Azad and Benny are Equal Partners. Their Capitals are Rs 40,000 and Rs 80,000, respectively - Bzziii.com
Azad and Benny are equal partners. Their capitals are Rs 40,000 and Rs 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.
Calculations for Interest on Capital
Azad = Rs. 40,000 `\times` `5/100`
= Rs 2,000
Benny = Rs. 80,000 `\times` `5/100`
Azad | Benny | Total | |
Interest on Capital | 2,000 | 4,000 | 6,000 |
Less: Wrong distribution of Profit Rs 6,000 | (3,000) | (3,000) | (6,000) |
Adjusted Profit | (1,000) | (1,000) | X |
Journal
Date | Particulars | L.F | Amount | Amount | |
Azad’s Current A/c To Benny’s Current A/c (Adjustment of profit made) | Dr. | 1,000 | 1000 |
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