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:
 
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:
X=1,20,000×5100×4.512=Rs.2,250Y=45,000×5100×612=Rs.1,125


 
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
 

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