Question

On 31\textsuperscript{st March, 2023, the capitals of Raghav and Diya stood at ₹ 4,00,000 and ₹ 3,00,000 respectively, after the necessary adjustment in respect of drawings and net profit. Subsequently, it was discovered that interest on capital @ 10\% p.a had been omitted. The Net Profit for the year ended 31\textsuperscript{st} March, 2023 amounted to ₹ 1,00,000. During the year ended 31\textsuperscript{st} March, 2023, Raghav’s drawings were ₹ 2,000 drawn at the beginning of each month, while Diya’s drawings were ₹ 3,000 drawn at the beginning of each quarter. Pass the necessary adjustment entry.}

Hint:

When interest on capital or drawings is omitted, pass the necessary adjustments by recalculating them before making the journal entry.

Answer 1

Interest on capital for Raghav: \( 4,00,000 \times 10\% = ₹40,000 \)
Interest on capital for Diya: \( 3,00,000 \times 10\% = ₹30,000 \)
Interest on drawings for Raghav: \( 2,000 \times 12 \times 10\% = ₹2,400 \)
Interest on drawings for Diya: \( 3,000 \times 4 \times 10\% = ₹1,200 \)

Journal Entry:

Particulars	Dr Amount (₹)	Cr Amount (₹)
Interest on Capital A/c Dr	70,000
To Raghav’s Capital A/c		40,000
To Diya’s Capital A/c		30,000
Interest on Drawings A/c Dr	3,600
To Raghav’s Current A/c		2,400
To Diya’s Current A/c		1,200