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
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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 |
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|
|
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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 |