(1)When there is single error.
A, B and C, are partners with capitals of ₹100,000, ₹200,000 and ₹300,000 respectively sharing profits and losses in the ratio of 3:2:1. The partnership deed provides for allowing interest on Capital @ 8 % p.a. After the final accounts have been prepared, it was discovered that interest on capital was allowed @ 6% p.a. Give necessary adjusting journal entry.
|Partner||Dr. ₹||Cr. ₹||Net Dr./Cr.|
A’s Capital account Dr. 4,000
To B’s Capital account 4,000
(Being the adjusting journal entry)
(2) When there are multiple errors.
The net profit of X, Y and Z for the year ended March 31, 2012 was ₹ 60,000 and the same was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently discovered that the following points were not recorded in the books :
(i) Interest on Capital @ 5% p.a.
(ii) Interest on drawings amounting to X ₹ 700, Y ₹ 500 and Z ₹ 300.
(iii) Partner’s Salary: X ₹ 1000 p.a., Y ₹ 1500 p.a.
The capital accounts of partners were fixed as : X ₹ 50,000, Y ₹ 40,000 and Z ₹ 30,000. Record the adjustment entry.
Dr. Profit and loss Appropriation account Cr.
|To Interest on capital X
To Interest on capital Y
To Interest on capital Z
To Partners’ salary X
To Partners’ salary Y
To Bal. trfd to Capital accounts (profit)
|By Net Profit
By Interest on Drawings X
By Interest on Drawings Y
By Interest on Drawings Z
Now the comparative table is to be prepared:
X’s capital account Dr. 1400
Z’s capital account Dr. 200
To Y’s Capital account 1600