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
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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)
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