A and B were partners in a firm sharing profits equally. Interest on their capitals is A= ₹10,000 and B= ₹5,000. Profit for the year were distributed without providing interest on capital. Pass the necessary adjustment entry to rectify the error.

B's Capital A/c Dr.     ₹2500
    To A's Capital A/c            ₹2500
(Being interest on capital is rectified)

The correct answer is option 2-
B's Capital A/c Dr.     ₹2500
    To A's Capital A/c            ₹2500
(Being interest on capital is rectified)

Total interest will be credited to partners = ₹15,000.
It will result a loss for the firm and this loss is shared between partners equally i.e. (1:1)
So, A's loss = 15,000/2
                  =  ₹7,500
B's loss = 15,000/2
            =  ₹7,500 
This loss is debited to partner account.

A will be credited with interest on capital of ₹10,000 and debited with loss of ₹7,500 so net credit to A account is ₹2,500.

B will be credited with interest on capital of ₹5,000 and debited with loss of ₹7,500 so net debit to B account is ₹2,500.

As there is no specific mention in question about the maintenance of capital accounts of partners so it is assumed they are maintained by fluctuating method. Thus, adjustment entry is passed in capital account.

Adjustment entry will be:
 B's Capital A/c Dr.        ₹2500
        To A's Capital A/c            ₹2500
(Being interest on capital is rectified)