QUESTION 7
7. The Capital Accounts of X and Y stood at Rs 10,00,000 and Rs 7,50,000 respectively after necessary adjustments in respect of the drawings and the net profits for the year ended 31st March, 2016. It was subsequently ascertained that 5% p.a. interest on capital and drawings was not provided in arriving at the net profit. The drawings of the partners had been : X - Rs 30,000 drawn at the end of each quarter and Y - Rs 45,000 at the end of each half year. The profit for the year as adjusted amounted to Rs 5,00,000 The partners share profits in the ratio of 3 : 2.
Pass Journal entries to rectify the above error.
Dear Student,
Calculation of Opening Capital:
Calculation of interest on drawings:
Regards
Calculation of Opening Capital:
| Particulars | X | Y |
| Capital at the end | 10,00,000 | 7,50,000 |
| Less: Profit already credited | 3,00,000 | 2,00,000 |
| Add: Drawings already debited | 1,20,000 | 90,000 |
| Capital at the beginning | 8,20,000 | 6,40,000 |
| Statement Showing Adjustment | ||
| Particulars | X | Y |
| Amount should be credited: | ||
| Interest on capital | 41,000 | 32,000 |
| Interest on drawings | (2,250) | (1,125) |
| Amount of profit(5,00,000-41,000-32,000+2,250+1,125) Rs.4,30,375 | 2,58,225 | 1,72,150 |
| Amount should be credited | 2,96,975 | 2,03,025 |
| Amount wrongly credited | 3,00,000 | 2,00,000 |
| Net Effect | (3,025) | 3,025 |
Calculation of interest on drawings:
| Journal | ||||
| Particulars | L.F. | Debit Amount Rs |
Credit Amount Rs |
|
| X’s Capital A/c | Dr. | 3,025 | ||
| To Y’s Capital A/c | 3,025 | |||
| (Adjustment entry made) | ||||
Regards
