The adjusting entry for interest on capitals provided at 6% instead of 5% p.a.

To rectify the error of interest on capitals provided at 6% instead of 5% p.a., an adjusting entry needs to be passed. This adjusting entry will ensure that the correct amount of interest is recorded in the books of accounts for the year ending 31st March 2019.

1. Determine the adjustment amount:
To calculate the adjustment amount, we need to find the difference between the interest provided at 6% and the interest that should have been provided at 5%. The formula to calculate the adjustment amount is:

Adjustment amount = (Capital * Rate of Interest) - (Capital * Correct Rate of Interest)

For X:
Adjustment amount for X = (25,00,000 * 6%) - (25,00,000 * 5%)
= (25,00,000 * 0.06) - (25,00,000 * 0.05)
= 1,50,000 - 1,25,000
= 25,000

Similarly, we can calculate the adjustment amounts for partners Y and Z.

2. Pass the adjusting entry:
The adjusting entry will be passed to rectify the error and adjust the interest on capitals. The entry will be as follows:

Interest on Capitals A/c Dr. 25,000
To X's Capital A/c 25,000
(Being the excess interest provided adjusted in X's capital account)

Interest on Capitals A/c Dr. 25,000
To Y's Capital A/c 25,000
(Being the excess interest provided adjusted in Y's capital account)

Interest on Capitals A/c Dr. 25,000
To Z's Capital A/c 25,000
(Being the excess interest provided adjusted in Z's capital account)

3. Explanation of the adjusting entry:
The adjusting entry debits the Interest on Capitals account and credits each partner's capital account for the adjustment amount. This entry reduces the capital balance of each partner by the excess interest provided and records it in the Interest on Capitals account.

By passing this adjusting entry, the error of providing interest on capitals at 6% instead of 5% is rectified. The correct amount of interest on capitals is now recorded in the books of accounts. This adjustment ensures that each partner's capital reflects the correct amount after considering the interest on capitals at the correct rate.