X, Y and Z were partners sharing in 3:2:1. After the accounts for the year were prepared which showed profits of Rs. 1,50,000, it was discovered that interest on capital @ 6% p.a. and interest on drawings @ 12% p.a. was not considered. The capital of the partners were Rs. 5,00,000, Rs. 3,00,000 and Rs. 2,00,000 whereas the drawings were: X Rs. 5,000 at the beginning of each month, Rs. Y Rs. 20,000 at the end of each quarter and Z Rs. 30,000 at the beginning of each half year.
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Answer:
Particulars X Y X
Interest on capital to be credited@8% 24000 16000 8000
Add: Profit to be distributed 6000 3600 2400
Less : Interest @ 10% (30000) (20000) (10000)
Net effect Nil (400) 400
Interest has been charged at a higher rate by 2%.So,profit needs to be increased by 2%.
Adjustment Entry is:-
Y's current A/c Dr. 400
To Z's current A/c 400
(Being adjustment entry passed)
Explanation:
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