Question

A, B and C were sharing profits equally. Their capitals were Rs.20,000; 10,000

and 15,000 respectively. After closing the accounts for the year 2020 it was found

that the interest on capital @ 10% p.a. was not allowed before distributing the

profits. It was decided to pass a single adjusting entry to rectify the accounts of

the previous years.
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Answer 1

Answer:

details A B C firm

interest

on cap 2000 1000 1500 (4500)

profit/loss (1500) (1500) (1500) 4500

net effect 500 (500) nil nil

B's capital account.... Dr 500

to A's capital account 500