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, 2019, 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

Date
Particulars

L.F.

Debit Amount

(₹)

Credit Amount

(₹)

2019
March 31

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

Suggest Corrections

215

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	Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019 March 31	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)

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