ACCOUNTS BY SONIA SETIA

  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)...

PAST ADJUSTMENTS PARTNERSHIP ACCOUNTING PARTNERSHIP FUNDAMENTALS (SINGLE ADJUSTMENT ENTRY)   PAST ADJUSTMENTS ADJUSTMENTS FOR INCORRECT APPROPRIATIONS OF PROFITS IN PAST AFTER CLOSING THE BOOKS.   Sometimes after closing the accounts of a partnership firm i.e. preparing the Financial Statements, some Errors and Omissions in the accounts of the earlier years are noticed. For example---- interest on capital or interest on Drawings is omitted, allowed or charged at low or higher rate, profit or losses are distributed among the partners in a wrong ratio and so on. These errors and omissions are rectified by adjusting the capital accounts of the affected partners by passing -----  (a)An Adjustment Entry (a) Adjustment entries   (a) When An Adjustment Entry (single adjustment entry) is passed:   In this case, net effect of the Errors is determined and an adjustment entry is passed by debiting and crediting the partner’s capital/current Accounts. I...