Adjustments

Profit commission is calculated only when the firm has an applicable profit. If the firm incurs a net loss, there is no profit base for calculating the commission, so the commission payable is nil. It is not added to the loss because a commission specified on profit does not arise in a loss-making year unless the deed expressly provides otherwise. Exam tip: Check whether the firm has profit before calculating any ‘commission on profit’.

Claims are A (₹20000) and B (₹12000), total (₹32000) but profit is (₹28000). B gets (28000\times\frac{12000}{32000}=₹10500).

Opening capital is found by adding drawings and loss to closing capital and subtracting interest. (210000+25000+33000-12000=₹256000).

Removing wrong debit credits B by (₹30000), but expense reduces B's profit by (₹9000). Net credit is (₹21000).

The first withdrawal is for (12) months and the second for (6) months. Interest is (20000\times10%+20000\times10%\times\frac{6}{12}=₹3000).

The first withdrawal is for (6) months and the second for (0) months. Interest is (18000\times8%\times\frac{6}{12}=₹720).

After salary residual profit is (₹64000). A's correct total is (36000+64000\times\frac{3}{5}=₹74400), while he earlier got (₹60000).

Total claim is (₹60000) and available profit is (₹45000). The third partner gets (10000\times\frac{45000}{60000}=₹7500).

B's normal share is (₹30000) and guarantee is (₹50000). Under firm guarantee B receives (₹50000), leaving (₹40000) for A.

B's normal share is (144000\times\frac{4}{9}=₹64000). A bears deficiency (₹8000), so A gets (₹80000-₹8000=₹72000).

Commission on sales is not based on profit, so it is a business expense. Amount is (1000000\times2%=₹20000).

Personal tax is B's drawings, not firm expense. Removing expense increases profit, but B must be debited for drawings (₹18000).

Removing expense increases A's profit by (25000\times\frac{2}{5}=₹10000), but personal premium debits him (₹25000). Net debit is (₹15000).

The direct answer is option A: the total error in profit is ₹12,000. Interest on drawings is income for the firm, so it must be credited to the Profit and Loss Appropriation Account. The wrong entry debited ₹6,000, which reduced profit by ₹6,000. The correct entry would credit ₹6,000, which would increase profit by ₹6,000. Therefore, changing the wrong debit into the correct credit causes a total difference of ₹6,000 + ₹6,000 = ₹12,000. Option A is correct because it gives this double effect. Option B, ₹6,000, counts only the credit that should have been made or only one side of the correction. Option C, ₹3,000, has no accounting basis here. Option D, no error, is wrong because the account side was changed and profit was affected. Remember: when an amount wrongly debited should have been credited, the total correction is twice the amount.

The originally recorded credit of ₹15,000 treated interest on capital as if it increased profit. The correct treatment is a debit of ₹15,000, which reduces profit. To correct the error, the wrong credit must first be cancelled by a debit of ₹15,000. Then the proper debit of ₹15,000 must be recorded. Both changes reduce the previously overstated profit.

Therefore the total reduction is ₹15,000 + ₹15,000 = ₹30,000. The first ₹15,000 removes the incorrect increase, and the second ₹15,000 records the actual expense or appropriation correctly. Hence option A is correct. A reduction of only ₹15,000 would correct just one side of the error and would leave the final profit misstated.

First (6) months are at (₹24000) per annum and next (6) months at (₹36000) per annum. Total is (12000+18000=₹30000).

After salary residual profit is (₹80000) and A's share is (₹48000). A's total receipt is (₹68000), so deficiency is (₹2000).

B's normal share is (₹44000) and guarantee is (₹48000). Under firm guarantee B gets (₹48000), leaving (₹62000) for A.

The periods are (12), (9) and (3) months. Interest is (40000\times15%+30000\times15%\times\frac{9}{12}+20000\times15%\times\frac{3}{12}=₹10125), so the options indicate an error.

Total credits = ₹1,30,000 + ₹7,000 = ₹1,37,000. Total debits = ₹36,000 + ₹24,000 + ₹10,000 = ₹70,000. Therefore, distributable profit = ₹1,37,000 − ₹70,000 = ₹67,000. ₹1,37,000 is only the total credit, while ₹70,000 represents appropriations charged to the account. Exam tip: Find the balance of the Appropriation Account by subtracting total debits from total credits.

B's residual profit share is (38000-10000=₹28000). This is (1/5) of total residual profit, so total residual profit is (₹140000).

With a special agreement interest on capital may be payable even without profit. In such case it behaves like a charge against profit.

For first (6) months interest is on (₹80000) and next (6) months on (₹60000) at (6%). Total is (₹2400+₹1800=₹4200).

The full (₹16000) should be charged to A. A was charged only (₹12000) and B was wrongly charged (₹4000), so debit A and credit B.

Wrong equal share was (₹30000). Correct third share is (90000\times\frac{2}{9}=₹20000), so he is debited (₹10000).