Question

Sun and Moon are Partners in Partnership Firm sharing Profits and Losses equally. You are required to give the effects of Adjustments with the help of the following information.

Trial Balance as on 31st March 2019

Debit Balance	Amount ₹	Credit Balance	Amount ₹
Land & Building	40,000	Capital A/C
Furniture	18,000	Sun	33,500
Machinery	40,000	Moon	33,500
(Purchased on 1/7/18)		Current A/c: Sun	6,000
Goodwill	2,000	Sundry Creditors	25,000
Wages	2,000	Bank Overdraft	10,000
Current A/c: Moon	4,000	Reserve Fund	5,000
8% Debentures	8,000	Providend Fund	5,000
(Purchased on 1/10/18)
Providend Fund Investment	3,500
Stock of Postal stamps	500
	1,18,000		1,18,000

Adjustments:

1) Partners are entitled to get salary ₹ 6,000 p.a. in addition to their profit & loss sharing.

2) Depreciation on Land & Building, Furniture & Machinery @10%, 5% and 3% respectively.

3) Interest on Capital 5% p.a.

4) Closing Stock ₹ 60,743.

5) Wages included ₹ 1,000 as advance is given to workers.

6) Interest due but not paid ₹ 800.

7) Total Net Profit amounted to ₹ 38,113.

Answer 1

Dr.	In the books of Sun and Moon Partner’s Current Account						Cr.
Particulars		Sun	Moon	Particulars	Sun	Moon
To Balance b/d			4,000	By Balance b/d	6,000	-
				By Profit and Loss A/c (Share in Net Profit)	19,056	19,056
				By Profit and Loss A/c (Partners Salary)	6,000	6,000
				By Profit and Loss A/c (Interest on Capital)	1,675	1,675
To Balance c/d		32,731	22,732
		32,731	26,732		32,731	26,732
				By Balance b/d	32,731	22,732

 

Balance Sheet as on 31st March 2019
Liabilities	Amt ₹	Amt ₹	Assets	Amt ₹	Amt ₹
Capital Accounts:			Land & Building	40,000
Sun	33,500		Less: Depreciation	4,000	36,000
Moon	33,500	67,000	Furniture	18,000
Current A/cs:			Less: Depreciation	900	17,100
Sun	32,731		Machinery	40,000
Moon	22,732	55,463	Less: Depreciation	900	39,100
Sundry Creditors		25,000	Goodwill		2000
Bank Overdraft		10,000	8 % Debentures	8,000
Reserve Fund		5,000	Add: O/s Interest	320	8,320
Provident Fund		5,000	Provident Fund Investments		3,500
O/s Interest		800	Stock & Postal Stamps		500
		1,68,263	Closing Stock		60,743
			Advance to Workers		1,000
		1,68,263			1,68,263

Working Notes:

(1) Depreciation on machinery is calculated for 9 months. (i.e. from 1/7/18 to 31/3/19)

Depreciation = `40,000xx 3/100 xx9/12` = ₹ 900

(2) Interest on 8 % debentures, calculated for 6 months. (i.e. from 1/10/18 to 31/3/19)

I = `"PRN"/100= 8,000 xx 8/ 100 xx 6 /12` = ₹ 320

(3) Advance given to workers (by firm) ₹ 1,000 is an asset for the firm, so, it is shown on Assets side.

(4) Interest due but not paid is a liability for firm, so, it is shown on the Liabilities side