On December 31st, 2018 after closing of accounts, the capitals of A, B and C stood in
26,000 and Leela 19,480)
the books of firm at * 2,00,000, * 1,50,000 and 1,00,000. Subsequently, it was
discovered that the interest on capital @ 10% per annum had been omitted. The profit
for the year amounted to 75,000 and the partner's drawings had been 10,000;
$7,500 and 5,000 respectively.
Calculate interest on capital.
[Ans. Interest on capital : A 18,500, B 13,250 and C 8,000 ]
Answers
Answer:
Calculation of capital at the beginning
P Q R
Capital at the end 40000 30000 20000
Add;- drawings 10000 7500 4500
Less;profits (30000) (20000) (10000)
Capital at the beginning 20000 17500 14500
Interest on capital @ 5% 1000 875 725
The following adjustment entry needs to be passed:-
P's capital A/c Dr 1300
Q's capital A/c Dr. 867
R's capital A/c Dr 433
To Profit and loss Appropriation A/c 2600
(Profits to be reversed)
Table showing Adjustments to be made
Partners Profits to be written back Profits to be distributed
(60000-2600) Adjustements
P -30000 28700 -1300
Q -20000 19133 -867
R -10000 9567 -433