AccountsISC Class 12 · Fundamentals of Partnership

Past Adjustments in Partnership: ISC Class 12 Accounts

Updated 15 October 2026 · Fact-checked

A past adjustment corrects errors found after a partnership's accounts are closed, such as omitted interest on capital, interest on drawings or salary, or profit shared in the wrong ratio. Instead of reopening the accounts, you work out each partner's net excess or shortfall in a table and pass one entry between partners' capital or current accounts.

Follow the four rows to each partner's net effect; the effects add to zero, so one entry debits the partner who gained and credits the one who lost.

Illustration drawn for QuestionBuddy.

Understand Past Adjustments in Partnership

When is it needed? The year's accounts are closed and profit has been distributed. Then the partners discover that something the deed required was left out or done wrongly: interest on capital not credited, interest on drawings not charged, a partner's salary or commission missed, or profit divided in the wrong ratio. The CISCE syllabus lists these past adjustments (interest on capital, interest on drawings, salary and profit-sharing ratio) and asks for rectification through a single journal entry or through adjusting and closing entries, followed by adjusted capital or current accounts.

Why one entry works. Omitting an appropriation does not change the firm's total profit. It only changes who got how much. Every rupee wrongly given to one partner was wrongly withheld from another, so the corrections always add up to zero. That is why the entry is between partners only: the partner who got too much is debited and the one who got too little is credited.

The adjustment table. Draw one column per partner and four rows:

Amounts that should have been credited (interest on capital, salary, commission).
Amounts that should have been debited (interest on drawings).
Reverse the net omitted amount in the profit-sharing ratio: if the omitted items total a net credit, that much less profit would have been shared, so debit it in the ratio.
Net effect = row 1 − row 2 − row 3. Positive means 'credit this partner'; negative means 'debit'.

Wrong ratio. Compare what each partner received with what he should have received under the correct ratio; the difference is the adjustment.

Capitals not given. If interest is on opening capital and only closing capitals are given, work back first: Opening = Closing + Drawings − Profit share already credited (plus or minus other items). The 2025 ISC paper set a rectification problem where many candidates subtracted an accrued amount that should have been added, so write the sign of every item.

Special case. If capitals happen to be in the profit-sharing ratio, omitted interest on capital needs no adjustment: what each partner should have received is exactly what is reversed from him.

Which accounts? Fixed capitals: current accounts. Fluctuating capitals: capital accounts.

Past Adjustments in Partnership: key facts

Rows of the adjustment table: Credit omitted interest on capital, salary, commission
Debit omitted interest on drawings
Reverse net omitted amount in profit-sharing ratio
Net effect credit (+) or debit (−); The net effects always sum to zero.
Net effect for a partner: Net = Omitted credits − Omitted debits − (Total net omitted × his profit share)
Wrong ratio adjustment: Adjustment = Profit × correct share − Profit × share actually used; Positive: credit the partner.
Adjustment journal entry: Partner(s) with negative net: Capital/Current A/c Dr → Partner(s) with positive net: Capital/Current A/c Cr; No P&L Appropriation A/c is reopened.
Opening capital from closing (fluctuating): Opening = Closing + Drawings − Profit share credited − Capital introduced; Needed when interest is on opening capital.

Credit omitted	interest on capital, salary, commission
Debit omitted	interest on drawings
	Reverse net omitted amount in profit-sharing ratio
Net effect	credit (+) or debit (−)

How to answer Past Adjustments in Partnership questions

Past adjustments are short in ISC but easy to lose marks on. Use the same layout every time.

1List what was omitted or wrongly done, partner by partner.
2If capitals are not given, find the opening capitals first.
3Build the table: credits omitted, debits omitted, net omitted reversed in the profit-sharing ratio.
4Find the net effect for each partner and check the row adds to zero.
5Pass one entry: debit the partners with negative net, credit those with positive net.
6If asked, show the adjusted capital or current accounts with the adjustment posted.

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.

Settling a forgotten salary with one transfer

Suppose two cousins run a weekend food stall. Ravi does all the cooking, so they agreed he would get a salary of ₹10,000 for the season before sharing profit equally. At the season's end they split the ₹50,000 profit equally, ₹25,000 each, forgetting the salary.

Do they need to redo the whole season's accounts? How much should change hands?

Try it first, then show the solutionSolution

Correct split: Ravi's salary ₹10,000, then ₹40,000 shared equally, so Ravi ₹30,000 and his cousin ₹20,000.
Already received: ₹25,000 each.
Difference: Ravi is short by ₹5,000, his cousin got ₹5,000 too much.

Answer: No. One transfer of ₹5,000 from the cousin to Ravi fixes it, which is exactly what the single adjustment entry does in the books.

Memory hook: Fix the people, not the profit.

Tricks to remember Past Adjustments in Partnership

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

C – D – R – N
Credit omitted, Debit omitted, Reverse in ratio, Net effect: the four rows of the table.
Use it when: Laying out any past adjustment.
Zero-sum check
The net effects must add to zero; if not, an arithmetic slip is hiding.
Use it when: Checking your table before the entry.
Capitals in ratio, nothing to do
If capitals are in the profit-sharing ratio, omitted interest on capital cancels out.
Use it when: Quick MCQs and HOTS reasoning.

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

After the accounts of Amar and Bina (equal partners) were closed, it was found that interest on capital had been omitted: Amar ₹20,000, Bina ₹10,000. The adjustment entry is:
(a) Amar's Capital Dr 5,000; To Bina's Capital 5,000
(b) Bina's Capital Dr 5,000; To Amar's Capital 5,000
(c) Bina's Capital Dr 10,000; To Amar's Capital 10,000
(d) P&L Appropriation Dr 30,000; To Capitals 30,000

Try it first, then show the solutionSolution

Total 30,000 reversed equally: 15,000 each.
Amar: 20,000 − 15,000 = +5,000; Bina: 10,000 − 15,000 = −5,000.

Answer: (b) Bina's Capital Dr 5,000; To Amar's Capital 5,000

Example 2: Three partners: adjustment table · 3 marks · Short answerBoard level

Asha, Bhanu and Chetan share profits 2:2:1 with capitals of ₹3,00,000, ₹2,00,000 and ₹1,00,000. Interest on capital at 10% p.a. was omitted for 2025-26 after the profit had been distributed. Pass the adjustment entry. (3 marks)

Try it first, then show the solutionSolution

Interest omitted: 30,000, 20,000, 10,000; total ₹60,000.
Reverse in 2:2:1: 24,000, 24,000, 12,000.
Net: Asha +6,000; Bhanu −4,000; Chetan −2,000 (sum zero).
Entry: Bhanu's Capital A/c Dr 4,000; Chetan's Capital A/c Dr 2,000; To Asha's Capital A/c 6,000.

Answer: Bhanu Dr ₹4,000 and Chetan Dr ₹2,000; Asha Cr ₹6,000.

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

Xavier and Yash should share profits 3:1, but the profit of ₹1,20,000 for 2025-26 was distributed equally. Pass the adjustment entry. (3 marks)

Try it first, then show the solutionSolution

Should have got: Xavier 90,000; Yash 30,000.
Actually got: 60,000 each.
Xavier +30,000; Yash −30,000. Entry: Yash's Capital A/c Dr 30,000; To Xavier's Capital A/c 30,000.

Answer: Yash's Capital Dr ₹30,000; To Xavier's Capital ₹30,000.

Example 4: Several omissions at once · 6 marks · Long answerHarder board level

Priya, Qasim and Rhea share profits 2:2:1; capitals (fixed) ₹2,40,000, ₹1,60,000 and ₹1,00,000. After distributing the profit for 2025-26 it was found that: interest on capital at 5% p.a. was omitted; interest on drawings (Priya ₹1,800, Qasim ₹1,200, Rhea ₹600) was not charged; Rhea's salary of ₹1,000 per month was not credited. Prepare the adjustment table and pass one entry. (6 marks)

Try it first, then show the solutionSolution

Credits omitted: interest on capital 12,000, 8,000, 5,000; salary to Rhea 12,000.
Debits omitted: interest on drawings 1,800, 1,200, 600.
Net omitted = 25,000 + 12,000 − 3,600 = ₹33,400, reversed in 2:2:1: 13,360, 13,360, 6,680.
Net: Priya 12,000 − 1,800 − 13,360 = −3,160; Qasim 8,000 − 1,200 − 13,360 = −6,560; Rhea 5,000 + 12,000 − 600 − 6,680 = +9,720. Sum = 0.
Entry: Priya's Current A/c Dr 3,160; Qasim's Current A/c Dr 6,560; To Rhea's Current A/c 9,720.

Answer: Priya Dr ₹3,160, Qasim Dr ₹6,560; Rhea Cr ₹9,720.

Example 5: Wrong interest rate and wrong ratio together · 6 marks · Long answerHOTS / competency

Meena and Nikhil have capitals of ₹2,00,000 and ₹1,00,000. The profit before interest on capital for 2025-26 was ₹1,00,000. It was distributed after allowing interest on capital at 12% and sharing the balance equally. The deed actually provides interest at 10% and a ratio of 3:2. Pass the adjustment entry. (6 marks)

Try it first, then show the solutionSolution

As done: interest 24,000 and 12,000; balance 64,000 shared 32,000 each. Meena 56,000; Nikhil 44,000.
As it should be: interest 20,000 and 10,000; balance 70,000 in 3:2 = 42,000 and 28,000. Meena 62,000; Nikhil 38,000.
Meena +6,000; Nikhil −6,000.
Entry: Nikhil's Capital A/c Dr 6,000; To Meena's Capital A/c 6,000.

Answer: Nikhil's Capital Dr ₹6,000; To Meena's Capital ₹6,000.

Example 6: Opening capitals worked back first · 6 marks · Long answerHOTS / competency

The fluctuating capitals of Arun and Bela on 31st March 2026 were ₹3,40,000 and ₹2,10,000 after debiting drawings (Arun ₹40,000, Bela ₹30,000) and crediting profit of ₹1,20,000 shared equally. Interest on opening capital at 10% p.a. was omitted. Pass the adjustment entry. (6 marks)

Try it first, then show the solutionSolution

Opening capitals: Arun 3,40,000 + 40,000 − 60,000 = ₹3,20,000; Bela 2,10,000 + 30,000 − 60,000 = ₹1,80,000.
Interest omitted: 32,000 and 18,000; total 50,000 reversed equally, 25,000 each.
Net: Arun +7,000; Bela −7,000.
Entry: Bela's Capital A/c Dr 7,000; To Arun's Capital A/c 7,000.

Answer: Bela's Capital Dr ₹7,000; To Arun's Capital ₹7,000.

Where students lose marks in Past Adjustments in Partnership

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

Mistake: Reopening the P&L Appropriation Account
Thinking the profit itself changes.
Wrong working
P&L Appropriation A/c Dr 60,000; To Partners' Capital A/cs 60,000
Right working
Bhanu Dr 4,000, Chetan Dr 2,000; To Asha 6,000
Do this: Past adjustments move amounts between partners only.
Usually costs: Most of the marks for the entry.
Mistake: Forgetting to reverse the omitted amount in the profit-sharing ratio
Crediting interest on capital without taking it back from the profit shares.
Wrong working
Credit Asha 30,000, Bhanu 20,000, Chetan 10,000
Right working
Net only: +6,000, −4,000, −2,000
Do this: Always have the 'reverse in ratio' row.
Usually costs: 2 marks.
Mistake: Wrong sign for interest on drawings
Treating interest on drawings as a credit like interest on capital.
Wrong working
Priya: 12,000 + 1,800 − 13,360
Right working
Priya: 12,000 − 1,800 − 13,360 = −3,160
Do this: Interest on drawings is charged to the partner, so it is a debit.
Usually costs: 1-2 marks.
Mistake: Using closing capitals for interest on capital
Taking the figures given in the question directly.
Wrong working
Interest = 3,40,000 × 10% = 34,000
Right working
Opening 3,20,000 × 10% = 32,000
Do this: Work back to opening capital before calculating interest.
Usually costs: 1-2 marks.

Exam tips

Show the adjustment table with a total column; examiners award a mark for it even if the entry slips.
Write 'Being adjustment for interest on capital omitted' as the narration.
When the question gives an incorrect P&L Appropriation Account, ISC expects you to rework the correct distribution and then rectify; the 2025 examiners noted candidates skipping that step.
Use current accounts under fixed capitals and capital accounts under fluctuating capitals.

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
Past adjustments for omitted interest on capital are usually made through:
(a) P&L Appropriation A/c
(b) Profit and Loss Adjustment A/c
(c) Partners' Capital or Current A/cs
(d) Revaluation A/c
Hint
The accounts are already closed.
Answer
(c) Partners' Capital or Current A/cs
Q2 · 1 mark · MCQBoard level
Interest on drawings of Aman ₹1,000 and Bela ₹600 was not charged. They share profits equally. The adjustment entry is:
(a) Aman Dr 200; To Bela 200
(b) Bela Dr 200; To Aman 200
(c) Aman Dr 1,000; To Bela 1,000
(d) No entry
Hint
Net omitted 1,600 would have raised profit by 800 each.
Answer
(a) Aman Dr 200; To Bela 200
Q3 · 3 marks · Short answerBoard level
Chirag's salary of ₹24,000 for the year was omitted. Partners Arif, Bhavna and Chirag share profits 2:1:1. Pass the adjustment entry. (3 marks)
Hint
Reverse 24,000 in 2:1:1.
Answer
Reverse: 12,000, 6,000, 6,000. Net: Arif −12,000; Bhavna −6,000; Chirag +18,000. Entry: Arif's Capital Dr 12,000; Bhavna's Capital Dr 6,000; To Chirag's Capital 18,000.
Q4 · 3 marks · Short answerHarder board level
A profit of ₹90,000 was shared between Xena and Yuvan in the ratio 2:1 instead of equally. Pass the adjustment entry. (3 marks)
Hint
Compare with 45,000 each.
Answer
Xena got 60,000 (should be 45,000): −15,000; Yuvan +15,000. Entry: Xena's Capital Dr 15,000; To Yuvan's Capital 15,000.
Q5 · 3 marks · Short answerHOTS / competency
Lal, Mohan and Nair share profits 3:2:1 with capitals ₹1,50,000, ₹1,00,000 and ₹50,000. Interest on capital at 10% was omitted. What adjustment is needed? Explain. (3 marks)
Hint
Compare the capital ratio with the profit ratio.
Answer
Interest omitted 15,000, 10,000, 5,000; reversed in 3:2:1 it is 15,000, 10,000, 5,000. Net effect nil, so no entry is needed because the capitals are in the profit-sharing ratio.
Q6 · 6 marks · Long answerHarder board level
Dia and Eshan share profits 3:2 with capitals of ₹2,00,000 and ₹1,50,000. Interest on capital at 6% p.a. and Eshan's commission of ₹8,000 were omitted. Pass the adjustment entry. (6 marks)
Hint
Net omitted 29,000 reversed 3:2.
Answer
Credits: 12,000; 9,000 + 8,000. Reverse 29,000: 17,400 and 11,600. Net: Dia −5,400; Eshan +5,400. Entry: Dia's Capital Dr 5,400; To Eshan's Capital 5,400.
Q7 · 1 mark · Assertion-reasonHarder board level
Assertion (A): A past adjustment entry does not change the total capital of the firm.
Reason (R): The amounts debited to some partners equal the amounts credited to others.
(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
Zero-sum.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q8 · 6 marks · Long answerHarder board level
Interest on drawings was not charged: Farid ₹2,400, Gauri ₹1,800 and Hema ₹600. They share profits equally. Pass the adjustment entry. (6 marks)
Hint
Net omitted 4,800 would add 1,600 to each share.
Answer
Net: Farid −2,400 + 1,600 = −800; Gauri −1,800 + 1,600 = −200; Hema −600 + 1,600 = +1,000. Entry: Farid's Capital Dr 800; Gauri's Capital Dr 200; To Hema's Capital 1,000.
Q9 · 3 marks · Short answerHarder board level
Interest on capital was credited at 8% instead of 6% to Jaya (capital ₹2,50,000) and Kunal (capital ₹1,50,000), who share profits equally. Pass the adjustment entry. (3 marks)
Hint
Excess interest: 5,000 and 3,000.
Answer
Reverse excess: Jaya −5,000, Kunal −3,000; add 8,000 back to profit shared equally, +4,000 each. Net: Jaya −1,000; Kunal +1,000. Entry: Jaya's Capital Dr 1,000; To Kunal's Capital 1,000.
Q10 · 6 marks · Long answerHOTS / competency
The capitals of Sara and Tanu on 31st March 2026 were ₹2,60,000 and ₹1,90,000 after drawings of ₹30,000 and ₹20,000 and profit of ₹80,000 shared equally. Interest on opening capital at 5% p.a. was omitted. Pass the adjustment entry. (6 marks)
Hint
Find opening capitals first.
Answer
Opening: Sara 2,60,000 + 30,000 − 40,000 = 2,50,000; Tanu 1,90,000 + 20,000 − 40,000 = 1,70,000. Interest 12,500 and 8,500; reverse 21,000 equally (10,500 each). Net: Sara +2,000; Tanu −2,000. Entry: Tanu's Capital Dr 2,000; To Sara's Capital 2,000.

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 must the net effects in an adjustment table add up to?Show answer
Zero.
2.Omitted salary ₹12,000 to C; PSR A:B:C = 1:1:1. Net effect on C?Show answer
12,000 − 4,000 = +₹8,000.
3.Is interest on drawings omitted a credit or a debit to the partner?Show answer
A debit.
4.When does omitted interest on capital need no adjustment?Show answer
When capitals are in the profit-sharing ratio.
5.Which account is used under fixed capitals?Show answer
Partners' current accounts.

Past Adjustments in Partnership: frequently asked questions

Why not just reopen the Profit and Loss Appropriation Account?

The accounts are closed and the total profit is correct. Only its division among partners is wrong, so a single entry between partners is enough and keeps the closed books intact.

Can a past adjustment be shown through the Profit and Loss Adjustment Account?

Some books do this, but the ISC syllabus asks for a single journal entry or adjusting and closing entries; the single entry is the expected answer.

What if the question gives an incorrect Appropriation Account?

Rework the correct distribution, compare it with what was given, and pass one entry for the difference.

Does a past adjustment affect next year's interest on capital?

Under fluctuating capitals, yes, because the capital balances change. Under fixed capitals only the current accounts change.