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Question
Azad and Benny are equal partners. Their capitals are Rs 40,000 and Rs 80,000, respectively.After the accounts for the year have been prepared it is discovered that interest at 5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. It is decided to make an adjustment entry at the beginning of the next year. Record the necessary journal entry.
Solution
Interest on Capital
Azad = `40000 xx 5/100 = "Rs" 2000`
Benny = `80000 xx 5/100 = "Rs" 4000`
Adjustment of Profit
|
|
Azad |
Benny |
Total |
|
|
Interest on Capital |
2,000 |
4,000 |
= |
6,000 |
|
Less: Wrong distribution of Profit Rs 6,000 (1: 1) |
(3,000) |
(3,000) |
= |
(6,000) |
|
Adjusted Profit |
(1,000) |
(1,000) |
= |
NIL |
Adjusting Journal Entry
|
Date |
Particulars
|
L.F |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Azad's Current A/c |
|
1,000 |
1000 |
|
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