Question 60 Chapter 2 of +2-A
60. Azad and Benny are equal partners. Their capitals are 40,000 and 80,000 respectively. After the accounts for the year had been prepared, it was noticed that interest @ 5% p.a. as provided in the Partnership Deed was not credited to their Capital Accounts before distribution of profits. It is decided to pass an adjustment entry in the beginning of the next year.
Record the necessary Journal entry.
The solution of Question 60 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| Azad’s Capital A/c | Dr | 1,000 | |||
| To Benny’s Capital A/c | 1,000 | ||||
| (Being adjustment of Interest on partners′ capital made) | |||||
Working Note: –
| Statement Showing Adjustment of Profit required |
|||
| Particulars |
Azad |
Benny |
Total |
| Interest on Capital @5% p.a. | 2,000 | 4,000 | 6,000 |
| Less: Profits wrongly distributed to the extent of interest amount | 3,000 | 3,000 | 6,000 |
| -1,000 | 1,000 | – | |
Azad get less amount, so we have to credit his capital a/c with difference amount
Benny get extra so we have to debit his capital a/c with difference amount
Calculation of Interest on Azad’s & Benny’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Azad’s Capital | = | 40,000 | X | 5 |
| 100 |
Interest on Azad’s Capital = 2,000/-
| Interest on Benny’s Capital | = | 80,000 | X | 5 |
| 100 |
Interest on Benny’s Capital = 4,000/-
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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
