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Question
P and Q were partners in a firm sharing profits in 7 : 3 ratio. Their fixed capitals were P ₹ 5,00,000 and Q ₹ 8,00,000. For the year ended 31st March, 2024, interest on capital was credited @ 12% instead of 10%. Show the necessary adjusting entry for the rectification of the error. Also show the working notes clearly.
Journal Entry
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Solution
| Table Showing Adjustment | |||
| Particulars | P | Q | Total |
| Interest wrongly created @ 12% p.a. (Dr.) | 60,000 | 96,000 | 1,56,000 |
| Interest created @ 10% p.a. provided (Cr.) | 50,000 | 80,000 | 1,30,000 |
| 10,000 | 16,000 | 26,000 | |
| This loss will be divided in the ratio of 7 : 3. | 18,200 | 7,800 | 26,000 |
| 8,200 (Cr.) | 8,200 (Dr.) | ||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| Q’s Current A/c ...Dr. | 8,200 | - | ||
| To P’s Current A/c | - | 8,200 | ||
| (Being adjustment made for interest on capital short charged to P, now rectified by debiting Q’s Current A/c.) |
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