A firm which maintains fixed capital had two partners Vimla and Kamla sharing profits in the ratio 1:1 The firm credited the partners with profit without interest on Capital which is allowed in the deed. Choose the correct option to pass a journal entry for the past adjustment if the Interest on capital Rs.2000 for Vimla Rs.3000 for Kamla
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Vimla's current A/c Dr 500 To Kamla's Current A/c 500
The omitted interest on capital is corrected without reopening the accounts: each partner is credited with the interest due to him and debited with his share of the same amount in the profit sharing ratio, because the profit already distributed was larger by that amount. Only the net effect is passed. As the capitals are fixed, the adjustment goes through the partners' current accounts, not their capital accounts.
Total interest omitted = Rs. 2,000 + Rs. 3,000 = Rs. 5,000
Each partner's share of it in the ratio 1:1 = Rs. 2,500
Vimla: interest due Rs. 2,000 − share charged Rs. 2,500 = Rs. 500 (debit)
Kamla: interest due Rs. 3,000 − share charged Rs. 2,500 = Rs. 500 (credit)
Adjusting entry: Vimla's Current A/c Dr. Rs. 500, To Kamla's Current A/c Rs. 500
The entries through capital accounts would suit fluctuating capitals, not fixed capitals.
NCERT (2026-27 edition):
NCERT (2026-27 edition): |
