Ram, Mohan and Sohan sharing profits and losses equally have capitals of 70,000, 90,000 and 60,000. For the year ended 31st March, 2018, interest was credited to them @ 6% instead of 5%. Give adjustment Journal entry.

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Solution

In the given question excess interest of 1% has been charged to partners capital account. We have to reverse that excess interest.
Due to excessive interest,profit has been distributed less to the partners equally.
Interest on Capital to be reversed
Ram = 70,0001% = 700
Mohan= 90,0001%= 900
Sohan = 60,000*1% = 600
Total = 2200

Profit to be distribute to partners is 2200 equally
Ram = 733
Mohan = 733
Sohan = 733

Partners profits to be added back Interest Adjustment
to be written back
Ram + 733 -700 +33

Mohan +733 - 900 -166

Sohan +733 - 600 +133

So,Adjustment Entry to be passes is:-
Mohan's Capital A/c Dr 166
To Ram's Capital A/c 33
To Sohan's Capital A/c 133

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