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.
|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)|
|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|
|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|