Question

Profit for the year ended 31st March, 2018 was ₹ 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.

Answer 1

The adjustment entry are calculated below:

Explanation:

Given,

Mannu and shristhi are partners in a firm sharing profit in the ratio of 3 : 2.

Profit for the year ended 31st March, 2018 was ₹ 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired.

The interest on capital for Mannu and Shristhi will be Rs. 1500 and Rs. 500 respectively.

Thus, a total interest of Rs. 2000 has been made.

The Right distribution of Rs. 1820 as of the entry given below is Rs. 1380 for Mannu and Rs. 440 for Shristhi

Thus, an adjusted amount of Rs. 288 has been debited from Shristhi's capital account and has been credited to Mannu's capital account.