Question

36. Ramesh, Suresh and Tomar are partners in a firm. They have omitted interest on capital @ 10%
p.a. for three years ended 31st March, 2018. Their fixed capitals on which interest was to be
calculated throughout were :
Ramesh 1,00,000, Suresh 80,000, Tomar * 70,000.
Give the necessary adjusting Journal entry with working notes.
[Ans. Ramesh 5,000 (Cr.), Suresh 1,000 (Dr.), Tomar 7 4,000 (Dr.).]​

Answer 1

Answer:

Explanation:

1. Calculation of Interest on Capital:

A = 1,00,000 *10 / 100 = Rs. 10,000

B =  80,000 * 10/100 = Rs. 8,000

C=  70,000 * 10/100 = Rs. 7,000

​Total Interest on Capital = Rs 25,000 (for one year)

For 3 years = Rs 25,000 * 3 = Rs 75,000

Statement Showing Adjustment

Particulars A B C Total

2016 10,000 8,000 7,000  25,000

In 2017 10,000 8,000 7,000 25000

In 2018 10,000 8000 7000 25000

  30,000    24,000   21,000   75,000  

Wrong Distribution  25,000   25,000   25,000   75,000  

Net Effect 5,000(Dr.) 1,000(Cr.) 4,000(Cr.) NIL

JOURNAL ENTRY

Particular

A’s Capital A/c Dr.   5,000  

 To B’s Capital A/c                1,000

To C’s Capital A/c                        4,000

(Being adjustment of interest on capital omitted in previous 3 years)