The fixed capital accounts a of Shiv, Azeem and Angad, sharing profits and losses in the ratio of 2:2:1, stood at ₹ 4,00,000, ₹ 6,00,000 and ₹ 2,00,000 respectively.
The accounts for the year ended 31st March, 2022, were drawn up and closed and the Current Account balances of the partners were determined to be:
Shiv ₹35,000, Azeem ₹40,000 and Angad ₹ 25,000.
Subsequently the following errors were discovered on 1 April, 2022:
(a) Interest on capital @ 10% per annum had been allowed to the partners, although there was no provision for it in the partnership deed. (b) Salary of ₹16,000 per annum to Shiv and ₹ 20,000 per annum to Azeem was not allowed to them, despite a provision for salary in the partnership deed. (c) Commission of ₹24,000 was not allowed to Angad, despite a provision for commission in the partnership deed.
You are required to prepare the adjusted Current Accounts of the partners on 1st April, 2022, to rectify the lapse in accounting,
OR
Ruma and Neha started business on 1st April, 2021, with fixed capitals of ₹ 4,00,000 and ₹ 3,50,000 respectively. On 1st October, 2021, they decided that their total capital (fixed) should be ₹8, 00, 000, in their profit-sharing ratio of 3:2. Accordingly, they introduced extra capital or withdrew excess capital. Their partnership deed provided for the following:
(a) Interest on capital to be allowed @ 10% per annum. (b) A monthly salary of ₹ 1,000 each to be allowed to both Ruma and Neha. (c) Interest on drawings to be charged @ 18% per annum.
Ruma had withdrawn ₹ 12,000, during the year. As per the deed, the interest on her drawings amounting to ₹1,080 to be charged from her.
During the year ending 31st March, 2022, the firm earned a net profit of ₹ 2,04, 000 before charging manager’s commission of ₹ 20,400 and interest on bank loan of ₹ 4,000.
You are required to:
(i) Give the journal entry to close Ruma’s Drawings Account. (ii) Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2022
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