AccountancyCBSE Class 12 · Accounting for Partnership: Basic Concepts

Past Adjustments in Partnership Class 12: Net Effect Table and Adjustment Entry

Updated 15 October 2026 · Fact-checked

Past adjustments correct errors or omissions found after a partnership's accounts are closed, such as omitted interest on capital, interest on drawings, salary, commission or profit shared in the wrong ratio. Instead of reopening the accounts, the net effect on each partner is worked out in a table and corrected by one adjustment entry between partners' capital or current accounts.

Understand Past Adjustments in Partnership

When does it arise? Sometimes, after the final accounts are prepared and profit has already been credited to the partners, it is found that something was omitted or done wrongly: interest on capital or on drawings not recorded, a partner's salary or commission left out, or the profit shared in the wrong ratio. The firm does not reopen the old accounts. It makes the correction directly in the partners' capital accounts (current accounts if capitals are fixed).

The logic. Any omitted appropriation would have reduced the divisible profit by the same amount. So the correction has two halves:
1. Give each partner what he should have got (credit), or take back what he should have paid (debit, for interest on drawings).
2. Take back the same net total from the partners in their profit sharing ratio, because that much less profit should have been divided.
The sum of the two halves for each partner is the net effect. The net effects always add up to zero: one partner gains only what another loses.

The net effect table.

Columns: one per partner, plus Total.
Rows: interest on capital (Cr), salary/commission (Cr), interest on drawings (Dr), and the line 'Less: profit wrongly distributed / recovered in ratio' (Dr or Cr).
Last row: net effect, Cr or Dr.

The single adjustment entry. Debit the partner(s) with a net debit and credit the partner(s) with a net credit:

Losing partner's Capital/Current A/c Dr
To Gaining partner's Capital/Current A/c

Wrong ratio. If profit was shared in the wrong ratio, compare the amount each partner got with what he should have got under the right ratio. The difference is the adjustment.

Several years. If the same profit was shared wrongly over several years, add the profits and adjust once on the total.

Special case. If partners' capitals are in the same proportion as the profit sharing ratio, an omission of interest on capital has no net effect, so no entry is needed.

Past Adjustments in Partnership: key facts

Net effect of an omission: Amount the partner should have received − share (in PSR) of the total omitted amount; For interest on drawings, the partner should have paid, so start with a debit.
Wrong ratio: Adjustment = Profit × correct share − Profit × share actually credited; Positive: credit the partner; negative: debit.
Check: Σ net effects = 0; If it is not zero, an arithmetic slip has crept in.
Adjustment entry: Partner with net Dr A/c Dr; To Partner with net Cr A/c; Use current accounts when capitals are fixed.

How to answer Past Adjustments in Partnership questions

Every past-adjustment question is solved with the same table. Build it carefully and the entry writes itself.

1List what was omitted or done wrongly, and the profit sharing ratio.
2Row by row, credit what partners should have received (interest on capital, salary, commission) and debit what they should have paid (interest on drawings).
3Total the net amount omitted and debit it to partners in the profit sharing ratio (or credit it, if interest on drawings dominates).
4For a wrong ratio, compare 'should have got' with 'actually got' instead.
5Add each column for the net effect; confirm the totals add to zero.
6Pass one entry: partners with a net debit Dr, partners with a net credit Cr; write a narration.

Past Adjustments in Partnership in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Profit shared in the wrong ratio

Suppose Neha, Om and Pia run a home tiffin service. Their written agreement says profits are shared 3 : 2 : 1, because Neha put in the most money and time. At the year-end, Om, who keeps the books, shares the profit of ₹60,000 equally by mistake, and the accounts are closed.

Without reopening the accounts, what single adjustment fixes the error, and why is Om not affected?

Try it first, then show the solutionSolution

Actually credited: ₹20,000 each.
Should have been: Neha 30,000, Om 20,000, Pia 10,000.
Net effect: Neha +10,000, Om nil, Pia −10,000; total zero.

Answer: Pia's Capital A/c Dr ₹10,000 To Neha's Capital A/c ₹10,000. Om's correct share (2/6 of ₹60,000) is ₹20,000, exactly what he got under equal sharing, so his account needs no change.

Memory hook: A past adjustment only moves money between partners; the firm's total never changes.

Tricks to remember Past Adjustments in Partnership

Short memory aids. Say each one aloud once, then use it on a question the same day.

Give, Take back, Net
Give what was omitted, Take back the total in PSR, Net the two: GTN.
Use it when: Building the net effect table.
Zero-sum check
Net effects always add to zero. A non-zero total means a mistake.
Use it when: Checking your table before writing the entry.
Capital ratio = PSR, no entry
If capitals are in the profit sharing ratio, omitted interest on capital nets to zero.
Use it when: Assertion-reason and 1-mark traps.

Past Adjustments in Partnership: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Omitted interest on capital, two partners · 1 mark · MCQBoard level

A and B share profits equally. Their capitals are ₹1,00,000 and ₹50,000. After the accounts were closed, it was found that interest on capital at 10% p.a. had been omitted. The adjustment entry is:
(a) A's Capital A/c Dr 2,500 To B's Capital A/c 2,500
(b) B's Capital A/c Dr 2,500 To A's Capital A/c 2,500
(c) B's Capital A/c Dr 5,000 To A's Capital A/c 5,000
(d) No entry

Try it first, then show the solutionSolution

Interest: A 10,000, B 5,000; total 15,000 taken back equally: 7,500 each.
Net: A +2,500, B −2,500.

Answer: (b) B's Capital A/c Dr 2,500 To A's Capital A/c 2,500

Example 2: Omitted interest on capital, three partners · 3 marks · Short answerBoard level

X, Y and Z share profits equally. Their capitals were ₹3,00,000, ₹2,00,000 and ₹1,00,000. Interest on capital at 6% p.a. was omitted while closing the accounts for the year ended 31st March 2026. Show the net effect and pass the adjustment entry. (3 marks)

Try it first, then show the solutionSolution

Interest to be credited: X 18,000, Y 12,000, Z 6,000; total 36,000.
Take back 36,000 equally: 12,000 each.
Net: X +6,000, Y nil, Z −6,000.

Answer: Z's Capital A/c Dr 6,000 To X's Capital A/c 6,000 (being interest on capital omitted, now adjusted). Y is not affected.

Example 3: Profit shared in the wrong ratio · 3 marks · Short answerHarder board level

P, Q and R distributed a profit of ₹1,80,000 equally, although their deed provides a ratio of 3 : 2 : 1. Pass the adjustment entry. (3 marks)

Try it first, then show the solutionSolution

Credited: 60,000 each.
Should be: P 90,000, Q 60,000, R 30,000.
Net: P +30,000, Q nil, R −30,000.

Answer: R's Capital A/c Dr 30,000 To P's Capital A/c 30,000.

Example 4: Three omissions together · 4 marks · Short answerHarder board level

A, B and C share profits 2 : 2 : 1, with capitals of ₹2,00,000, ₹1,50,000 and ₹50,000. After closing the accounts it was found that (i) interest on capital at 10% p.a., (ii) interest on drawings of A ₹2,000, B ₹1,500 and C ₹500, and (iii) C's salary of ₹1,000 per month were all omitted. Prepare the net effect table and pass the adjustment entry. (4 marks)

Try it first, then show the solutionSolution

Credit interest on capital: A 20,000, B 15,000, C 5,000; credit C's salary 12,000.
Debit interest on drawings: A 2,000, B 1,500, C 500.
Net omitted = 40,000 + 12,000 − 4,000 = 48,000; take back in 2 : 2 : 1: A 19,200, B 19,200, C 9,600.
Net: A 18,000 − 19,200 = −1,200; B 13,500 − 19,200 = −5,700; C 16,500 − 9,600 = +6,900; total zero.

Answer: A's Capital A/c Dr 1,200; B's Capital A/c Dr 5,700; To C's Capital A/c 6,900.

Example 5: Wrong ratio plus omitted appropriations, fixed capitals · 6 marks · Long answerHOTS / competency

Asha, Bina and Chetan are partners in Lakeview Lodge with fixed capitals of ₹4,00,000, ₹3,00,000 and ₹3,00,000. The profit of ₹2,40,000 for the year ended 31st March 2026 was distributed equally. The deed provides: interest on capital at 10% p.a., a salary to Bina of ₹2,000 per month, and profits in the ratio 2 : 1 : 1. Show the correct distribution, the net effect and the adjustment entry. (6 marks)

Try it first, then show the solutionSolution

Correct appropriations: interest on capital 40,000, 30,000, 30,000 (1,00,000); Bina's salary 24,000.
Remaining profit = 2,40,000 − 1,24,000 = 1,16,000 in 2 : 1 : 1: 58,000, 29,000, 29,000.
Should have got: Asha 98,000; Bina 30,000 + 24,000 + 29,000 = 83,000; Chetan 59,000 (total 2,40,000).
Actually got 80,000 each, so net: Asha +18,000, Bina +3,000, Chetan −21,000.
Fixed capitals, so current accounts are used.

Answer: Chetan's Current A/c Dr 21,000 To Asha's Current A/c 18,000 To Bina's Current A/c 3,000 (being the past adjustment for omitted interest on capital and salary and the wrong profit ratio).

Example 6: When no entry is needed · 1 mark · Assertion-reasonHOTS / competency

Assertion (A): If partners' capitals are in their profit sharing ratio, the omission of interest on capital needs no adjustment entry.
Reason (R): Each partner's interest equals his share of the total interest taken back, so the net effect is nil.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Try it first, then show the solutionSolution

Interest is proportional to capital; if capital ratio = PSR, interest ratio = PSR.
Each partner gets back exactly what is taken from him. R explains A.

Answer: (a) Both A and R are true, and R is the correct explanation of A.

Where students lose marks in Past Adjustments in Partnership

The slips examiners see most often, and what to write instead.

Mistake: Passing separate entries for each omission
Treating each item as its own correction.
Wrong working
Three entries: interest on capital, salary, interest on drawings.
Right working
One combined entry from the net effect table.
Do this: Questions ask for 'a single adjustment entry'; give exactly one.
Usually costs: 1-2 marks.
Mistake: Reopening the appropriation account
Thinking the old account must be redone.
Wrong working
Profit and Loss Appropriation A/c Dr ... To Partners' Capital A/c
Right working
Adjust directly between partners' capital (or current) accounts.
Do this: Old accounts stay closed.
Usually costs: Full marks of the entry.
Mistake: Forgetting the 'take back' row
Only crediting the omitted interest.
Wrong working
X's Capital Cr 18,000; Y Cr 12,000; Z Cr 6,000.
Right working
Also debit 36,000 in PSR; net X +6,000, Z −6,000.
Do this: Every omission has a matching recovery in the profit sharing ratio.
Usually costs: 2 marks.
Mistake: Using capital accounts when capitals are fixed
Not reading the capital method.
Wrong working
Chetan's Capital A/c Dr 21,000
Right working
Chetan's Current A/c Dr 21,000
Do this: Fixed capitals: all adjustments go through current accounts.
Usually costs: 1 mark.

Exam tips

Draw the net effect table even if only the entry is asked; it earns step marks and catches slips.
Write 'Dr' or 'Cr' against every figure in the table.
Add the narration 'being adjustment for omission of ...'.
A past adjustment is usually a 3-mark question; with several omissions or a ratio change it can be 4 marks.

Practice questions on Past Adjustments in Partnership

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
A and B have equal capitals of ₹2,00,000 each and share profits 3 : 1. Interest on capital at 5% p.a. was omitted. The adjustment entry is:
(a) B's Capital A/c Dr 5,000 To A's Capital A/c 5,000
(b) A's Capital A/c Dr 5,000 To B's Capital A/c 5,000
(c) A's Capital A/c Dr 10,000 To B's Capital A/c 10,000
(d) No entry is needed
Hint
Interest 10,000 each; take back 20,000 in 3 : 1.
Answer
(b) A's Capital A/c Dr 5,000 To B's Capital A/c 5,000
Q2 · 1 mark · MCQBoard level
Past adjustments are made when:
(a) a new partner is admitted
(b) errors or omissions are found after the final accounts are closed
(c) the firm is dissolved
(d) assets are revalued
Hint
Timing is the clue.
Answer
(b) errors or omissions are found after the final accounts are closed
Q3 · 3 marks · Short answerBoard level
P, Q and R share profits 2 : 2 : 1. Q's salary of ₹3,000 per month was omitted for the year. Pass the adjustment entry. (3 marks)
Hint
Salary 36,000; take back 2 : 2 : 1.
Answer
Q gets 36,000; take back 14,400, 14,400, 7,200. Net: P −14,400, Q +21,600, R −7,200. Entry: P's Capital A/c Dr 14,400; R's Capital A/c Dr 7,200; To Q's Capital A/c 21,600.
Q4 · 3 marks · Short answerHarder board level
X and Y shared a profit of ₹90,000 equally instead of 2 : 1. Pass the adjustment entry. (3 marks)
Hint
Compare 45,000 each with 60,000 and 30,000.
Answer
X should get 60,000 (got 45,000), Y should get 30,000 (got 45,000). Y's Capital A/c Dr 15,000 To X's Capital A/c 15,000.
Q5 · 4 marks · Short answerHarder board level
A, B and C share profits 2 : 1 : 1 with capitals of ₹5,00,000, ₹3,00,000 and ₹2,00,000. Interest on capital at 8% p.a. was omitted. Prepare the net effect table and pass the entry. (4 marks)
Hint
Interest 40,000, 24,000, 16,000.
Answer
Interest Cr: 40,000, 24,000, 16,000 (80,000). Take back 2 : 1 : 1: 40,000, 20,000, 20,000. Net: A nil, B +4,000, C −4,000. C's Capital A/c Dr 4,000 To B's Capital A/c 4,000.
Q6 · 3 marks · Short answerHarder board level
M, N and O share profits equally. Interest on drawings of M ₹3,000, N ₹1,800 and O ₹1,200 was omitted. Pass the adjustment entry. (3 marks)
Hint
Drawings interest is charged (Dr) and the total is credited back equally.
Answer
Debit interest on drawings: 3,000, 1,800, 1,200 (6,000); credit 2,000 each. Net: M −1,000, N +200, O +800. M's Capital A/c Dr 1,000 To N's Capital A/c 200 To O's Capital A/c 800.
Q7 · 3 marks · Short answerHarder board level
Ritu, Sam and Tia share profits 2 : 2 : 1. Ritu's commission of 5% on the net profit of ₹2,00,000 (before any appropriation) was omitted. Pass the adjustment entry. (3 marks)
Hint
Commission 10,000.
Answer
Ritu Cr 10,000; take back 4,000, 4,000, 2,000. Net: Ritu +6,000, Sam −4,000, Tia −2,000. Sam's Capital A/c Dr 4,000; Tia's Capital A/c Dr 2,000; To Ritu's Capital A/c 6,000.
Q8 · 1 mark · Assertion-reasonHarder board level
Assertion (A): To correct an omission found after the accounts are closed, the Profit and Loss Appropriation Account is reopened.
Reason (R): Past adjustments are made through partners' capital or current accounts.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Closed accounts stay closed.
Answer
(d) A is false, but R is true.
Q9 · 4 marks · Short answerHOTS / competency
X and Y share profits 3 : 2 with fixed capitals of ₹3,00,000 and ₹2,00,000. The profit of ₹1,50,000 was distributed without allowing interest on capital at 10% p.a., Y's salary of ₹1,500 per month, and without charging interest on drawings (X ₹4,000, Y ₹2,000). Prepare the net effect table and pass the adjustment entry. (4 marks)
Hint
Net omitted = 50,000 + 18,000 − 6,000.
Answer
Credits: X 30,000; Y 20,000 + 18,000 = 38,000. Debits for drawings: X 4,000, Y 2,000. Net omitted 62,000 taken back 3 : 2: X 37,200, Y 24,800. Net: X 26,000 − 37,200 = −11,200; Y 36,000 − 24,800 = +11,200. X's Current A/c Dr 11,200 To Y's Current A/c 11,200.
Q10 · 3 marks · Short answerHOTS / competency
A and B share profits equally. Interest on capital at 10% p.a. was omitted, and the adjustment entry passed was B's Capital A/c Dr ₹4,000 To A's Capital A/c ₹4,000. Their total capital is ₹5,00,000. Find each partner's capital. (3 marks)
Hint
Total interest 50,000 is taken back 25,000 each.
Answer
Total interest = 50,000; each partner bears 25,000. A's interest − 25,000 = 4,000, so A's interest = 29,000 and capital = ₹2,90,000. B's capital = ₹2,10,000 (interest 21,000 − 25,000 = −4,000, as given).

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.What do the net effects in a past-adjustment table always add up to?Show answer
Zero.
2.Through which accounts is a past adjustment made when capitals are fixed?Show answer
Partners' current accounts.
3.Profit ₹60,000 shared equally instead of 2 : 1 between A and B: the entry?Show answer
B's Capital A/c Dr 10,000 To A's Capital A/c 10,000.
4.Is an entry needed if capitals are in the profit sharing ratio and interest on capital is omitted?Show answer
No; the net effect is nil.
5.Omitted interest on drawings: is the partner debited or credited first?Show answer
Debited, then the total is credited back in the profit sharing ratio.

Past Adjustments in Partnership: frequently asked questions

What are past adjustments in partnership accounts?

Corrections made after the final accounts are closed, for omissions such as interest on capital or drawings, salary or commission, or for profit shared in the wrong ratio, made by one entry between partners' accounts.

Why is only one entry passed?

Each omission changes both the item and the divisible profit; the net effect table combines them so a single entry transfers the net amount from losing to gaining partners.

Can past adjustments be made through a Profit and Loss Adjustment Account?

The usual board method is the net effect table and a direct entry between partners' capital or current accounts; it gives the same final balances.

How do I handle wrong ratios over several years?

Add the profits of all the years and compare the total each partner got with the total he should have got; pass one entry for the difference.