Question

8. A, B and C are partners in a firm sharing profits and losses in the ratio of
4:3 : 3 and their fixed capital were 1,00,000, 32,00,000 and $3,00,000
respectively. After the accounts of partnership have been drawn up and the
books closed off, it is discovered that interest has been credited to the partners
upon their capitals at 5% per annum although, no provision for interest is
made in the partnership agreement. Make adjustment entry.
4​

Answer 1

Answer:

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Explanation:

Particulars X Y X

Interest on capital to be [email protected]% 24000 16000 8000

Add: Profit to be distributed 6000 3600 2400

Less : Interest @ 10% (30000) (20000) (10000)

Net effect Nil (400) 400

Interest has been charged at a higher rate by 2%.So,profit needs to be increased by 2%.

Adjustment Entry is:-

Y's current A/c Dr. 400

To Z's current A/c 400

(Being adjustment entry passed)