Question 58 Chapter 2 of +2-A
58. P and Q were partners in firm sharing profits and losses equally. Their fixed capitals were 2,00,000 and 3,00,000 respectively. The Partnership Deed provided for interest on capital@ 12% per annum. For the year ended 31st March 2016, the profits of the firm were distributed without providing interest on capital.
Pass necessary adjustment entry to rectify the error.
The solution of Question 58 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| P’s Capital A/c | Dr | 6,000 | |||
| To Q’s Capital A/c | 6,000 | ||||
| (Being adjustment of Interest on partners′ capital made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
|||
| Particulars | P | Q |
Total |
| Interest on Capital @ 12% | 24,000 | 36,000 | 60,000 |
| Less: Profits wrongly distributed to the extent of interest amount (Total amount of interest distributed in the profit ratio i.e. 1:1) |
30,000 | 30,000 | 60,000 |
| -6,000 | 6,000 | – | |
P gets extra so we have to debit his capital a/c with difference amount
Q gets less amount, so we have to credit his capital a/c with difference amount
Calculation of Interest on P’s & Q’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on P’s Capital | = | 2,00,000 | X | 12 |
| 100 |
Interest on P’s Capital = 24,000/-
| Interest on Q’s Capital | = | 3,00,000 | X | 12 |
| 100 |
Interest on Q’s Capital = 36,000/-
Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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