Question

A re-payment of Rs$15,000$ has been posted to Janki Loan A/c, whereas Rs$3,000$ of this amount was paid as interest on the loan. To correct this error which journal entry would require?

• A. Debit Interest A/c and credit Janki Loan A/c with Rs$3,000$
• B. Debit Interest A/c and credit Janki Loan A/c with Rs$15,000$
• C. Debit Cash A/c and credit Janki Loan A/c with Rs$3,000$
• D. Debit Janki Loan A/c and credit Interest A/c with Rs$3,000$

Answer 1

Answer: (A)

Debit Interest A/c and credit Janki Loan A/c with Rs$3,000$

It is an error of principle as expenses are debited to the liability account. Hence rectification entry need to be passed as under:

Interest A/c Dr. 3000

To Janki Loan A/c 3000