Question

Ram, Mohan and Sohan sharing profits and losses equally have capitals of ₹ 1,20,000, ₹ 90,000 and ₹ 60,000. For the year ended 31st March, 2018, interest was credited to them @ 6% instead of 5%. Give adjustment Jounral entry.

Answer 1

The adjustment Jounral entry for the given case is provided below:

Explanation:

Given,

Ram, Mohan and Sohan sharing profits and losses equally have capitals of ₹ 1,20,000, ₹ 90,000 and ₹ 60,000.

The interest was credited to them @ 6% instead of @ 5%.

Calculation of Interest on Capital at 6% p.a:

Calculation of Interest at the rate of 6%

Interest on Ram's Capital

$=1,20,000 \times \frac{6}{100}=7,200$

Interest on Mohan's Capital

$=90,000 \times \frac{6}{100}=5,400$

Interest on Sohan's Capital

$=60,000 \times \frac{6}{100}=3,600$

Calculation of Interest on Capital at 5% p.a:

Calculation of Interest at the rate of 5%

Interest on Ram's Capital

$=1,20,000 \times \frac{5}{100}=6,000$

Interest on Mohan's Capital

$=90,000 \times \frac{5}{100}=4,500$

Interest on Sohan's Capital

$=60,000 \times \frac{5}{100}=3,000$

The adjustment journay entry is given below