Question

Manoj and Nitin were partners in a firm sharing profits and losses in the ratio \(2 : 1\). On 31st March 2023, the balances in their capital accounts after making adjustments for profits and drawings were \rupee90,000 and \rupee80,000 respectively. During the year, Manoj withdrew \rupee40,000 and Nitin withdrew \rupee20,000. Subsequently, it was noticed that interest on capital @10\% p.a. was not provided to the partners. Also, interest on drawings to Manoj \rupee3,000 and to Nitin \rupee2,000 was not charged. Pass necessary adjusting journal entry.

Hint:

Adjustments for interest on capital and drawings should always be made before finalizing the accounts to ensure accurate capital balances.

Answer 1

Step 1: Calculate Interest on Capital \[ \text{Manoj’s Capital: } \rupee90,000 \times \frac{10}{100} = \rupee9,000, \quad \text{Nitin’s Capital: } \rupee80,000 \times \frac{10}{100} = \rupee8,000. \] \[ \text{Total Interest on Capital: } \rupee9,000 + \rupee8,000 = \rupee17,000. \] Step 2: Interest on Drawings \[ \text{Manoj: } \rupee3,000, \quad \text{Nitin: } \rupee2,000. \] Step 3: Net Adjustment \[ \text{Manoj: } \rupee9,000 - \rupee3,000 = \rupee6,000 \quad (\text{to be credited}). \] \[ \text{Nitin: } \rupee8,000 - \rupee2,000 = \rupee6,000 \quad (\text{to be credited}). \] Journal Entry: \begin{center} \begin{tabular}{|l|p{8cm}|c|r|} \hline Date & Particulars & L.F. & Amount (\rupee)
\hline 2025-01-14 & Interest on Drawings A/c Dr. & & 5,000
\cline{2-4} & To Manoj’s Capital A/c & & 3,000
\cline{2-4} & To Nitin’s Capital A/c & & 2,000
\cline{2-4} & \multicolumn{3}{|l|}{(Being interest on drawings charged to partners)}
\hline 2025-01-14 & Interest on Capital A/c Dr. & & 17,000
\cline{2-4} & To Manoj’s Capital A/c & & 9,000
\cline{2-4} & To Nitin’s Capital A/c & & 8,000
\cline{2-4} & \multicolumn{3}{|l|}{(Being interest on capital credited to partners)}
\hline \end{tabular} \end{center}