12th | Accounting for Partnership Firm – Fundamental | Question No. 61 To 65 | Ts Grewal Solution 2023-2024

Azad and Benny are equal partners. Their capitals are  ` 40,000 and  ` 80,000 respectively. After the accounts for the year had been prepared, it was noticed that interest @ 5% p.a. as provided in the Partnership Deed was not credited to their Capital Accounts before distribution of profits. It is decided to pass an adjustment entry in the beginning of the next year. Record the necessary Journal entry.

Answer:

Interest on Capital
 

Azad	=	40,000 ×	5100	=  ` 2,000
Benny	=	80,000 ×	5100	=  ` 4,000

Adjustment of Profit

	Azad	Benny		Total
Interest on Capital	2,000	4,000	=	6,000
Less: Wrong distribution of Profit ` 6,000 (1: 1)	(3,000)	(3,000)	=	(6,000)
Adjusted Profit	(1,000)	(1,000)	=	NIL

Adjusting Journal Entry 

Date	Particular		L.F	Debit Amount ( `)	Credit Amount ( `)
	Azad's Current A/c	Dr.		1,000
	To Benny's Current A/c				1,000
	(Adjustment of profit made)

 

Ram, Mohan and Sohan sharing profits and losses equally have capitals of  ` 1,20,000,  ` 90,000 and  ` 60,000 respectively. For the year ended 31st March, 2023, interest was credited to them @ 6% instead of 5%.
Give adjustment Journal entry.

Answer:

Journal
Particulars		L. F.	Debit ( `)	Credit ( `)
Ram’s Capital A/c	Dr.		300
To Sohan’s Capital A/c				300
(Interest on Capital was wrongly credited, now adjusted)

Working Notes:

WN 1Calculation of Interest on Capital at 6% p.a.

Interest on Ram’s capital=1,20,000×6/100=7,200

Interest on Mohan’s capital=90,000×6/100=5,400

Interest on Sohan’s capital=60,000×6/100=3,600

 

WN 2Calculation of Interest on Capital at 5% p.a.

Interest on Ram’s capital=1,20,000×5/100=6,000

Interest on Mohan’s capital=90,000×5/100=4,500

Interest on Sohan’s capital=60,000×5/100=3,000

 

WN 3

Statement Showing Adjustment
Particulars	Ram	Mohan	Sohan	Total
Interest on Capital wrongly credited at 6% p.a. reversed	(7,200)	(5,400)	(3,600)	(16,200)
Interest on Capital credited at 5% p.a.	6,000	4,500	3,000	13,500
Wrong Distribution	(1,200)	(900)	(600)	(2,700)
Right Distribution of ` 2,700 (1:1:1)	900	900	900	(2,700)
Net Effect	(300)	NIL	300	NIL

 

 

Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at  ` 3,00,000,  ` 1,00,000,  ` 2,00,000. For the year ended 31st March, 2023, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was  ` 2,50,000.
Show your working notes clearly and pass necessary adjustment entry.

Answer:

	Journal
Date	Particulars		L.F.	Debit ( `)	Credit ( `)
2023 March 31	Shyam’s Current A/c	Dr.		200
	Mohan’s Current A/c	Dr.		400
	To Ram’s Current A/c				600
	(Interest on Capital adjusted)

Working Notes:

 

WN 1 Calculation of Interest on Capital 10% p.a.

Interest on Ram’s capital=3,00,000×10/100=30,000

Interest on Shyam’s capital=1,00,000×10/100=10,000

Interest on Mohan’s capital=2,00,000×10/100=20,000

 

WN 2 Calculation of Interest on Capital 9% p.a.

Interest on Ram’s capital=3,00,000×9/100=2,7000

Interest on Shyam’s capital=1,00,000×9/100=9,000

Interest on Mohan’s capital=2,00,000×9/100=18,000

 

WN 3

Statement Showing Adjustment
Particulars	Ram	Shyam	Mohan	Total
Interest on Capital credited at 10% p.a.	30,000	10,000	20,000	60,000
Interest on Capital wrongly credited at 9% p.a. reversed	(27,000)	(9,000)	(18,000)	(54,000)
Right distribution	3,000	1,000	2,000	6,000
Wrong distribution of ` 6,000 (2 : 1 : 2)	(2,400)	(1,200)	(2,400)	(6,000)
Net Effect	600	(200)	(400)	NIL

 

Profit earned by a partnership firm for the year ended 31st March, 2023 were distributed equally between the partners – Pankaj and Anu – without allowing interest on capital. Interest due on capital was Pankaj –  ` 3,000 and Anu –  ` 1,000.
Pass necessary adjustment entry.

Answer:

Journal
Date	Particulars		L.F.	Debit ( `)	Credit ( `)
	Anu’s  Capital A/c	Dr.		1,000
	To Pankaj’s Capital A/c				1,000
	(Adjustment of omission of Interest on Capital)

Working Note:

Statement Showing Adjustment
Particulars	Pankaj	Anu	Total
Interest on Capital to be credited	3,000	1,000	4,000
Profit wrongly distributed equally to be debited	(2,000)	(2,000)	(4,000)
Net Effect	1,000 (Cr.)	1,000 (Dr.)	NIL

 

Showing your working clearly, pass the necessary adjustment entry to rectify the error.

Answer:

Particulars	`	`
Ram’s Capital A/c   Dr, Mohan’s Capital A/c   Dr,             To Sohan’s Capital A/c (Being interest on Drawing Charged Wrongly, now Rectified)	180 630	810

 

Working notes:

WN1:

Table of Adjustments

	Ram	Mohan	Sohan
Interest on Drawing Wrongly Debited	1,080	-	1,440
Profits to be credited	1,260	630	630
Amount to adjusted	180(Dr.)	630(Dr.)	810(Cr.)

 

WN2: Interest on Drawing Wrongly Debited

Ram’s Interest on Drawing= 36,000×6/100×6/12=1,080

Sohan’s Interest on Drawing= 48,000×6/100×6/12=1,440

 

WN3:Profits to be credited (1,080+1,440=2,120)

Ram =  2,520×2/4=1,260

Mohan =2,520×1/4=630

Sohan = =2,520×1/4=630