Question

On 31\textsuperscript{st March, 2023, the capitals of Raghav and Diya stood at ₹ 4,00,000 and ₹ 3,00,000 respectively, after the necessary adjustment in respect of drawings and net profit. Subsequently, it was discovered that interest on capital @ 10\% p.a. had been omitted. The Net Profit for the year ended 31\textsuperscript{st} March, 2023 amounted to ₹ 1,00,000. During the year ended 31\textsuperscript{st} March, 2023, Raghav’s drawings were ₹ 2,000 drawn at the beginning of each month, while Diya’s drawings were ₹ 3,000 drawn at the beginning of each quarter. Pass the necessary adjustment entry.}

Hint:

When omitted interest is discovered, it must be adjusted in the capital accounts of the respective partners based on their capital balances.

Answer 1

1. Interest on capital: - Raghav’s interest = ₹ 4,00,000 \(\times\) 10\% = ₹ 40,000 - Diya’s interest = ₹ 3,00,000 \(\times\) 10\% = ₹ 30,000 2. Interest on drawings: - Raghav’s interest on drawings: - ₹ 2,000 \(\times\) 12 months \(\times\) 10\% = ₹ 2,400 - Diya’s interest on drawings: - ₹ 3,000 \(\times\) 4 quarters \(\times\) 10\% = ₹ 1,200 Adjustment entry for omitted interest on capital and interest on drawings: \[ Interest on Capital (Raghav)} = 40,000 \] \[ Interest on Capital (Diya)} = 30,000 \] Journal entry: \begin{center} \begin{tabular}{|l|c|c|} \hline Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline Interest on Capital (Raghav) A/c Dr & 40,000 &
Interest on Capital (Diya) A/c Dr & 30,000 &
To Raghav’s Capital A/c} & & 40,000
To Diya’s Capital A/c} & & 30,000
\hline \end{tabular} \end{center}