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A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.?
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A, B, C are partners . when the accounts were closed on 31st March 202...
Adjusting Entry for Interest on Capital
To make the necessary adjustment for the interest on capital, the following steps should be followed:
Step 1: Calculate the amount of interest that should have been allowed at the rate of 6% per annum.
- A's capital = Rs. 1,00,000 x 6% = Rs. 6,000
- B's capital = Rs. 80,000 x 6% = Rs. 4,800
- C's capital = Rs. 60,000 x 6% = Rs. 3,600
Step 2: Calculate the amount of interest that was actually allowed at the rate of 4% per annum.
- A's capital = Rs. 1,00,000 x 4% = Rs. 4,000
- B's capital = Rs. 80,000 x 4% = Rs. 3,200
- C's capital = Rs. 60,000 x 4% = Rs. 2,400
Step 3: Calculate the difference between the two amounts for each partner.
- A's interest adjustment = Rs. 6,000 - Rs. 4,000 = Rs. 2,000
- B's interest adjustment = Rs. 4,800 - Rs. 3,200 = Rs. 1,600
- C's interest adjustment = Rs. 3,600 - Rs. 2,400 = Rs. 1,200
Step 4: Pass the necessary adjusting entry to correct the error.
- Interest on Capital A/c Dr. Rs. 2,000
- To A's Capital A/c Rs. 2,000
- Interest on Capital A/c Dr. Rs. 1,600
- To B's Capital A/c Rs. 1,600
- Interest on Capital A/c Dr. Rs. 1,200
- To C's Capital A/c Rs. 1,200
Explanation
The above adjusting entry is necessary to correct the error of allowing interest on capital at the rate of 4% instead of 6%. The adjustment is made by debiting the Interest on Capital A/c and crediting the respective Capital A/c of each partner. This entry will increase the interest expense and decrease the capital of each partner by the same amount.
By making this adjustment, the true and fair view of the financial statements is maintained, and the partners' capital balances are adjusted to reflect the correct interest on their capital.
To make the necessary adjustment for the interest on capital, the following steps should be followed:
Step 1: Calculate the amount of interest that should have been allowed at the rate of 6% per annum.
- A's capital = Rs. 1,00,000 x 6% = Rs. 6,000
- B's capital = Rs. 80,000 x 6% = Rs. 4,800
- C's capital = Rs. 60,000 x 6% = Rs. 3,600
Step 2: Calculate the amount of interest that was actually allowed at the rate of 4% per annum.
- A's capital = Rs. 1,00,000 x 4% = Rs. 4,000
- B's capital = Rs. 80,000 x 4% = Rs. 3,200
- C's capital = Rs. 60,000 x 4% = Rs. 2,400
Step 3: Calculate the difference between the two amounts for each partner.
- A's interest adjustment = Rs. 6,000 - Rs. 4,000 = Rs. 2,000
- B's interest adjustment = Rs. 4,800 - Rs. 3,200 = Rs. 1,600
- C's interest adjustment = Rs. 3,600 - Rs. 2,400 = Rs. 1,200
Step 4: Pass the necessary adjusting entry to correct the error.
- Interest on Capital A/c Dr. Rs. 2,000
- To A's Capital A/c Rs. 2,000
- Interest on Capital A/c Dr. Rs. 1,600
- To B's Capital A/c Rs. 1,600
- Interest on Capital A/c Dr. Rs. 1,200
- To C's Capital A/c Rs. 1,200
Explanation
The above adjusting entry is necessary to correct the error of allowing interest on capital at the rate of 4% instead of 6%. The adjustment is made by debiting the Interest on Capital A/c and crediting the respective Capital A/c of each partner. This entry will increase the interest expense and decrease the capital of each partner by the same amount.
By making this adjustment, the true and fair view of the financial statements is maintained, and the partners' capital balances are adjusted to reflect the correct interest on their capital.
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A, B, C are partners . when the accounts were closed on 31st March 202...
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A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.?
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A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.?.
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A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.?, a detailed solution for A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.? has been provided alongside types of A, B, C are partners . when the accounts were closed on 31st March 2020 it was found that interest on capital was allowed at the rate of 4% instead of 6% per annum. The capitals of partners were rs.1,00,000 , rs.80,000 and rs.60,000 respectively. Pass the necessary adjusting entry.? theory, EduRev gives you an
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