Q3 P, Q and R arc equal partners with fixed capitals of ₹5,00,000, ₹4,00,000 and ₹3,00,000 respectively. After closing the accounts for the year ending 31st March 2019, it was discovered that interest on capitals was provided @ 7% instead of 9% p.a. In the adjusting entry :
P will be credited by ₹2,000 and Q will be debited by ₹2,000.
P will be debited by ₹2,000 and Q will be credited by ₹2,000.
P will be debited by ₹2,000 and R will be credited by ₹2,000.
P will be credited by ₹2,000 and R will be debited by ₹2,000.
Answers
The correct answer is P will be credited by ₹2,000 and R will be debited by ₹2,000.
- A journal entry is the record of the financial transaction of a business in its financial books.
Calculating interest on capital with incorrect rate of 7%
For P:
= (Rs 5,00,000 × 7)/100 = 35,000
For Q:
= (Rs 4,00,000 × 7)/100 = 28,000
For R:
= (Rs 3,00,000 × 7)/100 = 21,000
Calculating interest on capital with correct rate of 9%
For P:
= (Rs 5,00,000 × 9) ÷ 100 = 45,000
For Q:
= (Rs 4,00,000 × 9) ÷ 100 = 36,000
For R:
= (Rs 3,00,000 × 9) ÷ 100 = 27,000
Calculating Loss - ( Determining the side having a bigger amount, and deducting the amount from the side with the lower amount.)
= 1,08,000 - Rs 84,000
= 24,000
Calculating the share of each partner
For P:
= 24,000 × 1/3 = 8,000
For Q:
= 24,000 × 1/3 = 8,000
For R:
= 24,000 × 1/3 = 8,000
Therefore, the correct rectifying entry will be
R's current A/c Dr 2,000
To P's current A/c 2,000
(Being the rectification made)
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