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Question

Profit earned by a partnership firm for the year ended 31st March, 2018 were distributed equally between the partners – Pankaj and Anu – without allowing interest on capital. Interest due on capital was Pankaj – ₹ 3,000 and Anu – ₹ 1,000.
Pass necessary adjustment entry.

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Solution

Journal

Date

Particulars

L.F.

Debit Amount

(₹)

Credit Amount

(₹)

Anu’s Capital A/c

Dr.

1,000

To Pankaj’s Capital A/c

1,000

(Adjustment of omission of Interest on Capital)

Working Note:

Statement Showing Adjustment

Particulars

Pankaj

Anu

Total

Interest on Capital to be credited

3,000

1,000

4,000

Profit wrongly distributed equally to be debited

(2,000)

(2,000)

(4,000)

Net Effect

1,000

(Cr.)

1,000

(Dr.)

NIL


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