Ram, Mohan and Sohan sharing profits and losses equally have capitals of ₹ 1,20,000, ₹ 90,000 and ₹ 60,000 respectively. For the year ended 31st March, 2019, interest was credited to them @ 6% instead of 5%.
Give adjustment Journal entry.

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Solution

Journal

Particulars

L. F.

Debit Amount

(₹)

Credit Amount

(₹)

Ram’s Capital A/c

Dr.

300

To Sohan’s Capital A/c

300

(Interest on Capital was wrongly credited, now adjusted)

Working Notes:

WN 1 Calculation of Interest on Capital at 6% p.a.

WN 2 Calculation of Interest on Capital at 5% p.a.

WN 3

Statement Showing Adjustment

Particulars

Ram

Mohan

Sohan

Total

Interest on Capital wrongly credited at 6% p.a. reversed

(7,200)

(5,400)

(3,600)

(16,200)

Interest on Capital credited at 5% p.a.

6,000

4,500

3,000

13,500

Wrong Distribution

(1,200)

(900)

(600)

(2,700)

Right Distribution of Rs 2,700 (1:1:1)

900

900

900

(2,700)

Net Effect

(300)

NIL

300

NIL

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Journal
Particulars		L. F.	Debit Amount (₹)	Credit Amount (₹)
Ram’s Capital A/c	Dr.		300
To Sohan’s Capital A/c				300
(Interest on Capital was wrongly credited, now adjusted)

Statement Showing Adjustment
Particulars	Ram	Mohan	Sohan	Total
Interest on Capital wrongly credited at 6% p.a. reversed	(7,200)	(5,400)	(3,600)	(16,200)
Interest on Capital credited at 5% p.a.	6,000	4,500	3,000	13,500
Wrong Distribution	(1,200)	(900)	(600)	(2,700)
Right Distribution of Rs 2,700 (1:1:1)	900	900	900	(2,700)
Net Effect	(300)	NIL	300	NIL

Ram, Mohan and Sohan sharing profits and losses equally have capitals of ₹ 1,20,000, ₹ 90,000 and ₹ 60,000 respectively. For the year ended 31st March, 2019, interest was credited to them @ 6% instead of 5%. Give adjustment Journal entry.

Ram, Mohan and Sohan sharing profits and losses equally have capitals of ₹ 1,20,000, ₹ 90,000 and ₹ 60,000 respectively. For the year ended 31st March, 2019, interest was credited to them @ 6% instead of 5%.
Give adjustment Journal entry.