Question

A, B, and C are partners sharing profits and losses in the ratio of 1 : 2 : 3. They have omitted interest on capital @ 8% p.a. for two years ended 31st March, 2024. Their fixed capitals were ₹ 4,00,000, ₹ 6,00,000 and ₹ 8,00,000, respectively. Pass the necessary adjusting entry.

Answer 1

Calculation of interest on capital for 2 years:

	Amount (₹)
A: 8% on Rs 4,00,000 for 2 years	64,000
B: 8% on Rs 6,00,000 for 2 years	96,000
C: 8% on Rs 8,00,000 for 2 years	1,28,000
Total interest	2,88,000

 

Table showing adjustment				Amounts (₹)
	A	B	C	Total
Interest on Capital (Cr.)	64,000	96,000	1,28,000	2,88,000
Division of Rs 2,28,000 in profit-sharing ratio (1 : 2 : 3)	48,000	96,000	1,44,000
Difference	(Cr) 16,000		(Dr) 16,000

Since the capitals are fixed, current accounts will be debited or credited.

Journal entry
Date	Particulars	L.F	Debit (₹)	Credit (₹)
	C’s Capital A/c   ...Dr.		16,000	-
	To A’s Capital A/c		-	16,000
	(Being Omission of interest on capital for two years rectified)