Question

A, B and C are partners. Their fixed capitals as on 31st March, 2024, were A ₹ 2,00,000, B ₹ 3,00,000 and C ₹ 4,00,000. Profits for the year ended 31st March, 2024, amounting to ₹ 1,80,000, were distributed. Give the necessary adjusting entry in each of the following alternative cases:

Case (a) Interest on capital was credited @ 8% p.a., though there was no such provision in the partnership deed.

Case (b) Interest on capital was not credited @ 8% p.a., though there was such a provision in the partnership deed.

Case (c) Interest on capital was credited @ 8% p.a. instead of 10% p.a.

Case (d) Interest on capital was credited @ 10% p.a. instead of 8% p.a.

Answer 1

Case (a)

Adjusting Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	C’s Current A/c   ...Dr.		8,000	-
	To A’s Current A/c		-	8,000
	(Being interest on capital wrongly created, now rectified.)

 

Table Showing Adjustment
Particulars	A		B		C		Total
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Interest on Capital @ 8% p.a. Wrongly created, now rectified	16,000		24,000		32,000			72,000
Profit Credited 1 : 1 : 1		24,000		24,000		24,000	72,000
	16,000	24,000	24,000	24,000	32,000	24,000	72,000	72,000
Net Effect	8000 (Cr.)				8000 (Dr.)

Case (b)

Adjusting Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	A’s Current A/c   ...Dr.		8,000	-
	To C’s Current A/c		-	8,000
	(Being interest on capital wrongly created, now rectified.)

 

Table Showing Adjustment
Particulars	A		B		C		Total
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Interest on Capital @ 8% p.a. Wrongly created, now rectified		16,000		24,000		32,000	72,000
Loss Credited 1 : 1 : 1	24,000		24,000		24,000			72,000
	24,000	16,000	24,000	24,000	24,000	32,000	72,000	72,000
Net Effect	8000 (Dr.)				8000 (Cr.)

Case (c)

Adjusting Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	A’s Current A/c   ...Dr.		2,000	-
	To C’s Current A/c		-	2,000
	(Being interest on capital wrongly created, now rectified.)

 

Table Showing Adjustment
Particulars	A		B		C		Total
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Interest on Capital @ 8% p.a. Wrongly created, now rectified	16,000		24,000		32,000			72,000
Interest on Capital @ 10% p.a. provided		20,000		30,000		40,000	90,000
Loss Credited 1 : 1 : 1	6,000		6,000		6,000			18,000
	22,000	20,000	30,000	30,000	38,000	40,000	90,000	90,000
Net Effect	2000 (Dr.)				2000 (Cr.)

Case (d)

Adjusting Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	C’s Current A/c   ...Dr.		2,000	-
	To A’s Current A/c		-	2,000
	(Being interest on capital wrongly created, now rectified.)

 

Table Showing Adjustment
Particulars	A		B		C		Total
	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Interest on Capital @ 10% p.a. Wrongly created, now rectified	20,000		30,000		40,000			90,000
Interest on Capital @ 8% p.a. provided		16,000		24,000		32,000	72,000
Profit Credited 1 : 1 : 1		6,000		6,000		6,000	18,000
	20,000	22,000	30,000	30,000	40,000	38,000	90,000	90,000
Net Effect	2000 (Cr.)				2000 (Dr.)