After preparing the Capital accounts of the partners it is sometimes discovered that there is some error in the calculation or omission of one or more items like: Interest on capital, Interest on Drawings, Salary or any other type of remuneration to one or more partners, profit sharing ratio etc.

In that case rather than cutting and preparing the capital accounts again for this correction, only adjusting entries are passed concerning the capital accounts of the partners thus affected. This has been covered under two heads here:

(1)  In case of single error:

The procedure to follow is ………Do what has not been done, Cancel what has been done wrongly.

Then pass an adjusting entry by preparing a comparative table .For preparing this comparative table Dr. /Cr. the partners as required by the provisions of the deed, then Cr. /Dr. to cancel as actually done.

Pass Journal entry with the excess amount in the net amount column.

Name of the   partner Dr. Cr. Net Dr./Cr.

(2) In case of multiple errors:

When there are multiple errors to be set right , prepare Profit and Loss Appropriation account as per new correct provisions and calculate the claim of the partners separately.

Now prepare the comparative table as prepared above , Cr. the partner with the new claim and Dr. him for the amount already transferred to his capital account before such provisions were recorded correctly.

Now pass the adjusting entry with the net amount .

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