PARTNERSHIP ACCOUNTS - Adjustments after closing the accounts

1. Ms. K. KALAI SELVI
Assistant Professor of Commerce
PG & Research Department of Commerce
Bon Secours College for Women, Thanjavur

2. Adjustments after closing the
accounts

3. Sum No. 26

4. (Answer for Sum No.26)
Calculationof Opening Capital:
Particulars Amirtharaj
Rs.
Anandraj
Rs.
Selvaraj
Rs.
Capital as on 31.12.2008
Add: Drawings
Less : Profit
65,000
7,500
50,000
2,500
28,750
3,750
72,500
22,500
52,500
15,000
32,500
7,500
Opening Capital
(01.01.2008)
50,000 37,500 25,000
Workings Notes:
(i) Net Profit = Rs. 45,000
Profit Share 3 : 2 : 1
Amirtharaj = 45,000 X 3/6 = 22,500
Anandraj = 45,000 X 2/6 = 15,000
Selvaraj = 45,000 X 1/6 = 7,500

5. Profit & Loss Appropriation A/c
Date Particulars Amount
Rs.
Date Particulars Amount
Rs.
31.12.2008
31.12.2008
To Interest on Capital
Amirtharaj 2,500
Anandraj 1,875
Selvaraj 1,250
-------
To Transfer of Profit
Amirtharaj 19,875
Anandraj 13,250
Selvaraj 6,625
-------
5,625
39,750
31.12.2008
31.12.2008
By Net Profit b/d
,, Interest on Drawings
Amirtharaj
Anandraj
Selvaraj
45,000
175
100
100
45,375 45,375
Workings Notes:
(ii) Interest on Capital
Amirtharaj = 50,000 x 5/100 = 2,500 Anandraj = 37,500 x 5/100 = 1,875 Selvaraj = 25,000 x 5/100 = 1,250
(iii) Profit after Adjustment = Rs. 39,750
Profit Share 3 : 2 : 1
Amirtharaj = 39,750 X 3/6 = 19,875 Anandraj = 39,750 X 2/6 = 13,250 Selvaraj = 39,750X 1/6 = 6,625

6. Journal Entries
Date Particulars Leger
Folio
Amount
Rs.
Amount
Rs.
31.12.2008
31.12.2008
31.12.2008
Profit & Loss Appropriation A/c Dr.
To Interest on Capital Amirtharaj A/c
To Interest on Capital Anandraj A/c
To Interest on Capital Selvaraj A/c
( Being interest on capital omitted to be entered
earlier now credited)
Interest on Drawings Amirtharaj A/c Dr.
Interest on Drawings Anandraj A/c Dr.
Interest on Drawings Selvaraj A/c Dr.
To Profit & Loss Appropriation A/c
(Being interest on drawings not debited earlier now
it was debited)
Profit & Loss Appropriation A/c Dr.
To Amirtharaj Capital A/c
To Anandraj Capital A/c
To Selvaraj Capital A/c
(Being profit share given to the partners’ capital
account)
5,625
175
100
100
39,750
2,500
1,875
1,250
375
19,875
13,250
6,625

7. Partners’ Capital Account
Date Particulars Amirtharaj
Rs.
Anandraj
Rs.
Selvaraj
Rs.
Date Particulars Amirtharaj
Rs.
Anandraj
Rs.
Selvaraj
Rs.
31.12.2008 To Drawings
,, Interest on Drawings
,, Balance c/d
7,500
175
64,700
2,500
100
50,025
3,750
100
29,025
01.01.2008
31.12.2008
31.12.2008
By Balance b/d
,, Interest on Capital
,, Profit share
50,000
2,500
19,875
37,500
1,875
13,250
25,000
1,250
6,625
72,375 52,625 32,875 72,375 52,625 32,875
01.01.2009 By Balance b/d 64,700 50,025 29,025

8. Sum No. 27
(Answer for Sum No.27)
Calculation of Additional Interest given and its Distribution to Partners :
Workings :
Calculation of Interest on Capital @ 7%
Sankar = 1,00,000 X 7/100 = Rs.7,000
Sekar = 50,000 X 7/100 = Rs.3,500
Calculation of Interest on Capital @ 5%
Sankar = 1,00,000 X 5/100 = Rs.5,000
Sekar = 50,000 X 5/100 = Rs.2,500

9. Sankar
Rs.
Sekar
Rs.
Interest credited already 7% p.a
Actual Interest allotted – 5% p.a
7,000
5,000
3,500
2,500
Additional amount credited as Interest
Additional profit
(Rs.2,000 + Rs.1,000 = Rs.3,000)
3,000 / 2 = Rs.1,500
2,000
1,500
1,000
1,500
-500 (Dr.) 500 (Cr.)
Adjustment Entry :
Sankar’s Capital A/c Dr. 500
To Sekar’s Capital A/c 500
(Being interest excessively given adjusted now)

10. Sum No. 28

11. (Answer for Sum No.28)
Calculation of Opening Capital:
Workings Notes:
(i) Net Profit = Rs. 12,000
Profit Share = Equal
= 12,000 / 3
= Rs.4,000
Particulars Indira
Rs.
Julie
Rs.
Kavitha
Rs.
Capital as on 31.12.2008
Add: Drawings
Less : Profit
15,000
2,500
12,500
2,000
10,000
1,500
17,500
4,000
14,500
4,000
11,500
4,000
Opening Capital (01.01.2008) 13,500 10,500 7,500

12. ii) Interest on Capital
Indira = 13,500 x 10/100 = 1,350
Julie = 10,500 x 10/100 = 1,050
Kavitha = 7,500 x 10/100 = 750
Profit & Loss Appropriation A/c
Date Particulars Amount
Rs.
Date Particulars Amount
Rs.
31.12.2008
31.12.2008
To Interest on Capital
Indira 1,350
Julie 1,050
Kavitha 750
-------
To Transfer of Profit
Indira 3,050
Julie 3,050
Kavitha 3,050
-------
3,150
9,150
31.12.2008
31.12.2008
By Net Profit b/d
,, Interest on Drawings
Indira
Julie
Kavitha
12,000
125
100
75
12,300 12,300

13. Workings Notes:
(iii) Profit after Adjustment = Rs. 9,150
Profit Share = Equal
= 9,150/ 3
= 3,050
Indira
Rs.
Julie
Rs.
Kavitha
Rs.
Profit credited already 4,000 4,000 4,000
Interest on Capital @ 10%
Actual Profit
1,350
3,050
1,050
3,050
750
3,050
Less : Interest on Drawings
4,400
125
4,100
100
3,800
75
Actual Balance after adjustment 4,250 4,000 3,725

14. Adjustment Entry :
Kavitha’s Capital A/c Dr. 250
To Indira’s Capital A/c 250
(Being amount excessively given adjusted now)
Partners’ Capital Account
Date Particulars Indira
Rs.
Julie
Rs.
Kavitha
Rs.
Date Particulars Indira
Rs.
Julie
Rs.
Kavitha
Rs.
31.12.08
31.12.08
31.12.08
To Drawings
,, Interest on
Drawings
,, Balance c/d
2,500
125
15,275
2,000
100
12,500
1,500
75
9,725
01.01.08
31.12.08
31.12.08
By Balance b/d
,, Interest on
Capital
,, Profit share
13,500
1,350
3,050
10,500
1,050
3,050
7,500
750
3,050
17,900 14,600 11,300 17,900 14,600 11,300
01.01.2009 By Balance b/d 15,275 12,500 9,725

15. Sum No. 29

16. (Answer for Sum No.29)
Calculation of opening capital :
Workings :
(i) Calculation of profit share :
Profit for the year 2008 = Rs.2,40,000
Profit sharing Ration = 3 : 2 : 1
A = 2,40,000 x 3 / 6 = 1,20,000
B = 2,40,000 x 2 / 6 = 80,000
C = 2,40,000 x 1 / 6 = 40,000
Particulars A
Rs.
B
Rs.
C
Rs.
Capital as on 31.12.2008
Add: Drawings
Less : Profit
1,60,000
40,000
1,20,000
30,000
80,000
18,000
2,00,000
1,20,000
1,50,000
80,000
98,000
40,000
Opening Capital (01.01.2008) 80,000 70,000 58,000

17. Workings :
(ii) Calculation of Interest on Capital :
A =80,000 X 5 /100 = 4,000
B =70,000 X 5 /100 = 3,500
C =58,000 X 5/100 = 2,900
Profit & Loss Appropriation A/c
Date Particulars Amount Date Particulars Amount
31.12.2008
31.12.2008
To Interest on Capital :
A’s Capital A/c
B’s Capital A/c
C’s Capital A/c
,, Adjusted Profit :
A’s share 1,15,860
B’s share 77,240
C’s share 38,620
------------
4,000
3,500
2,900
2,31,720
31.12.2008
31.12.2008
By Net Profit
,, Interest on Drawings :
A’s Capital A/c
B’s Capital A/c
C’s Capital A/c
2,40,000
1,000
720
400
2,42,120 2,42,120

18. Workings :
(iii) Calculation of Adjusted Profit share :
A’s share = 2,31,720 x 3/6 = 1,15,860
B’s share = 2,31,720 x 2/6 = 77,240
C’s share = 2,31,720 x 1/6 = 38,620
A B C
Net Profit provided before Adjustment 1,20,000 80,000 40,000
Actual Profit
Add:Interest on Capital
1,15,860
4,000
77,240
3,500
38,620
2,900
Less: Interest on Drawing 1,000 720 400
Actual amount 1,18,860 80,020 41,120

19. Workings :
(iv) Calculation of Adjustment :
A = 1,20,000 – 118860 = 1140 (Excess amount wrongly credited to A)
B = 80,000 - 80,020 = -20 (Shortage Amount has to pay to B)
C = 40,000 - 41,120 = -1,120 (Shortage Amount has to pay to C)
(v) Adjusted Journal Entry :
A’s Capital A/c 1,140
B’s Capital A/c 20
C’s Capital A/c 1,120
( Being Excess amount received from A and distributed to B & C )

20. Sum No. 30
Workings:
Murali : Murthy : Madhavan
4 : 2 : 1
Madhavan’s Share of Profit was guaranteed by minimum Rs.15,000
Profit for the year 2008 = Rs.63,000/-

21. (i) Calculation of profit share :
Madhavan = 63,000 x 1/7 = 9,000
(less than guaranteed amount of Rs.15,000)
= 15,000 – 9,000 = 6,000
Madhavan’s Profit share = Rs.15,000
Balance profit= 63,000 - 15,000 = 48,000
Murali’s profit share = 48,000 x 4/6 = 32,000
Murthy’s profit share = 48,000 x 2/6 = 16,000
Note :-
(Balance profit will be shared by Murali and Murthy in their profit sharing ratio 4 : 2. Madhavan was
already paid by his guaranteed amount. Hence his ratio was not taken in the calculations of Murali and
Murthy’s share capital Ratio)

22. Profit & Loss Appropriation A/c
Particulars Amount Particulars Amount
To Share of Profit :
Murali’s Capital A/c
Murthy’s Capital A/c
Madhavan’s Capital A/c
32,000
16,000
15,000
By Net Profit 63,000
63,000 63,000

23. Sum No. 31

24. (Answer for Sum No.31)
Note :-
(To calculate interest on capital opening capital is needed.
In this sum they have given the opening capital.
Hence we need not to calculate opening capital)
Workings :
(ii) Calculation of Interest on Capital :
Lakshman = 10,000 X 5 /100 = 500
Nagarajan = 15,000 X 5 /100 = 750
Parthiban = 20,000 X 5/100 = 1,000

25. Workings :
(iii) Calculation of Profit Share :
( Profit shall be distributed as per the ratio of opening capital )
Lakshman : Nagarajan : Parthiban
10,000 : 15,000 : 20,000
2 : 3 : 4
Lakshman = 15,750 X 2 /9 = 3,500
Nagarajan = 15,750 X 3 /9 = 5,250
Parthiban = 15,750 X 4 /9 = 7,000
(Parthiban’s share shall be not go below Rs.7,500 and Lakshman has to give the amount)

26. Profit & Loss Appropriation A/c
Date Particulars Amount Date Particulars Amount
31.12.2008
31.12.2008
31.12.2008
To Lakshman’s Salary
,, Interest on Capital :
Lakshman’s Capital A/c
Nagarajan’s Capital A/c
Parthiban’s Capital A/c
,, Adjusted Profit :
Lakshman’s Capital A/c 3,500
Less : Partiban’s share 500
----------
Nagarajan’s Capital A/c
Parthiban’s Capital A/c 7,000
Add : Lakshman 500
----------
4,500
500
750
1,000
3,000
5,250
7,500
31.12.2008 By Net Profit :
(7500+7500+7500) 22,500
22,500 22,500

27. Partners’ Capital Account
Date Particulars Lakshma
Rs.
Nagaraj
Rs.
Partiba
Rs.
Date Particulars Lakshma
Rs.
Nagaraj
Rs.
Partiban
Rs.
31.12.08
31.12.08
To Drawings
,, Balance c/d
6,000
12,000
6,000
15,000
6,000
22,500
01.01.08
31.12.08
31.12.08
31.12.08
By Balance b/d
,, Salary
,, Interest on
Capital
,, Profit share
10,000
4,500
500
3,000
15,000
-
750
5,250
20,000
-
1,000
7,500
18,500 21,000 28,500 18,000 21,000 28,500
01.01.2009 By Balance b/d 12,000 15,000 22,500

28. Sum No. 32

29. Workings :
(i) Calculation of Interest on Capital :
Arun = 1,00,000 x 6 / 100 = 6,000
Amar = 80,000 x 6 / 100 = 4,800
Karthikeyan = 60,000 x 6 / 100 = 3,600
--------
Total = 14,400
(Wrongly credited Interest on capital total amount was credited to profit share)
Ratio = 4 : 3 : 1
Arun’s profit share = 14,400 x 4 / 8 = 7,200
Amar’s profit share = 14,400 x 3 / 8 = 5,400
Karthikeyan’s profit share = 14,400 x 1 / 8 = 1,800

30. Arun Amar Karthikeyan
Interest on Capital (wrongly credited) 6,000 4,800 3,600
Interest on Capital transferred to Profit
share
7,200 5,400 1,800
1,200 (Cr) 600 (Cr) 1,800 (Dr.)
Journal Entry:
Karthikeyan’s Capital Capital A/c Dr. 1,800
Arun’s Capital Capital A/c 1,200
Amar’s Capital Capital A/c 1,800
(Being Interest on Capital wrongly credited now adjusted)