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 |
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| R’s Capital A/c | Dr. |
| 1,000 |
|
| To P’s Capital A/c |
|
| 5,000 | |
| (Adjustment on Interest on capital omitted) |
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| 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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