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Question

Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at ₹ 3,00,000, ₹ 1,00,000, ₹ 2,00,000. For the year ended 31st March, 2018, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was ₹ 2,50,000.
Show your working notes clearly and pass necessary adjustment entry.

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Solution

Journal

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

Shyam’s Current A/c

Dr.

200

Mohan’s Current A/c

Dr.

400

To Ram’s Current A/c

600

(Interest on Capital adjusted)

Working Notes:

WN 1 Calculation of Interest on Capital 10% p.a.

WN 2 Calculation of Interest on Capital 9% p.a.

WN 3

Statement Showing Adjustment

Particulars

Ram

Shyam

Mohan

Total

Interest on Capital credited at 10% p.a.

30,000

10,000

20,000

60,000

Interest on Capital wrongly credited at 9% p.a. reversed

(27,000)

(9,000)

(18,000)

(54,000)

Right distribution

3,000

1,000

2,000

6,000

Wrong distribution of Rs 6,000 (2:1:2)

(2,400)

(1,200)

(2,400)

(6,000)

Net Effect

600

(200)

(400)

NIL


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