Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs 30,000, Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for the year ended March 31, 2007 amounting to Rupees 24,000 had been credited to partners in the proportion in which they shared profits. During the tear their drawings for Mohan, Vijay and Anil were Rs 5,000, Rs 4,000 and Rs 3,000, respectively. Subsequently, the following omissions were noticed:

(a)

Interest on Capital, at the rate of 10% p.a., was not charged.

(b)

Interest on Drawings: Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded in the books.

Record necessary corrections through journal entries.

 

Interest on Capital shall be calculated on opening capital.

 

 

Mohan

Vijay

Anil

Closing Capital

30,000

25,000

20,000

Add: Drawings

5,000

4,000

3,000

Less: Profit (1:1:1)

(8,000)

(8,000)

(8,000)

Opening Capital

27,000

21,000

15,000

 

Interest on Capital

 

Mohan = 27,000 ×

10

 = Rs 2,700

100

 

Vijay = 21,000 ×

10

 = Rs 2,100

100

 

Anil = 15,000 ×

10

 = Rs 1,500

100

 

Adjustment of Profit

 

 

Mohan

Vijay

Anil

 

Total

Interest on Capital (on Opening Capital)

2,700

2,100

1,500

 

6,300

Interest on Drawings

(250)

(200)

(150)

 

(600)

 

2,450

1,900

1,350

 

5,700

Wrong distribution

(1,900)

(1,900)

(1,900)

=

(5,700)

 

550

NIL

(550)

 

 

 

Adjusting Journal Entry

 

Date

 

Particulars

 

L.F

Debit Amount

Rs

Credit Amount

Rs

 

 

 

 

 

 

 

Anil's Capital A/c

Dr.

 

550

 

 

To Mohan’s Capital A/c

 

 

 

550

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

 

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