Loading Tutorstips...
✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Pranav, Karan and Rahim were partners sharing profits in the ratio of 3 : 2 : 1. Their capitals were ₹5,00,000, ₹3,00,000 and ₹2,00,000 respectively as on 1st April, 2024. According to the Partnership Deed, they were entitled to interest on capital @ 10% p.a. For the year ended 31st March, 2025, a profit of ₹78,000 was distributed among the partners without providing for interest on capital. Pass the necessary adjusting entry and show the working clearly.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 2025 Mar 31 | Karan’s Capital A/c Dr. | 2,600 | ||
| To Rahim’s Capital A/c | 2,600 | |||
| (Interest on capital omitted, now adjusted) |
Statement Showing Adjustment
| Particulars | Pranav | Karan | Rahim |
|---|---|---|---|
| Interest on capital allowed (in ratio 5 : 3 : 2, limited to profit ₹78,000) | 39,000 | 23,400 | 15,600 |
| Less: Profit wrongly distributed (3 : 2 : 1) | (39,000) | (26,000) | (13,000) |
| Net Effect | Nil | –2,600 (Dr.) | +2,600 (Cr.) |
Working Note: Full interest on capital (Pranav ₹50,000 + Karan ₹30,000 + Rahim ₹20,000 = ₹1,00,000) exceeds the profit of ₹78,000, so interest is allowed only to the extent of profit, in the ratio of interest 5 : 3 : 2.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Chapter 1 Q.66 - Accounting for Partnership Firm Fundamentals", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 1 - Accounting for Partnership Firm – Fundamentals.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
You can take our custom-built interactive practice quiz directly on this page to test your understanding of "T.S. Grewal Class 12 Chapter 1 Q.66 - Accounting for Partnership Firm Fundamentals" instantly.