The ABC partnership had net income of $100,000 for 20X9. They allocate profits and losses in...
The ABC partnership had net income of $100,000 for 20X9. They allocate profits and losses in the ratio 5:3:2. After closing the 12/31/20X9 books they discovered that $30,000 was spent on a piece of land in December 20X9 and was expensed. What should happen?
Homework Answers
Land is a capital expenditure but by mistake it was considered as revenue expenditure. If this error is rectified, partners' capital balances would increase.
Since the books have been closed, the correction must be made against the capital accounts. The following journal entry would be made for correction of the error:
Journal
| Date | Account title | Debit | Credit |
| Land | 30,000 | ||
| Capital, A | 15,000 | ||
| Capital, B | 9,000 | ||
| Capital, C | 6,000 |
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