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:
$X=1,20,000\times \frac{5}{100}\times \frac{4.5}{12}=Rs.2,250\phantom{\rule{0ex}{0ex}}Y=45,000\times \frac{5}{100}\times \frac{6}{12}=Rs.1,125$
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(5,00,00041,00032,000+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:
$X=1,20,000\times \frac{5}{100}\times \frac{4.5}{12}=Rs.2,250\phantom{\rule{0ex}{0ex}}Y=45,000\times \frac{5}{100}\times \frac{6}{12}=Rs.1,125$
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