The partners of a firm distributed the profits for the year ended 31st March 2003, Rs. 90,000 in the ratio of 3:2:1 without providing for the following adjustments.
(i) A and C were entitled to a salary of Rs 1,500 p.a.
(ii) B was entitled to a salary of Rs4,500
(iii) B and C had guaranteed a minimum profit of Rs 35000 p.a. to A
(iv) Profits were to be shared in the ratio of 3:3:2
Pass necessary journal entry for the above adjustment in the books of the firm.
Dear Student,
Adjustment required can be calculated as follows:
So, the adjustment entry would be as follows:
Regards,
Adjustment required can be calculated as follows:
Particulars | Partner A | Partner B | Partner C | Firm |
Profits wrongly distributed | 45,000 (Dr) | 30,000 (Dr) | 15,000 (Dr) | 90,000(Cr) |
Salary to be provided | 1,500 (Cr) | 4,500 (Cr) | 1,500 (Cr) | 7,500 (Dr) |
Actual Profit which needs to be distributed in 3:3:2 is | 30,937.50 (Cr) | 30,937.50 (Cr) | 20,625 (Cr) | 82,500 (Dr) |
Since Guaranteed Profit to A is Rs 35,000, so difference of Rs. 4062.5 would be shared by B & C in their profit sharing ratio i.e 3:2 | 4062.50 (Cr) | 2437.50 (Dr) | 1625 (Dr) | NIL |
Net Adjustment | 8,500 (Dr) | 3,000 (Cr) | 5,500 (Cr) | NIL |
So, the adjustment entry would be as follows:
Journal | ||||
Particulars | L.F. | Debit Amount (Rs) |
Credit Amount (Rs) |
|
A's Capital A/c | Dr. | 8,500 | ||
To B's Capital A/c | 3,000 | |||
To C's Capital A/c | 5,500 | |||
(Being adjustment entry passed for required corrections) |
Regards,