Amar Akbar and Anthony are partners in a firm. On 1st April, 2025 their fixed capital stood at 9,00,000,4,50,000 and - 4,50,000 respectively. As per…

CA Foundation · Accounting · MTP · September 2025
Amar Akbar and Anthony are partners in a firm. On 1st April, 2025 their fixed capital stood at 9,00,000,4,50,000 and - 4,50,000 respectively. As per the provision of partnership deed: (1) Anthony was entitled for a salary of 90,000 p.a. (2) All the partners were entitled to interest on capital at 5% p.a. (3) Profits and losses were to be shared in the ratio of Capitals of the partners. Net Profit for the year ended 31st March, 2024 of 5,94,000 and 31st March, 2025 of 8,10,000 was divided equally without providing for the above adjustments. You are required to pass an adjustment journal entry to rectify the above errors.

Suggested Answer and Working Notes:

Particulars Amar Akbar Anthony Total Profit of firm I. Amount already credited: Share of profit (in the ratio of1:1:1) (2023-24, 2024-25) 4,68,000 4,68,000 4,68,000 14,04,000 II. Amount which should have been credited: Anthony’s Salary (2023-24, 2024-25) 1,80,000 Interest on Capital (2023-24, 2024-25) 90,000 45,000 45,000 Share of Profit 5,22,000 2,61,000 2,61,000 10,44,000 6,12,000 3,06,000 4,86,000 Net effect (I - II) (₹ 1,44,000) 1,62,000 (18, 000) - The necessary journal entry will be: Particulars Debit (₹) Credit (₹) Akbar’s Current A/c Dr. 1,62,000 To Amar’s Current A/c 1,44,000 To Anthony’s Current A/c 18,000 (Salary to Anthony, Interest on capital charged and profit shared among partners in the ratio of capital)

Topics: Rectification of Errors

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