Question

Ram and Mohan are equal partners. Their capitals are 4,000 and 8,000 respectively. After the accounts for the year are prepared it is discovered that interest @ 5% p.a on capital as provided in the partnership deed has not been credited to the capital accounts before distribution of profits. It is decided to make an adjusting entry in the beginning of next year. Give necessary adjustment entry

Answer 1

The entry will be as follows :

Interest on Capital Account Dr. 600

Capital Account - Ram Cr. 200
Capital Account - Mohan Cr. 400

Answer 2

Capitals

Ram : Rs. 4000

Mohan : Rs. 8000

Interest on capitals

Ram : Rs. 4000 *5/100 = 200

Mohan : Rs. 8000 * 5/100 = 400

They are equal partners, so...

Rs. 400 + Rs. 200 = Rs. 600

Share per person : Rs. 600/2 = 300

Ram a/c. Dr. 300

To Mohan a/c. 300

Thank you....