A, B and C were partners sharing profits and losses equally. Their respective capitals balances on 31.3.2015 were $ 1,20,000, $ 99,000 and $ 1,62,000 respectively. After closing the accounts for the yea 31st March, 2015 it was discovered that during the year 2014-15, interest on capitals at the rate of 5% p.a. was provided to all the partners, however, there was no such clause in the partnership deed. Profits for the year ended 31st March, 2015 amounting to $ 45,000 was also credited to the partners capital, in arriving at the closing capitals of the partners. You are required to pass an adjusting entry to rectify this error.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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