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karnataka class 12 commerce Accountancy Adjustments of partnership accounts


karnataka class 12 commerce Accountancy Adjustments of partnership accounts

karnataka class 12 commerce Accountancy Adjustments of partnership accounts :- we will provide complete details of karnataka class 12 commerce Accountancy Adjustments of partnership accounts in this article.

karnataka class 12 commerce Accountancy Adjustments of partnership accounts

After preparing the Capital accounts of the partners it is sometimes discovered that there is some error in the calculation or omission of one or more items like: Interest on capital, Interest on Drawings, Salary or any other type of remuneration to one or more partners, profit sharing ratio etc.

In that case rather than cutting and preparing the capital accounts again for this correction, only adjusting entries are passed concerning the capital accounts of the partners thus affected. This has been covered under two heads here:

(1)  In case of single error:

The procedure to follow is ………Do what has not been done, Cancel what has been done wrongly.

Then pass an adjusting entry by preparing a comparative table .For preparing this comparative table Dr. /Cr. the partners as required by the provisions of the deed, then Cr. /Dr. to cancel as actually done.

Pass Journal entry with the excess amount in the net amount column.

Name of the   partnerDr.Cr.Net Dr./Cr.

(2) In case of multiple errors:

When there are multiple errors to be set right , prepare Profit and Loss Appropriation account as per new correct provisions and calculate the claim of the partners separately.

Now prepare the comparative table as prepared above , Cr. the partner with the new claim and Dr. him for the amount already transferred to his capital account before such provisions were recorded correctly.

Now pass the adjusting entry with the net amount .

karnataka class 12 commerce Accountancy Adjustments of partnership accounts:-Questions relating to Adjustment of Closed Partnership accounts. (Pass adjustment entry).

  1. Profit ₹30,000 distributed among A, B, C in the ratio 3:2:1 instead of 1:2:3(Answer: A’s Capital a/c Dr. ₹10,000, B’s Capital a/c Cr. ₹10,000).
  2. Profit ₹60,000 distributed among A, B, C equally instead of 1:2:3 (Answer: A’s Capital a/c Dr.10, 000, C’s Capital a/c Cr. ₹10,000).
  3. A, B, C decided to change their Profit sharing ratio from 2:1:2 to equal ratio with retrospective effect from the year 2009.Profits for the years 2009, 2010, 2011 earned by them amounted to ₹50,000, ₹70,000 and ₹90,000 respectively. (Answer: A’s Capital a/c Dr.14, 000, C’s Capital a/c Dr. ₹14,000 and B’s Capital a/c Cr.₹28,000).
  4. P, Q and R have their capitals ₹3, 00,000, ₹2, 00,000 and ₹2, 00,000 respectively. After the distribution of year’s profit it was discovered that Interest on Capital @6% was not allowed as provided in the partnership deed (Answer: Q’s Capital a/c Dr.2, 000, R’s Capital a/c Dr. ₹2,000 and P’s Capital a/c Cr.₹4,000).
  5. X, Y and Z have their capitals ₹2, 00,000, ₹3, 00,000 and ₹4, 00,000 respectively. After the distribution of year’s profit in the profit sharing ratio 1:3:2 it was discovered that Interest on Capital @6% was not allowed as provided in the partnership deed (Answer: Y’s Capital a/c Dr.9, 000, X’s Capital a/c Cr. ₹3,000 and P’s Capital a/c Cr. ₹6,000).
  6. X, Y and Z having capitals of ₹ 80,000, ₹60,000 and ₹40,000 respectively shared profits after allowing Interest on capital @6% instead of @8% (Answer: Z’s capital a/c Dr. ₹400 and X’s capital a/c Cr. ₹400).
  7. M, N and O having capitals of ₹ 50,000, ₹40,000 and ₹30,000 respectively shared profits after allowing Interest on capital @10% instead of @8% (Answer: M’s capital a/c Dr. ₹200 and O’s capital a/c Cr. ₹200).
  8. P and Q have their capitals ₹80,000 and ₹60,000 respectively. After the distribution of year’s profit in the ratio of 2:3 it was discovered that Interest on Drawings @5% p.a. was not charged as provided in the partnership deed ,their drawings amounted to ₹3,000 and ₹2,000 (Answer: P’s Capital a/c Dr.₹25, Q’s Capital a/c Cr. ₹25 )

karnataka class 12 commerce Accountancy Adjustments of partnership accounts

After closing the accounts, sometimes it is discovered that there is omission of salary, distribution of profits in the wrong ratio, omission of interest on capital or drawings, etc. Old accounts cannot be altered, so an adjustment entry is passed. For this, we will compute the amount already recorded and the amount that should have been recorded. And finally compute difference between the two amounts. Debit who received excess and credit who received short. Before closing partnership accounts, certain errors/ omissions are discovered, which are to be rectified before closing the accounts. These errors are discovered after closing Profit & & Loss account but before preparing Profit & Loss Appropriations account. A partner or partners can enjoy the right to have minimum amount of profit in a year as per the terms of partnership agreement. Guarantee may be provided in an existing profit sharing ratio or in some other agreed ratio. This guarantee may be provided by one partner or by all the partners. For this we calculate the actual share of profits of all partners and record it in inner column of P & L Appropriation A/c, add the shortage amount (guaranteed amount – actual share of profit) to the guaranteed partner’s share. Finally we distribute the shortage among guaranteeing partners in their agreed ratio

karnataka class 12 commerce Accountancy Adjustments of partnership accounts:-Adjustment in the Closed Accounts:

Accounts have been closed after the financial year, it is discovered that there have been some errors or omission in the old accounts. In such cases instead of altering the old accounts, and the signed balance sheet an adjustment entry for such error or omission is made at the beginning of the next year. Following adjustments are made:

  1. When Interest on Capitals or Drawings may have been omitted.
  2. When profits and losses have been distributed among the partner in a wrong proportion.
  3. When profit sharing ratio has been altered with effect from some past date.
  4. When salary or commission payable to a partner has been omitted.

karnataka class 12 commerce Accountancy Adjustments of partnership accounts

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karnataka class 12 commerce Accountancy Adjustments of partnership accounts

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