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Question -

Azad and Benny are equal partners. Their capitals are ₹ 40,000 and ₹ 80,000, respectively. After the accounts for the year have been prepared it is discovered that interest at 5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. It is decided to make an adjustment entry at the beginning of the next year. Record the necessary journal entry.



Answer -

Adjustmentof Profit

 

Azad

Benny

Total

Interest on Capital

2,000

4,000

=

6,000

Less: Wrong distribution of Profit ₹ 6,000 (1: 1)

(3,000)

(3,000)

=

(6,000)

Adjusted Profit

(1,000)

(1,000)

=

NIL

  

AdjustingJournal Entry

 

Date

 

Particulars

 

L.F

Debit Amount

₹

Credit Amount

₹

 

 

 

 

 

 

 

Azad’s Current  A/c

Dr.

 

1,000

 

 

To Benny’s Current A/c

 

 

 

1,000

 

(Adjustment of profit made)

 

 

 

 

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