X and Y are partners sharing profits and losses in the ratio of 3 : 2. They employed Z as their Manager to whom they paid a salary of Rs. 7,500 per month. Z had deposited Rs. 2,00,000 on which interest was payable Rs. 9% p.a. At the end off the accounting year (i.e., 31st March, 2018) 2017-18 (after division of the year’s profits), it was decided that Z should be treated as a partner with effect from 1st April, 2014 with 1/6th share of profits, his deposit being considered as capital carrying interest @ 6% p.a. like capitals of other partners. The firm’s profits and losses after allowing interest on capitals were 2014-15: Profit Rs. 5,90,000; 2015-16: Profit Rs. 6,26,000; 2016-17: Loss Rs. 40,000 and 2017-18: Profit Rs. 7,80,000. Record necessary Journal entries to give effect to the above.
