Question

p and q are partner in a firm sharing profit in 3 ratio 1 ratio. their respective fixed capital were 10 lakh and 6 lakh. the partnership deed provided interest on capital at the rate 12% p.a. the partnership deed further provided the interest on capital will be allowed fully even if it will result into a loss to the firm.the net profit of the firm for the year ended 31st March 2018 was 15 lakh .pass the necessary general entries in books of the firm allowing interest on capital and division of P&L among the partner.​

Answer 1

Answer:

Rectification Entry is as follows:-

Q's capital A/c Dr. 2500

To P's capital A/c 2500

(Being Adjustment entry passed)

Due to omission of interest on capital,profit is excessively credited to the extent of interest of capital. So, Profit to the extent of interest is to be reversed.

Table Showing Adjustments To Be Made

Particulars P Q

Interest on capital 10,000 5000

Excess Profits credited (7500) (7500)

Net Effect 2500 (2500)