Question

On 31st March, 2018, after the closing of the accounts, the Capital Accounts of P, Q and R stood in the books of the firm at ₹ 40,000; ₹ 30,000 and ₹ 20,000 respectively. Subsequently, it was discovered that interest on capital @ 5% had been omitted. Profit for the year ended 31st March, 2018 amounted to ₹ 60,000 and the partners' drawings had been P–₹ 10,000, Q–₹ 7,500 and R–₹ 4,500. The profit-sharing ratio of P, Q and R is 3 : 2 : 1. Give necessary adjustment entry.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	P’s Current A/c	Dr.		300
	To Q’s Capital A/c				8
	To R’s Capital A/c				292
	(Interest on Capital was omitted, now adjusted)

Working Notes:

WN 1 Calculation of Capital at the beginning (as on April 01, 2017)

Particulars	P	Q	R
Capital as on March 31, 2017 (Closing)	40,000	30,000	20,000
Add: Drawings	10,000	7,500	4,500
Less: Profit Rs 60,000 (3:2:1)	(30,000)	(20,000)	(10,000)
Capital as on April 01, 2016 (Opening)	20,000	17,500	14,500

WN 2 Calculation of Interest on Capital


WN 3

Statement Showing Adjustment
Particulars	P	Q	R	Total
Interest on Capital (to be credited)	1,000	875	725	2,600
For sharing above Loss (3:2:1)	(1,300)	(867)	(433)	(2,600)
Net Effect	(300)	8	292	NIL