Question

Cheese and Slice are equal partners. Their capitals as on April 01, 2022, were Rs. 50,000 and Rs. 1,00,000 respectively. After the accounts for the financial year ending March 31, 2023 have been prepared, it is observed that interest on capital @ 6% per annum and salary to Cheese @ ₹ 5,000 per annum, as provided in the partnership deed, have not been credited to the partners’ capital accounts before distribution of profits.

You are required to give necessary rectifying entries using the Profit and Loss adjustment account.

Hints:

1. Separate entries will be passed for allowing interest on capital and salary by debiting the Profit and Loss Adjustment A/c.
2. Entry will be passed for distributing the loss on adjustment of ₹ 14,000 equally.

Answer 1

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
March 31	Profit and Loss Adjustment A/c   ...Dr.		9,000	-
	To Cheese’s Capital A/c		-	3,000
	To Slice’s Capital A/c		-	6,000
	(Being interest on capital omitted earlier now provided.)
March 31	Profit and Loss Adjustment A/c   ...Dr.		5,000	-
	To Cheese’s Capital A/c		-	5,000
	(Being salary omitted earlier now provided.)
March 31	Cheese’s Capital A/c   ...Dr.		7,000	-
	Slice’s Capital A/c   ...Dr.		7,000	-
	To Profit and Loss Adjustment A/c		-	14,000
	(Being Loss on Adjustment transferred to partners.)