Ram and mohan are partners sharing profits and losses in the ratio 2:1. at the end of the year on 31st march,2011 they decided to take their manager sohan in to partnership with effect from 1st april,2008. as manager ,he was geeting an annual salary of rs24000 . he had also advanced rs30000 to the firm by way of a loan on which he was geeting interest @15% p.a.
during the three year firm profits after adjusting salary to sohan ,interest on loan and interest on capital of the partners were :::-
2009 profit 43900
2010 loss 20000
2011 profit 1,00,000
according to the new aggrement, sohan is to be given annual salary of rs16800 and 1/5 th share inthe profits of the firm . sohan's loan shall be treated as his capital from the begining and similar to other partners as his capital carry interest @10% p.a
RECORD THE JOURNAL ENTRY TO GIVE EFFECT TO THE ABOVE.
| Journal Entry | ||||||
| Date | Particulars | L.F. | Debit Amount Rs |
Credit Amount Rs |
||
| Ram’s Capital A/c | Dr. | 2,600 | ||||
| Mohan’s Capital A/c | Dr. | 1,300 | ||||
| To Sohan’s Capital A/c | 3,900 | |||||
| (Excess amount paid to Sohan borne by Ram and Mohan) | ||||||
| Sohan’s Loan A/c | Dr. | 30,000 | ||||
| To Sohan’s Capital A/c | 30,000 | |||||
| (Sohan’s Loan A/c transferred to his Capital A/c) | ||||||
| Particulars | Amount (Rs) |
| Interest on Loan 30,000*5% (15-10) for 3 years | 4,500 |
| Salary 7,200 (24,000-16,800) for 3 years | 21,600 |
| Total | 26,100 |
| Particulars | Amount (Rs) |
| Profit for the year 2009 | 43,900 |
| Profit for the year 2011 | 1,00,000 |
| 1,43,900 | |
| Less: Loss for the year 2010 | 20,000 |
| 1,23,900 | |
| Add: Increase in Profit by Sohan, becoming a partner instead of manager | 26,100 |
| 1,50,000 |
Sohan’s share of Profit = 1,50,000*1/5
Sohan’s Share of Profit after becoming a partner is Rs 30,000 but as a manager he had received Rs 26,100, therefore, Rs 3,900 (30,000-26,100) should be credited to his Capital A/c by existing partners in the ratio 2:1.