X and Yare partners in the ratio of 3 : 2. Their fixed capitals are ₹2,00,000 and ₹1,00,000 respectively. After clsoing the accounts for the year ending 31st March 2019, it was discovered that interest on capital was allowed @ 12% instead of 10% per annum. By how much amount A will be debited/credited in the adjustment entry :
(A) ₹600 (Debit)
(B) ₹400 (Credit)
(C) ₹400 (Debit)
(D) ₹600 (Credit)
Answers
Answer:
Explanation:
1. When Capitals are Fixed
Calculation of Opening Capital X Y
Closing Capital 10,00,000 12,50,000
Add:-withdrawal of capital 5,00,000 1,25,000
Less:Additional Capital (2,50,000) (6,25,000)
Opening Capital 12,50,000 7,50,000
Calculation of Interest on Capital X Y
Interest on Opening capital 75,000 45,000
(12,50,000*6%) (7,50,000*6%)
Add:Interest on additional capital 13,750 18,750
(2,50,000*6%*11/12) (6,25,000*6%*6/12)
Less:Interest on capital withdrawn (15000) (6875)
[5,00,000*6%*6/12] [1,25,000*6%*11/12]
Total 73750 56875
2. When capitals are Fluctuating :
Calculation of Opening Capital X Y
Closing capital 10,00,000 12,50,000
Add:withdrawal of capital 5,00,000 1,25,000
Drawings 2,50,000 1,25,000
Less:additional capital (2,50,000) (6,25,000)
Less:profits (3,00,000) (2,00,000)
Total 12,00,000 6,75,000
Calculation of interest on capital X Y
Interest on opening capital 72,000 40,500
(12,00,000*6%) (6,75,000*6%)
Add interest on add capital 13,750 18,750
(2,50,000*6%*11/12) (6,25,000*6%*6/12)
Less: Interest on withdrawal ( 15,000) (6875)
(5,00,000*6%*6/12) (1,25,000*6%*11/12)
Total 70750 52,375