Question

The Capitals of. A, B and C as on 31st March, 2018 amounted to 90,000, 3,30,000 and 6,60,000 respectively. The profits amounting to $Rs.$ 1,80,000 for the year 2017-18 were distributed in the ratio of 4 :1 :1 after allowing Interest on Capital @ 10% p.a. During the year, each partner withdrew the amount of $Rs.$ 3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12%. Pass the necessary adjustment entry showing the working clearly.

Answer 1

Calculation of Opening Capital

A B C

Closing Capital 90000 330000 660000

Add:drawings 360000 360000 360000

Less:-Profits (120000) (30000) (30000)

Opening capital 3,30,000 6,60,000 9,90,000

Interest on capital@2% 6600 13200 19800

Journal entry is:-

A's Capital A/c Dr. 66,600

To B's capital A/c 30,000

To C's capital A/c 36,600

(Being adjustment entry passed)

Table Showing Adjustments to be made

Particulars	A	B	C
Interest on capital	6600	13200	19800
Add;-profits to be distributed	46,800	46,800	46,800
Less:-profit wrongly debited	(120000)	(30000)	(30000)
Net effect	( 66,600)	30,000	36,600