The Capitals of A, B and C as on 31st March, 2018 amounted to ₹ 90,000, ₹ 3,30,000 and ₹ 6,60,000 respectively. The profits amounting ₹ 1,80,000 for the year 2017-18 were distributed in the ratio of 4 : 1 : 1 after allowing interest on Capital @ 10% p.a. During the year, each partner withdrew ₹ 3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12%. Pass the necessary adjustment entry showing the working clearly.

The Capitals of A, B and C as on 31st March, 2018 amounted to ₹ 90,0

1.	The Capitals of A, B and C as on 31st March, 2018 amounted to ₹ 90,000, ₹ 3,30,000 and ₹ 6,60,000 respectively. The profits amounting ₹ 1,80,000 for the year 2017-18 were distributed in the ratio of 4 : 1 : 1 after allowing interest on Capital @ 10% p.a. During the year, each partner withdrew ₹ 3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12%. Pass the necessary adjustment entry showing the working clearly.
Answer» n: Journal PARTICULARS L.F. Debit Rs. Credit Rs. A's CAPITAL A/c Dr. 66,000 To B's Capital A/c 30,000 To C's Capital a/c 36,000 (Being Adjustment of profit made) Working Note : 1. Calculation of Opening Capital Particulars A Rs. B Rs. C Rs. 1. Closing Capital 90,000 3,30,000 6,60,000 2. Add : Drawings 3,60,000 3,60,000 3,60,000 4,50,000 6,90,000 10,20,000 3. Less: Profit already credited (4:1:1) (1,20,000) (30,000) (30,000) 4. Opening Capital with interest on capital 3,30,000 6,60,000 9,90,000 Less: Interest on Capital (4. x 10/110) (30,000) (60,000) (90,000) Opening Capital 3,00,000 6,00,000 9,00,000 2. Calculation of Interest on Capital Interest on A's Capital = 3,00,000 x = 30,000 Interest on B's Capital = 6,00,000 x = 60,000 Interest on C's Capital =9,00,000 x = 90,000 3. Statement showing adjustment Particulars A Rs. B Rs. C Rs. Total Rs. Interest on Capital 10% 30,000 60,000 90,000 1,80,000 Profits to be distributed 1,20,000 30,000 30,000 1,80,000 Less: Interest on Capital 12% (36,000) (72,000) (1,08,000) (216,000) Less: Share profit ratio(1:1:1) (48,000) (48,000) (48,000) (1,44,000) 66,000 30,000 36,000 Net Effect Dr. Cr. Cr. NIL

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