Question

A, B and C are partners in a firm sharing Profits and losses in the ratio of 2:3:5. Their fixed capitals were Rs 15,00,000, Rs 30,00,000 and Rs 60,00,000 respectively. For the year ended 31st March, 2014 interest on capital was credited to them at 12% instead of 10%. Pass the necessary adjustment entry.

Answer 1

TABLE SHOWING ADJUSTMENT

$\begin{array}{ccccc}& A\left(Rs\right)& B\left(Rs\right)& C\left(Rs\right)& \text{Total (Rs)}\\ \text{Interest already credited at 12\%}& 1,80,000& 3,60,000& 7,20,000& 12,60,000\\ \text{Interest that should have been credited at 10\%}& \underset{–}{1,50,000}& \underset{–}{3,00,000}& \underset{–}{6,00,000}& \underset{–}{10,50,000}\\ \text{Partners Over credited with}& 30,000& 60,000& 1,20,000& 2,10,000\\ \text{By recovering this interest from the partners,}& & & & \\ \text{the profits of the firm will be increased by}& & & & \\ \text{Rs 2,10,000. This profit will be divided in the}& & & & \\ \text{ratio of 2:3:5}& \underset{–}{42,000}& \underset{–}{63,000}& \underset{–}{1,05,000}& \underset{–}{2,10,000}\\ \text{Net effect}& 12,000& 3,000& 15,000& -\\ & (Cr.)& (Cr.)& (Dr.)& \end{array}$

Adjustment Entry:-

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F}& \text{Dr.Rs}& \text{Cr.Rs}\\ 2014& & & & \\ \text{March 31}& \text{C's Current A/c}Dr.& & 15,000& \\ & \text{To A's Current A/c}& & & 12,000\\ & \text{To B's Current A/c}& & & 3,000\\ & \text{(Interest excessive charged, now rectified)}& & & \end{array}$