$A, B$ and $C$ are partners in a firm sharing profits and losses in the ratio of $2 : 2 : 1$ . Their capitals (fixed) are $R s .1, 00, 000; R s . 80, 000$ and $R s . 70, 000$ respectively. For the year 2017-18; it credited interest on capital @ $9 %$ p.a. instead of $12 %$ . Give the adjustment Journal entry.

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Solution

Rectifying Entry is:-
B's current A/c Dr. 600
To C's current A/c 600
(Being adjustment entry passed)

Interest is charged @9% instead of 12%.So,the differential interest @3% is to be charged and the amount of interest is the profit to be reversed.

Table showing adjustments to be made
Particulars A B C
Amount of interest @ 3% 3000 2400 2100
Profit amount to be debited ( 3000) (3000) (1500)
Net Effect nil (600) 600

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Particulars	A	B	C
Amount of interest @ 3%	3000	2400	2100
Profit amount to be debited	( 3000)	(3000)	(1500)
Net Effect	nil	(600)	600

A,B and C are partners in a firm sharing profits and losses in the ratio of 2:2:1. Their capitals (fixed) are Rs.1,00,000;Rs.80,000 and Rs.70,000 respectively. For the year 2017-18; it credited interest on capital @ 9% p.a. instead of 12%. Give the adjustment Journal entry.