Practicing Success
A, B & C are partners sharing profits and losses in the ratio of 5: 3: 2. The partnership deed provides for charging interest on drawings @ 10% p.a. The drawings of A, B & C amounted to ₹40,000, ₹30000 and ₹20,000 respectively. Interest on drawings is charged for the full year. After the final accounts have been prepared, it was discovered that interest on drawings has not been taken into consideration. Pass the necessary adjustment journal entry? |
B's Current A/c Dr. ₹300 B's Capital A/c Dr. ₹400 B's Capital A/c Dr. ₹500 B's Capital A/c Dr. ₹300 |
B's Capital A/c Dr. ₹300 |
The correct answer is option 4- Interest on drawings- Charging interest from partner is a profit for the firm. This profit is divided between partners in their profit sharing ratio i.e. 5:3:2 So, adjustment entry is: B's Capital A/c Dr. ₹300 * Capital account is debited or credited as in case of no information, partners account are maintained by fluctuating account. |