Question 74 Chapter 2 of +2A
74. Capital Accounts of A and B stood at 4,00,000 and 3,00,000 respectively after necessary adjustments in respect of the drawings and the net profit for the year ended 31st March 2019. It was subsequently noticed that 5% p.a. interest on capital and also drawings were not taken into account in arriving at the distributable profit. The drawings of the partners had
been: A – 12,000 drawn at the end of each quarter and B – 18,000 drawn at the end of each halfyear.
The profit for the year as adjusted amounted to 2,00,000. The partners share profits in the ratio of 3: 2. You are required to pass Journal entries and show adjusted Capital Accounts of
the partners.
The solution of Question 74 Chapter 2 of +2A
:
Date  Particulars 
L.F.  Debit  Credit  
A’s Capital A/c  Dr  1,210  
To B’s Capital A/c  1,210  
(Being adjustment made) 
Particulars 
A  B  Particulars 
A  B 
To B’s Capital A/c  1,210  –  By Balance B/d  4,00,000  3,00,000 
By A’s Capital A/c *1  –  1,210  
To Balance c/d  3,98,790  3,01,210  
4,00,000  3,01,210  4,00,000  3,01,210 
Working Note: –
Statement Showing Adjustment of Profit required 

Particulars  Amount of A’s Capital 
Amount of B’s Capital 
Capital at the end  4,00,000  3,00,000 
Less: Profit already Distributed (3:2) 
1,20,000  80,000 
Add: Drawings During the year  48,000  36,000 
Capital at the beginning  3,28,000  2,56,000 
Statement Showing Adjustment of Profit required 

Particulars  A  B  Total 
Amount of Interest on Capital @5% p.a.*2  16,400  12,800  29,200 
Less: Amount of Interest on Drawing @5% p.a.*3 & *4  – 900  – 450  – 1,350 
Actual total amount due – will be distributed as  15,500  12,350  27,850 
Less: – Wrongly total amount distributed in the profit sharing ration i.e. 3: 2  – 16,710  – 11,140  22,760 
– 1,210  1,210  –  
A get extra so we have to debit his capital a/c with difference amount 
B get less amount, so we have to credit his capital a/c with difference amount

*2 Calculation of Actual Amount of Interest on A’s, B’s, Capital
Interest on Capital = Opening Capital X Rate of Interest
Interest on A’s Capital  =  3,28,000  X  5 
100 
Interest on A’s Capital = 16,400/
Interest on B’s Capital  =  2,56,000  X  5 
100 
Interest on B’s Capital = 12,800/
*3 Calculation of interest on A’s Drawings
If partners withdrawal the same amount of drawing on a regular basis then we can calculate the interest on drawing with help of following formula: –
Interest on Drawing = Total Drawing X Rate of Interest X Period/12 Months
Rate of Interest = 5%
Period = the period/time will be calculated with the help of following formula: –
Period  =  Time left after 1st withdrawal  +  Time left after Last withdrawal 
2 
Withdrawal at the end of each quarter = 12,000
It means 1st withdrawal has made on 30/06/2019
So, Time left from 30/06/2019 to 31/03/2020
are 9 Months
And last withdrawal has made on 31/03/2020
So, Time left from 31/03/2020 to 31/03/2020
are 0 Month and 0 day
Now, put this time period in the formula
Period  =  9  +  0 
2 
Period  =  9  
2 
Period = 4.5
total Drawing  =  12,000 * 4  =  48,000  Multiplied by 4 because a number of the quarter in the year is 4. 
Interest on Drawing  =  48,000  X  5  X  4.5 
100  12 
Interest on Drawing = 900/
*4 Calculation of interest on B’s Drawings
If partners withdrawal the same amount of drawing on a regular basis then we can calculate the interest on drawing with help of following formula: –
Interest on Drawing = Total Drawing X Rate of Interest X Period/12 Months
Rate of Interest = 5%
Period = the period/time will be calculated with the help of following formula: –
Period  =  Time left after 1st withdrawal  +  Time left after Last withdrawal 
2 
B drew at the end of each halfyear = 18,000
It means 1st withdrawal has made on 30/09/2019
So, Time left from 30/09/2019 to 31/03/2020
are 6 Months
And last withdrawal has made on 31/03/2020
So, Time left from 31/03/2020 to 31/03/2020
are 0 Month and 0 day
Now, put this time period in the formula
Period  =  6  +  0 
2 
Also, Check out the solved question of previous Chapters: –
The Content covered in this article:
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for NotforProfit Organizations and Partnership Firms)
 Chapter No. 1 – Financial Statement of NotForProfit Organisations
 Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
 Chapter No. 3 – Goodwill: Nature and Valuation
 Chapter No. 4 – Change in ProfitSharing 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