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 interest on capital or drawings is omitted, pass the necessary adjustments by recalculating them before making the journal entry.

Answer 1

Interest on capital for Raghav = \( 4,00,000 \times 10\% = ₹ 40,000 \). Interest on capital for Diya = \( 3,00,000 \times 10\% = ₹ 30,000 \). Interest on drawings for Raghav = \( 2,000 \times 12 \times 10\% = ₹ 2,400 \). Interest on drawings for Diya = \( 3,000 \times 4 \times 10\% = ₹ 1,200 \). Journal Entry: \begin{center} \begin{tabular}{|l|c|c|} \hline Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline Interest on Capital A/c Dr & 70,000 &
To Raghav’s Capital A/c & & 40,000
To Diya’s Capital A/c & & 30,000
\hline Interest on Drawings A/c Dr & 3,600 &
To Raghav’s Current A/c & & 2,400
To Diya’s Current A/c & & 1,200
\hline \end{tabular} \end{center}