PAST ADJUSTMENTS WITH MULTIPLE JOURNAL ENTRIES.PARTNERSHIP ACCOUNTING.PARTNERSHIP FUNDAMENTALS.

 

When Adjustment entries are passed instead of one adjustment Entry.

In this situation, Analytical table to determine the net effect of all the adjustments is not prepared instead journal entries are passed for each error or omission by debiting or crediting the Profit and Loss Adjustment Account. After passing the entries for adjustment of errors and omissions, Profit and Loss Adjustment Account is closed by debiting or crediting (as the situation is) with the corresponding credit or debit to the partner’s Current accounts, if Fixed Capital Account Method is followed or Partner’s Capital Accounts , if Fluctuating Capital Account Method is followed.

ACCOUNTING ENTRIES

1.      ADJUSTMENT ENTRIES FOR THE ITEMS TO BE CREDITED TO THE PARTNER’S CAPITAL/CURRENT ACCOUNTS.

Profit & loss Adjustment a/c    Dr.

       To partner’s capital/current a/c

(Adjustment made for previously omitted, now recorded)

 

2.      ADJUSTMENT ENTRIES FOR THE ITEMS WHICH ARE TO BE DEBITED TO THE PARTNER’S CAPITAL/CURRENT ACCOUNTS.

Partner’s capital/current a/c     Dr.

      To Profit & loss Adjustment a/c

3.      For net profit/loss due to above adjustments.

 

For profit:

 

Profit and Loss Adjustment a/c

       To Partner’s Capital/Current a/c

(Profit on adjustment credited to partner’s capital/current a/c)

 

For loss:

 

Partner’s capital/current a/c

     To Profit & loss Adjustment a/c

(Loss on adjustment transferred to partner’s capital/current a/c)

Comments

Post a Comment

Popular posts from this blog

cash flow statement

    CASH FLOW STATEMENT CASH FLOW STATEMENT IS CLASSIFIED INTO THREE MAIN ACTIVITIES. 1.CASH FLOW FROM OPERATING ACTIVITIES. 2.CASH FLOW FROM INVESTING ACTIVITIES. 3.CASH FLOW FROM FINANCING ACTIVITIES.   1.OPERATING ACTIVITIES The operating activities section of the cash flow statement is a crucial financial reporting element that delves into the cash transactions directly associated with a company's core business operations. It serves as a detailed account of how a business generates and utilizes cash in its day-to-day activities, offering insights into its operational efficiency and financial health.   At its core, operating activities involve the cash flows resulting from the principal revenue-generating activities of a company. This includes cash receipts from customers, payments to suppliers, wages to employees, and operational expenses. Positive cash flow from operating activities signals that a company is effectively covering its operati...
Read more

“Called-up” and “Paid-up” Capitals.Under the Companies Act 2013.

  “Called-up” and “Paid-up” Capitals Under the Companies Act 2013, "called-up capital" and "paid-up capital" are terms associated with a company's capital structure. Here's an elaboration on both:   1 . Called up Capital :    - Called-up capital refers to the portion of share capital that a company has called or demanded from shareholders.    - When a company issues shares, it may not require shareholders to pay the entire value immediately. Instead, it may ask them to pay in installments or on a specified schedule.    - Called-up capital represents the amount that the company has asked shareholders to pay at a particular point in time, whether in full or in part.   2 . Paid up Capital :    - Paid-up capital refers to the portion of called-up capital that shareholders have actually paid to the company.    - It represents the amount of money that shareholders have contributed to the company by purchasin...
Read more
CASH FLOW STATEMENT INTRODUCTION  A cash flow statement is a financial document that tracks the inflow and outflow of cash within an organization over a specific period. It provides a comprehensive overview of a company's liquidity, revealing how cash is generated and utilized in operational, investing, and financing activities. Broken down into three main sections, the cash flow statement includes operating activities (cash generated from core business operations), investing activities (cash flows from buying or selling assets), and financing activities (cash flows related to debt, equity, or dividend transactions). This statement is crucial for assessing a company's financial health, liquidity, and its ability to meet short-term obligations.
Read more