Suresh and Ramesh were partners in a firm sharing profits in the ratio of 3:2. Their fixed capitals were Suresh-Rs.9,00,000 and Ramesh-Rs.6,00,000. The partnership deed provided for the following:

(i) Interest on capital @ 5% p.a.

(ii) Rs.60,000 p.a. salary to Suresh and salary of Rs.2,000 per month to Ramesh.

The profit earned by the firm for the year ended 31.3.2007 was Rs.2,34,000. The profits were divided equally without providing for the above. Pass adjustment entry.

 
  Journal Entry
Date Particulars L.F. Debit Amount
Rs
Credit Amount
Rs
           
  Ramesh’s Current A/c Dr.   33,000  
    To Suresh’s Current A/c       33,000
  (Profit was wrongly distributed and Interest on Capital and Salary has not been charged, now rectified)        











Adjusting Table:
Particulars Suresh Ramesh Total
Profit wrongly distributed in the ratio 1:1 (Dr.) 1,17,000 1,17,000 2,34,000
Interest on Capital @5%  (Cr.) 45,000 30,000 75,000
Salary 60,000 24,000 84,000
Profit after adjustment (Dr.) 12,000 63,000 75,000
Right distribution of Profit of Rs 75,000 in the ratio 3:2 (Cr.) 45,000 30,000 75,000
Difference 33,000 (Cr.) 33,000 (Dr.) Nil

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