Question

p,q and r are sharings profits in ratio 2:1:1 have fixed capitals of 4 lakh,3lakh and 2lakh respectively.after closing the accounts for the year ending 31 march 2021 it was discovered that interest on capital was provided @6% instead of 8% p.a. what will be the adjusting entry

Wrong lyrics
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Answer 1

Answer:

Particulars X Y X

Interest on capital to be credited@8% 24000 16000 8000

Add: Profit to be distributed 6000 3600 2400

Less : Interest @ 10% (30000) (20000) (10000)

Net effect Nil (400) 400

Interest has been charged at a higher rate by 2%.So,profit needs to be increased by 2%.

Adjustment Entry is:-

Y's current A/c Dr. 400

To Z's current A/c 400

(Being adjustment entry passed)