On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were ₹ 80,000, ₹ 60,000, ₹ 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted. (a) The profit for the year ended 31st March, 2014 was ₹ 80,000. (b) During the year Saroj and Mahinder each withdrew a sum of ₹ 24,000 in equal instalments in the end of each month and Umar withdrew ₹ 36,000. (c) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a. (d) The profit-sharing ratio among partners was 4 : 3 : 1. Showing your workings clearly, pass the necessary rectifying entry.

On 31st March, 2014, the balances in the Capital Accounts of Saroj, Ma

1.	On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were ₹ 80,000, ₹ 60,000, ₹ 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted. (a) The profit for the year ended 31st March, 2014 was ₹ 80,000. (b) During the year Saroj and Mahinder each withdrew a sum of ₹ 24,000 in equal instalments in the end of each month and Umar withdrew ₹ 36,000. (c) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a. (d) The profit-sharing ratio among partners was 4 : 3 : 1. Showing your workings clearly, pass the necessary rectifying entry.
Answer» n: Journal Date Particulars L.F. Debit Rs. Credit Rs. SAROJ's CAPITAL A/c Dr. 2,350 Mahinder's Capital A/c Dr. 1,300 To limits Capital A/c 3.650 (Being Profits wrongly distributed without providing interest on capital and drawings, now adjusted) WORKING Note 1. Calculating of Opening Capital Particulars Saroj Rs. Mahinder Rs. Umar Rs. Closing Capital 80,000 60,000 40,000 Add : Drawings 24,000 24,000 24,000 Less : Profits (80,000 (40,000) (30,000) (10,000)in 4:3:1) Opening Capital 64,000 54,000 66,000 2. Calculation of Interest on Capital Interest on Saroj's Capital = 64,000 x- = 6,400 Interest on Mahinder's Capital =54,000 x = 5,400 Interest on Umar's Capital = 66,000 x = 6,600 3. Calculation of Share of Profits to be credited Profit available for distribution among partners = Rs.80,000 - Rs.18,400 + Rs.2,000 = Rs.63,600Saroj's Profit Share = 63, 600 x = 31, 800 Mahinder's Profit Share =63,600 x = 23, 850 U mar's Profit Share = 63,600 x = 7,950 4: Statement showing adjustment Statement Showing Adjustment Particulars Saroj Rs. Mahinder Rs. Umar Rs. Total Interest on Capital 6,400 5,400 6,600 18,400 Interest on Drawings (550) (550) (900) (2,000) Profits to be distributed 31,800 23,850 7,950 63,600 Total (A) 37,650 28,700 13,650 80,000 Less : Profits wrongly (40.000) (30.000) (10.000) (80,000)distributed ((2.350) (1.300) 3.650 NET Effect (A - B) Dr Dr Cr NIL

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