P, Q and R are partners in a firm sharing profits and losses in the ratio of 2:3:5. Their fixed capitals were 15,00,000, Rs.30,00,000 and Rs.60,00,000 respectively. For the year 2009 interest on capital was credited to them @ 12% instead of 10%. Pass the necessary adjustment entry
Answers
ANSWER
The following rectifying journal entries needs to be passed:-
P's capital A/c Dr. 60,000
Q's capital A/c Dr. 60,000
R's capital A/c Dr. 60,000
To Profit and loss Appropriation A/c 1,80,000
(Being the share of profit wrongly distributed reversed)
Profit and Loss Adjustment A/c Dr. 36,000
To R's capital A/c 36,000
(Being remuneration credited)
Profit and loss Adjustment A/c Dr. 30,000
To P's capital A/c(3,00,000*5%) 15,000
To Q's capital A/c(1,50,000*5%) 7,500
To R's capital A/c(1,50,000*5%) 7,500
(Being interest on capital credited to partners)
Profit and loss Adjustment A/c Dr. 1,14,000
To P's capital A/c 45,600
To Q's capital A/c 45,600
To R's capital A/c 22,800
(Being the divisible profit credited to partners)
Explanation:
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