Rs.12,000 from the firm and distributed to the flood victims. On the other hand, Hina withdrew Rs.2,00,000 from her capital on 1st January, 2013 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 that the partners wanted to communicate to the society.
Solution
Journal Entries
| Date | Particulars | L.F. | Debit(Rs.) | Credit(Rs.) |
|
Seerat’s Capital A/c Dr. To Naveen’s Capital A/c To Hima’s Capital A/c (Being Omission of interest on drawings, now adjusted) |
189
|
35 154
|
Adjusting Table:
| Particular | Naveen | Seerat | Hina | Total |
|
Interest on Drawings(Dr.) Profit of ` 770 shared in Ratio 5:3:2(Cr.) Difference |
(350) 385 35(Cr.) |
(450) 231 189(Dr.) |
154 154(Cr.) |
770 770 Nil |
Working Notes:
Calculation of Interest Drawings:
Interest on Naveen’s Drawings = 10,000 × 6/100 × 7/12 = Rs.350
Interest on Seeerat’s Drawings = 12,000 × 6/100 × 7/12 = Rs.450
Note: The amount withdrawn by Hina (Rs.2,00,000) is withdrawal of capital and not drawings.
Values involved in the above scenario are as follows:
- Duty for Nation
- Upliftment of Victims
