Past Adjustments (practice paper)

(Basics of Partnership) 

Topic : Past Adjustments 

1. Vinod and Kumar were partners in a firm sharing profits in the ratio of 3:5. Their fixed capitals were Rs.2,50,000 and Rs.4,50,000 respectively. After the final accounts of the year had been closed, it was found that interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the capital accounts of the partners. Give necessary adjustment entry. [3]

2. A, B and C were sharing profits equally. Their capitals were Rs.20,000; 10,000 and 15,000 respectively. After closing the accounts for the year 2013 it was found that the interest on capital @ 10% p.a. was not allowed before distributing the profits. It was decided to pass a single adjusting entry to rectify the accounts of the previous years. Journalize.                        [3]              

3. Vinod, Singh and Kumar are partners in a firm sharing profits in the ratio of 5:3:2. Their fixed capitals were Rs.3,00,000; Rs.2,00,000 and Rs.1,00,000 respectively. For the year 2013, interest on capitals was credited to their capital accounts @8% p.a. instead of 10% p.a. showing your working clearly, pass the necessary adjusting entry.                                               [3]

4. MK, PK and AK are partners in a firm having fixed capitals of Rs.40,000; Rs.20,000; 25,000 respectively sharing profits as 7 : 6 : 4. The rate of interest on capital was agreed at 10% per annum, but was wrongly credited to them 12% per annum. Give adjustment entry. [3]

5. Vinod, Gaurav and Swami sharing profits and losses equally. Their capitals were Rs.1,20,000; Rs.90,000 and Rs.60,000 respectively. For the year 2014, interest was credited to them @6% instead of 5% p.a. Give adjustment entry.                                               [3]               

6. X, Y and Z are partners in a firm who share profits in the ratio of 2 : 3 : 5. The firm earned a profit of Rs.1,50,000 for the year ended December 31, 2013. The profit by mistake was distributed among X, Y and Z in the ratio of 3:2:1. This error was noted only in the beginning of the next year. Pass necessary entry to rectify the error.          [3]

7. PK, MK and NK shared profits in the ratio of 3:2:1. The profits of the last three years were Rs.2,80,000, Rs.1,68,000 and Rs.2,12,000 respectively. These profits were by mistake, shared equally for all the three years. It is now decided to correct the error. Give necessary entry for the same. [3]

8. X, Y and Z are partners in a firm sharing profits in the ratio of 3:2:1 respectively. Z wants that he should share profits of the firm equally in future. He further wants that change in [3] profit sharing ratio should be applicable retrospectively for the last three years. other partners have no objection to this. The profits for the last three years were Rs.60,000, 47,000 and 55,000. Give adjustment entry. (4)

9. On March 31, 2013 after the close of books of accounts, the capital accounts of A, B and C stood at Rs.48,000; 40,000 and Rs 24,000 respectively. The profits for the year Rs.72,000 was distributed equally. Subsequently it was discovered that interest on capital @5% p.a. had been omitted. The profit sharing ratio was 2:2:1. Pass adjustment entry.               (4) 

10. A, B and C were partners in a firm. On 1.4.2013 their capitals were Rs.1,00,000; Rs.50,000 and Rs.50,000 respectively. As per the provisions of the partnership deed:

(i) C was entitled for a salary of Rs.10,000 p.a.

(ii) Partners were entitled to interest on capital at 5% p.a.

(iii) Profits were to be shared in the ratio of partner’s capital.

The net profit for the year 2013-14 of Rs.66,000 was divided equally without providing for

the above terms. Give adjustment entry.                             (4)   

11. Vinod and Kumar were partners in a firm sharing profits in 3 : 2 ratio. Their respective fixed capitals were Rs.5,00,000 and Rs.7,50,000. The partnership deed provided for the following:

(a) Interest on capital @ 10% p.a.

(b) Interest on drawings @ 12% p.a.

During the year ended 31.3.2013, Vinod drawings were Rs.500 per month drawn at the end of every month and Kumar’s drawings were Rs.1,000 per month drawn in the beginning of the every month. After the preparation of final accounts for the year ended 31.3.2013 it was discovered that interest on Vinod’s drawing was not taken into consideration. Calculate interest on Vinod’s drawings and give adjustment entry.                                                  (4)    

12. A, B, C and D are partners sharing profits and losses in the ratio of 4:3:3:2. Their fixed capitals on 31.3.2010 were Rs.30,000; Rs.45,000; 60,000 and 45,000 respectively. After preparing the final accounts for the year ended 31.3.2011. it was discovered that interest on capital @12% p.a. was not allowed and interest on drawings amounting to Rs.1,000;1,250; 750 and 500 respectively was not charged. Give necessary adjustment entry.                  (4)

13. Seema, Tanuja and Tripti were partners in a firm trading in garments. They were sharing profits in the ratio of 5 : 3 : 2. Their capitals on 1st April, 2012 were Rs. 3,00,000, Rs. 4,00,000 and Rs. 8,00,000 respectively. After the flood in Uttarakhand, all partners decided to help the flood victims personally. For this Seema withdrew Rs. 20,000 from the firm on 15th September, 2012. Tanuja instead of withdrawing cash from the firm took garments amounting to Rs. 24,000 from the firm and distributed those to the flood victims. On the other hand, Tripti withdrew Rs. 2,00,000 from her capital on 1st January, 2013 and provided a mobile medical van in the flood affected area. The partnership deed provides for charging interest on drawings @ 6% p.a. After the final accounts were prepared it was discovered that interest on drawings had not been charged. Give the necessary adjusting journal entry and show the working notes clearly. Also state any two values which the partners wanted to communicate to the society                                                                      (6)

                                                               

                                                                     Challenge : 1

Vinod, Mohan and Sohan are partners sharing profits and losses in the ratio of 3:2:1. After the final accounts have been prepared, it was discovered that interest on drawings had not been taken into consideration. The interest on drawing of partners amounted to Vinod Rs.1,000; Mohan Rs.720 and Sohan Rs.400. Give adjustment entry

                                                                  Challenge : 2

Vinod and Swami are partners in a firm sharing profits and losses in the ratio of 3:2. The following was the balance sheet of firm as on 31.03.2013.

Liabilities                                Amount                                             Assets                                  Amount

Capitals : Vinod                  3,00,000                                       Sundry Assets                            4,00,000         

Swami                                1,00,000

                                         4,00,000                                                                                        4,00,000

The profits Rs.1,50,000 for the year ended 31.3.2013 were divided between the partners without allowing interest on capital @12% p.a. and salary to Vinod @ Rs.5,000 per month. During the year, Vinod withdrew Rs.50,000 and Swami Rs.1,00,000. Give necessary adjustment entry.

                                                               

                                                                    Challenge : 3

Vinod, Gaurav and Swami were partners in a firm. They had no partnership deed. They had been in business for 4 years and their profit or loss for this period was: year ending March 2004 Rs.39,000; March 2005 Rs.54,000; March 2006 Rs.18,000 (loss) and March 2007 Rs.75,000. During the year 2007-08, they agreed to share profits and losses in the ratio of 2:2:1 with retrospective effect from the year 2003-04. It was also decided that an interest (charge) of 5% p.a. was to be provided on capitals (fixed). Their capitals were Rs.80,000; Rs.60,000 and Rs.60,000 respectively. Give adjustment entry.

                                                                   ANSWERS

1. Vinod’s Current A/c Dr.1,250 and Kumar’s Current A/c Cr.1,250

2. B’s Capital A/c Dr.500 and Cr. A’s capital A/c 500

3. Kumar’s Current A/c Dr.400 and Singh’s Current A/c Cr.400

4. MK’s Current A/c Dr.100; AK’s Current A/c Dr.100 and PK’s Current A/c Cr.200

5. Vinod Dr. and Swami Cr. With 300 each

6. X’s Capital A/c Dr.45,000; Y’s Capital A/c Dr.5,000 and Z’s Capital A/c Cr.50,000

7. NK’s Capital A/c Dr.1,10,000 and PK’s Capital A/c Cr.1,10,000

8. Dr. X’s Capital A/c 27,000; Z’s Capital A/c Cr.27,000

9. Opening capital of A Rs.24,000; B Rs.16,000 and C Nil; C’s Capital A/c Dr.10,000; A’s Capital

A/c Cr.5,200 and B’s Capital A/c Rs.4,800

10. B’s Capital A/c Dr.8,000; A’s Capital A/c Cr.6,000 and C’s Capital A/c 2,000

11. Vinod’s Current A/c Dr.132 and Kumar’s Current A/c Cr.132

12. Dr A’s Current A/c 3,433; B’s current A/c 375; C’s Current A/c Cr.1,925; D’s current A/c

Cr.1,883.

13. Tanuja’s Capital A/c Dr                     309

                       To Seema’s Capital A/c                       35

                        To Tripti’s Capital A/c                      274

Challenge-1 : Mohan Dr. 13; Sohan Dr.47 and Vinod Cr.60

Challenge-2 : Swami’s Capital A/c Dr.26,400 and Vinod’s Capital A/c Cr.26,400

Challenge -3 : Swami Dr.16,000; Vinod Cr 10,000 and Gaurav Cr.6,000