Following are the annual accounts of partnership firm of Dharm and Karm:
Profit and loss A/c of Partnership firm of Dharm and Karm as on 31-3-2023
| Dr. Particulars | Amt.(₹) | Cr. Particulars | Amt.(₹) |
|---|---|---|---|
| To Cost of goods sold A/c | 1,16,000 | By Sales A/c | 1,96,000 |
| To Office expenses A/c | 20,000 | By Sundry Income A/c | 2,000 |
| To Sales expenses A/c | 16,000 | ||
| To Financial expenses A/c | 4,000 | ||
| To Sundry expenses A/c | 4,000 | ||
| To Partners' Capital A/c (Net profit): Dharm 22,800; Karm 15,200 | 38,000 | ||
| 1,98,000 | 1,98,000 |
Balance-Sheet of partnership firm of Dharm and Karm as on 31-3-2023:
| Capital-Liabilities | Amt.(₹) | Assets-Debts | Amt.(₹) |
|---|---|---|---|
| Capital: Dharm 40,000 + Net profit 22,800 = 62,800 − Drawings 12,000 | 50,800 | Non current Assets: Tangible assets: Fixed assets | 60,000 |
| Karm 30,000 + Net profit 15,200 = 45,200 − Drawings 6,000 | 39,200 | Investments | 12,000 |
| Liabilities | 8,000 | Current assets (with debtors) | 28,000 |
| Suspense A/c | 2,000 | ||
| 1,00,000 | 1,00,000 |
After preparation of annual accounts, the following adjustments are reported:
(1) 5% interest on capital is not calculated.
(2) 10% depreciation on fixed assets is to be provided.
(3) Prepaid rent is ₹ 200.
(4) Interest on investment is not received ₹ 400 and maintain bad-debts reserve of ₹ 600.
(5) Total of sales book is under cost by ₹ 2000.
(6) Purchase of ₹ 800 is not recorded in the books.
Prepare revised final accounts from the above information.
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Start your 14-day free trial to unlock the full solution →Revised profit Rs 33,200; interest on capital Rs 3,500; divisible profit Rs 29,700 in 3:2; Balance-Sheet total Rs 94,000.
Profit-sharing ratio (from original profit 22,800 : 15,200) = 3 : 2.
Statement of revised net profit (starting from reported profit Rs 38,000):
| Particulars | Rs |
|---|---|
| Reported net profit | 38,000 |
| Add: Sales book undercast (corrects Suspense Rs 2,000) | 2,000 |
| Add: Interest accrued on investment | 400 |
| Add: Prepaid rent | 200 |
| Less: Unrecorded purchase (added to cost of goods sold) | (800) |
| Less: Depreciation @10% on fixed assets (60,000 x 10%) | (6,000) |
| Less: Bad-debts reserve | (600) |
| Revised net profit (before interest on capital) | 33,200 |
Appropriation (interest on capital @5% on opening capital): Dharm 40,000 x 5% = 2,000; Karm 30,000 x 5% = 1,500; total 3,500. Divisible profit = 33,200 - 3,500 = Rs 29,700 -> Dharm 3/5 = 17,820; Karm 2/5 = 11,880.
Partners' Capital Accounts:
| Particulars | Dharm | Karm | Particulars | Dharm | Karm |
|---|---|---|---|---|---|
| To Drawings | 12,000 | 6,000 | By Balance b/d | 40,000 | 30,000 |
| To Balance c/d | 47,820 | 37,380 | By Interest on capital | 2,000 | 1,500 |
| By Profit share (3:2) | 17,820 | 11,880 | |||
| 59,820 | 43,380 | 59,820 | 43,380 |
Revised Balance-Sheet as on 31-3-2023:
| Liabilities | Rs | Assets | Rs |
|---|---|---|---| …
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