X and Y are partners in a firm sharing profits in the ratio of 3:2 with the capital of ₹50000 and ₹100000 respectively. It is discovered that interest at the rate of 6 per cent per annum, as provided in the partnership deed has not been credited to the partners’ capital accounts before distribution of profit. How this error can be rectified by the partnership firm?
Answer & explanation
Correct answer: option 4
The interest on capital not credited to the partners' capital accounts works out to be ₹ 3000 (6/100 × ₹50,000) for X and ₹ 6,000 (6/100 × ₹1,00,000) for Y.
This can be rectified by debiting the profit and loss adjustment account and crediting the partners' capital account with the respective amount. And due to this, loss occurred to firm, which is adjusted through debiting partner's capital A/c in their profit sharing ratio.