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Quantitative Aptitude

Simple Interest & Compound Interest

P and Q wer...

Question

$P$ and $Q$ were partners in a firm sharing profits and losses equally. Their fixed capitals were $R s . 2, 00, 000$ and $R s . 3, 00, 000$ respectively. The partnership deed provided for interest on capital $@ 12 %$ per annum. For the year ended 31 $^{s t}$ March, 2016, the profits of the firm Rs.60,000 were distributed without providing interest on capital.
Pass necessary adjustment entry to rectify the error.

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Solution

Adjusting Journal Entry
Journal
Date Particulars L.F. Debit Amount
(Rs) Credit Amount
(Rs)
P's Current A/c Dr.
To Q's Current A/c
(Interest on capital omitted, now adjusted.) 6,000
6,000

Working Notes:
Statement Showing Adjustment
Particular P Q Total
Interest on Capital @ 12%
Less: Profits wrongly distributed
to the extent of interest amount 24,000
(30,000) 36,000
(30,000) (60,000)
60,000
Net Effect (6,000) 6,000 NIL

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X, Y

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Date	Particulars	L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	P's Current A/c Dr. To Q's Current A/c (Interest on capital omitted, now adjusted.)		6,000	6,000

Particular	P	Q	Total
Interest on Capital @ 12% Less: Profits wrongly distributed to the extent of interest amount	24,000 (30,000)	36,000 (30,000)	(60,000) 60,000
Net Effect	(6,000)	6,000	NIL