Question

On 31st March, 2025, the balances in the capital accounts of Esha, Manav, and Daman after making adjustments for profits and drawings were ₹ 3,20,000, ₹ 2,40,000 and ₹ 1,60,000 respectively. Subsequently, it was discovered that the interest on capital and drawings had been omitted.

• The profit for the year ended on 31st March, 2025, was ₹ 90,000.
• During the year, Esha and Manav each withdrew a sum of ₹ 48,000 in equal instalments in the middle of every month and Daman withdrew ₹ 60,000.
• The interest on drawings was to be charged @ 5% per annum, and interest on capital was to be allowed @10% per annum.
• The profit-sharing ratio of the partners was 3 : 2 : 1.

Showing your workings clearly, pass the necessary rectifying entry.

Answer 1

Particulars	Esha	Manav	Daman
Closing Capitals as on 31.3.2025	3,20,000	2,40,000	1,60,000
Less: Share of profit (already credited ₹ 90,000 shared in the ratio of 3 : 2 : 1)	45,000	30,000	15,000
	2,75,000	2,10,000	1,45,000
Add: Drawings (already debited)	48,000	48,000	60,000
Opening capitals as on 1.4.2024	3,23,000	2,58,000	2,05,000

Interest on capital:

Esha = `3,23,000 xx10/100`

= 32,300

Manav = `2,58,000 xx10/100`

= 25,800

Daman = `2,05,000 xx10/100`

= 20,500

Total interest on capital = 32,300 + 25,800 + 20,500

= 78,600

Interest on drawings:

Esha = `48,000 xx 5/100 xx 6/12`

= 1,200

Manav = `48,000 xx 5/100 xx 6/12`

= 1,200

Daman = `60,000 xx 5/100 xx 6/12`

= 1,500

Total interest on drawings = 1,200 + 1,200 + 1,500

= 3,900

Table showing adjustment
Particulars	Esha	Manav	Daman	Total
Interest on opening capitals	32,300	25,800	20,500	78,600
Less: Interest on Drawings	1,200	1,200	1,500	3,900
Balance (Cr.)	31,100	24,600	19,000	74,700
Less: Division of the firm’s loss of 74,700 in the ratio of 3 : 2 : 1 (Dr.)	37,350	24,900	12,450
	(Dr.) 6,250	(Dr.) 300	(Cr.) 6,550

 

Rectifying Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
March 31	Esha’s Capital A/c   ...Dr.		6,250	-
	Manav’s Capital A/c   ...Dr.		300	-
	To Daman’s Capital A/c		-	6,550
	(Being an adjustment on account of the omission of the interest on capitals and drawings.)