The capital accounts of Amar and Harsh stood at $R s . 20, 000$ and $R s . 30, 000$ respectively after the necessary adjustments in respect of drawings and net profit for the year ended 31 $^{s t}$ March, 2017. It was subsequently ascertained that interest on capital @ $12 %$ per annum was not taken into account while arriving at the divisible profits for the year
During the year 2016-17, Amar had withdrawn $R s . 2, 000$ and Harsh's drawings were $R s . 1, 000$ .
The net profit for the year amounted to $R s . 15, 000$
The partners shared profits and losses in the ratio of $3 : 2$
You are required to pass the necessary journal entries to rectify the error in accounting.

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Solution

Opening capital is calculated using the formula given below:
$O p e n i n g c a p i t a l = C l o s i n g c a p i t a l + D r a w i n g s - P r o f i t$
Using the above equation
Amar's opening capital = Rs20,000+2000-9000 = Rs13,000
Harsh's opening capital =Rs30,000+1000-6000 = Rs25,000
Past Adjustment Table
Particular Amar Harsh Firm
Interest on capital
Wrong profit taken back in 3:2
Right profit given in 3:2
Balance 1,560 (Cr.)
9,000 (Dr.)
6,264 (Cr.)
1,176 (Dr.) 3,000 (Cr.)
6,000 (Dr.)
4,176 (Cr.)
1,176 (Cr.) 4,560 ( Dr.)
15,000 ( Cr.)
10,440 (Dr.)
Nil
Journal entry for rectification
Amar's capital a/c Dr. Rs1,176
To Harsh's capital a/c Rs1,176

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Record the necessary adjustment entry for rectifying the above errors of omission. Show your workings.

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Particular	Amar	Harsh	Firm
Interest on capital Wrong profit taken back in 3:2 Right profit given in 3:2 Balance	1,560 (Cr.) 9,000 (Dr.) 6,264 (Cr.) 1,176 (Dr.)	3,000 (Cr.) 6,000 (Dr.) 4,176 (Cr.) 1,176 (Cr.)	4,560 ( Dr.) 15,000 ( Cr.) 10,440 (Dr.) Nil