Question 67 Chapter 2 of +2-A
67. On 31st March 2019, after the closing of the accounts, the Capital Accounts of P, Q and R stood in the books of the firm at 40,000; 30,000 and 20,000 respectively. Subsequently, it was noticed that interest on capital @ 5% had been omitted. Profit for the year ended 31st March 2019 was 60,000 and the partners’ drawings had been P – 10,000, Q – 7,500 and R– 4,500. Profit-sharing ratio of P, Q and R is 3 : 2 : 1. Give necessary adjustment entry.
The solution of Question 67 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| P’s Capital A/c | Dr | 300 | |||
| To Q’s Capital A/c | 8 | ||||
| To R’s Capital A/c | 292 | ||||
| (Being adjustment made) | |||||
Working Note: –
| Calculation of Opening Capital of Partners | |||
| Particulars |
Amount of P’s Capital |
Amount of Q’s Capital |
Amount of R’s Capital |
| Capital at the end | 40,000 | 30,000 | 20,000 |
| Less: Profit already Distributed (1:1:1) |
30,000 | 20,000 | 10,000 |
| Add: Drawings During the year | 10,000 | 7,500 | 4,500 |
| Capital at the beginning | 20,000 | 17,500 | 14,500 |
| Statement Showing Adjustment of Profit required |
||||
| Particulars | P |
Q |
R |
Total |
| Actual Amount of Interest on Capital @10% p.a. | 1,000 | 875 | 725 | 2,600 |
| Less: wrongly Amount credited in Profit sharing ratio i.e. 3:2:1 | 1,300 | 867 | 433 | 2,600 |
| Actual Amount to be credited | 20,400 | 3,840 | 24,240 | |
| Less: wrongly Amount credited in Profit sharing ratio i.e. 3:2 | 14,544 | 9,696 | 24,240 | |
| 433 | 8 | 292 | – | |
|
P get extra so we have to debit his capital a/c with difference amount |
Q get less amount, so we have to credit his capital a/c with difference amount |
R get less amount, so we have to credit his capital a/c with difference amount |
||
Calculation of Actual Amount of Interest on P’s, Q’s, & R’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on P’s Capital | = | 20,000 | X | 5 |
| 100 |
Interest on P’s Capital = 1,000/-
| Interest on Q’s Capital | = | 17,500 | X | 5 |
| 100 |
Interest on Q’s Capital = 875/-
| Interest on R’s Capital | = | 14,500 | X | 5 |
| 100 |
Interest on R’s Capital = 725/-
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
