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Question

On 31st March, 2019, 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 noticed that interest on capital @ 5% had been omitted. Profit for the year ended 31st March, 2019 was ₹ 60,000 and the partners' drawings had been P – ₹ 10,000, Q – ₹ 7,500 and R – ₹ 4,500. Profit-sharing ratio of P, Q and R is 3 : 2 : 1. Give necessary adjustment entry.

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Solution

Journal

Date

Particulars

L.F.

Debit Amount

(₹)

Credit Amount

(₹)

2019

Mar.31


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, 2018)

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


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