Question

X, Y and Z are partners in a firm sharing profits and losses in the ratio 5 : 3 : 2. Their capitals (fixed) are ₹ 2,00,000; ₹ 1,50,000; and ₹ 1,25,000, respectively. For the year ended 31st March, 2024, interest on capital was credited to them @ 8% instead of 10%.

Give the adjusting journal entry.

Answer 1

Interest on capital has been credited @ 8% instead of 10%. Hence, additional interest of 2% will be credited to partners.

Table of Adjustment
Particulars	X	Y	Z	Total
Partners less credited with 2% interest (Additional interest to be credited to partners) (Cr.)	4,000	3,000	2,500	9,500
By allowing this interest, the profits of the firm will be reduced by Rs 9,500. This loss will be divided in the ratio of 5 : 3 : 2. (Dr.)	4,750	2,850	1,900	9,500
Net Effect	(Dr.) 750	(Cr.) 150	(Cr.) 600

 

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2024
March 31	X’s Current A/c    ...Dr.		750	-
	To Y’s Current A/c		-	150
	To Z’s Current A/c		-	600
	(Interest less charged on capital, now rectified.)