Question

A.b and C sharing profits in the ratio of 2:2:1 have fixed capital of Rs.300000,Rs.200000 and Rs.100000,respectively. After closing the accounts for the year ending 31st March 2019 it was discovered that interest on capitals was provided @12% instead of 10%p.a. In the adjusting entry.

Answer 1

Given:

Profit sharing ratio = A:B:C = 2:2:1

Capital

A = Rs.300000

B = Rs.200000

C = Rs.100000

Wrong Interest on Capital = 12%

Real Interest on Capital = 10%

To find:

To give adjusting entries for the wrong interests on Capital.

Solution:

Working-

First let's find the amount of interest assigned at 12% to each partner.

Interest at 12%

A = 12% of 300000

= Rs. 36000

B = 12% of 200000

= Rs. 24000

C = 12% of 100000

= 12000

Now, let's find the original amount of Interest which should be given

A = 10% of 300000

= Rs.30000

B = 10% of 200000

= Rs.20000

C = 10% of 100000

= Rs.10000

Now the difference between the amount of Interest

A = 36000 - 30000

= Rs. 6000

B = 24000 - 20000

= Rs. 4000

C = 12000 - 10000

= Rs. 2000

Now the entries

Interest of capital wrongly credited acc Dr 12000

A= 6000, B= 4000 and C= 2000

To profit and Loss acc Cr 12000