The capital accounts of A and B stood at Rs.400000 and Rs.300000 after necessary adjustments in respect of the drawings and the net profits for the year ended 31st march 2012. It was subsequently ascertained that 5 % p.a. interest on capital and drawings were not taken into account in arriving at the net profit. The drawings of the partners had been; A- Rs.12000 drawn at the end of each quarter and B- Rs.18000 drawn at the end of each half year. The profits for the year as adjusted amounted to Rs.200000. The partners share profits in the ratio 3:2.

You are required to paas the journal entries and show the adjusted capital accounts of the partners.

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

A’s Capital A/c

Dr.

 

1,210

 

 

To B’s Capital A/c

 

 

1,210

 

(Omission of Interest on Capital and Drawings, now rectified)

 

 

 

      

 

Partners’ Capital Account

 

Dr.

Cr.

Particulars

A

B

Particulars

A

B

B’s Capital A/c

1,210

Balance b/d

4,00,000

3,00,000

Balance c/d

3,98,790

3,01,210

A’s Capital A/c

1,210

 

4,00,000

3,01,210

 

4,00,000

3,01,210

 

 

 

 

 

 

Working Notes:

 

WN 1Calculation of Drawings

 Drawings of A = Rs 12,000 × 4 = Rs 48,000

 Drawings of B = Rs 18,000 × 2 = Rs 36,000

 

WN 2Calculation of capital at the beginning

 

A

 

B

Capital at the end of the year

4,00,000

 

3,00,000

Add: Drawings made during the year

48,000

 

36,000

 

4,48,000

 

3,36,000

Less: Profits already credited

(2,00,000 in the ratio of 3 : 2)

(1,20,000)

 

(80,000)

Opening balance of capital

3,28,000

 

2,56,000

 

WN 3 Calculation of Interest on Drawings

 

Date

Amount

Number of

Months

Product

 

Oct 01, 2011

Rs 36,000

6

Rs 1,08,000

 

March 31,2012

Rs 36,000

 

Rs 1,08,000

 

WN 4  Calculation of Interest on Capital

 

WN 5

Profit and Loss Appropriation Account

for the year ended March 31, 2012

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital to:

 

Profit and Loss Account

 

A

16,400

 

(Net Profit)

2,00,000

B

12,800

29,200

Interest on Drawings:

 

Profit transferred to:

 

A

900

 

A’s Capital A/c

1,03,290

 

B

450

1,350

B’s Capital A/c

68,860

1,72,150

 

 

 

2,01,350

 

2,01,350

 

 

 

WN 6

 

A

 

B

 

Total

Interest on Capital

16,400

 

12,800

 

29,200

Interest on Drawings

(900)

 

(450)

 

(1,350)

Profit and Loss Appropriation

1,03,290

 

68,860

 

1,72,150

Right distribution of Rs 2,00,000

1,18,790

 

81,210

 

2,00,000

Wrong Distribution of Rs 2,00,000 (3:2)

(1,20,000)

 

(80,000)

 

(2,00,000)

 

(1,210)

 

1,210

 

NIL

 

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