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Question

On 31st March, 2018, Capital Accounts of E,M and A after making adjustments for profits, drawings, etc., were as ERs.8,00,000;MRs.6,00,000 and ARs.4,00,000. Subsequently, it was found that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 5% p.a. Drawings during the year were: ERs.2,00,000;MRs.1,50,000 and ARs.90,000. Interest on drawings chargeable to the partners were: ERs.5,000;MRs.3,600 and ARs.2,000. The net profit during the year amounted to Rs.12,00,000. The profit-sharing ratio of the partners was 3:2:1.
Pass necessary adjustment entry for rectifying the above errors of omission. Show your workings.

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Solution

Journal entry to be passed:-
E's capital A/c Dr. 5700
To M's capital A/c 100
To A's capital A/c 5600
(Being Adjustment entry passed)


Calculation of Opening Capital
E M A
Closing Capital 8,00,000 6,00,000 4,00,000
Add:-Drawings 2,00,000 1,50,000 90,000
Less:Profits Credited (6,00,000) (4,00,000) (2,00,000)
Opening Capital 4,00,000 3,50,000 2,90,000
Interest on Capital@5% 20,000 17,500 14,500

Table showing Adjustments to be Made
Particulars E M A
Interest on capital 20,000 17,500 14,500
Interest on drawings (5000) (3600) (2000)
Profit to be credited 5,79,300 3,86,200 1,93,100
Profit wrongly credited (6,00,000)(4,00,000) (2,00,000)
Net Adjustment (5700) 100 5600

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