Question

A and B were partners sharing profits in 2 : 1 ratio. During the year ended 31st March, 2024, A’s drawings were ₹ 50,000 per month, drawn in the beginning of every month, and B’s drawings were ₹ 25,000 per month, drawn at the end of every month. After the preparation of final accounts, it was discovered that interest on A’s drawings @ 12% p.a. was not taken into consideration. Give the necessary adjusting entry on 1st April, 2024.

Answer 1

Calculation of A’s interest on drawings:

Total drawings for the year = 50,000 × 12

= 6,00,000

When an equal amount is withdrawn at the beginning of every month, interest is calculated for an average period of 6.5 months.

Interest on drawings = `6,00,000 xx 12/100 xx 6.5/12`

= 39,000

Table showing adjustment			Amounts (₹)
	A	B	Total
Interest on Drawings (Dr.)	39,000		39,000
Division of Rs 39,000 in profit-sharing ratio (2 : 1)	26,000	13,000	39,000
Difference	13,000 (Dr.)	13,000 (Cr.)

 

Journal Entry
Date	Particulars	L.F	Debit (₹)	Credit (₹)
2024
April 1	A’s Capital A/c   ...Dr.		13,000	-
	To B’s Capital A/c		-	13,000
	(Being Adjustment of omission of interest on drawings.)