P, Q, and R are partners in a firm sharing profits in the ratio of 1:2:2 . after division of the profits for the year ended 31st march 2012 their capitals were P : 150000, Q : 180000 nad R : 210000. during the year they withdrew 20000 each. the profit for the year was 60000. The partnership deed provided that the interest on capital will be allowed @10% p.a. While preparing capital accounts , interest on capital was not allowed. You are required to calculate the capital of P. Q, and R at 1st april 2009 and paas the adjustment entry for providing interest on capital. show your working clearly.

 

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Q’s Capital A/c

Dr.

 

4,000

 

 

R’s Capital A/c

Dr.

 

1,000

 

 

To P’s Capital A/c

 

 

5,000

 

(Adjustment on Interest on capital omitted)

 

 

 

 

 

P

Q

R

Closing Balance of Capital

1,50,000

1,80,000

2,10,000

Add: Drawings made during the year

20,000

20,000

20,000

 

1,70,000

2,00,000

2,30,000

Less: Profit already credited (1 : 2 : 2)

(12,000)

(24,000)

(24,000)

Opening Balance of Capital

1,58,000

1,76,000

2,06,000

 

Calculation of Interest on Capital

 

Particulars

P

Q

R

Total

Interest on Capital

15,800

17,600

20,600

54,000

Wrong distribution of Rs 54,000 (1 : 2 : 2)

(10,800)

(21,600)

(21,600)

(54,000)

 

5,000

(4,000)

(1,000)

NIL

 

 

 

 

 

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