## (1)When there is single error.

Example:

A, B and C, are partners with capitals of ₹100,000, ₹200,000 and ₹300,000 respectively sharing profits and losses in the ratio of 3:2:1. The partnership deed provides for allowing interest on Capital @ 8 % p.a. After the final accounts have been prepared, it was discovered that interest on capital was allowed @ 6% p.a. Give necessary adjusting journal entry.

 Partner Dr. ₹ Cr. ₹ Net Dr./Cr. A 6,000 2,000 4,000 Dr. B 4,000 4,000 ——- C 2,000 6,000 4,000 Cr. Total 12,000 12,000

A’s Capital account         Dr. 4,000

To B’s Capital account   4,000

## (2) When there are multiple errors.

Example:

The net profit of X, Y and Z for the year ended March 31, 2012 was ₹ 60,000 and the same was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently discovered that the following points were not recorded in the books :

(i) Interest on Capital @ 5% p.a.

(ii) Interest on drawings amounting to X ₹ 700, Y ₹ 500 and Z ₹ 300.

(iii) Partner’s Salary: X ₹ 1000 p.a., Y ₹ 1500 p.a.

The capital accounts of partners were fixed as : X ₹ 50,000, Y ₹ 40,000 and Z ₹ 30,000. Record the adjustment entry.

Dr.                             Profit and loss Appropriation account                                                         Cr.

 Particulars ₹ Particulars ₹ To Interest on capital X To Interest on capital Y To Interest on capital Z To Partners’ salary X To Partners’ salary Y To Bal. trfd to Capital accounts (profit) 2500 2000 1500 1000 1500 53000 By Net Profit By Interest on Drawings X By Interest on Drawings Y By Interest on Drawings Z 60,000 700 500 300 61500 61500

Now the comparative table is to be prepared:

 Partner Dr.₹ Cr.₹ Net Dr./Cr. X 36000 2500+1000+31800-700=34600 1400Dr. Y 12000 2000+1500+10600-500=13600 1600Cr. Z 12000 1500+10600-300=11800 200Dr. Total 60000 60000

X’s capital account   Dr. 1400

Z’s capital account   Dr.   200

To Y’s Capital account       1600