Question

Anand, Ridhi, and Shyam were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. Their fixed capitals were Rs.1,00,000, Rs.60,000, and Rs.40,000 respectively.
For the year ended 31^st March, 2023, interest on capital was credited to their capital accounts @ 9% p.a. instead of 7% p.a. Pass the necessary adjusting Journal entry.

Hint:

While rectifying errors in interest on capital, calculate the excess or shortfall for each partner and adjust using their profit-sharing ratio.

Answer 1

Excess interest on capital credited: \[ \text{Anand: } Rs.1,00,000 \times (9\% - 7\%) = Rs.2,000 \] \[ \text{Ridhi: } Rs.60,000 \times (9\% - 7\%) = Rs.1,200 \] \[ \text{Shyam: } Rs.40,000 \times (9\% - 7\%) = Rs.800 \] Adjust the excess by passing a journal entry to transfer the amounts: \[ \text{Journal Entry:} \] \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{Dr. Amount (Rs.)} & \textbf{Cr. Amount (Rs.)} \\ \hline \text{Ridhi’s Capital A/c Dr.} & 1,200 & \\ \text{Shyam’s Capital A/c Dr.} & 800 & \\ \text{To Anand’s Capital A/c} & & 2,000 \\ \hline \end{array} \]