Pranav, Karan and Rahim were partners sharing profits in the ratio of 3 : 2 : 1. Their capitals were ₹ 5,00,00, ₹ 3,00,000, and ₹ 2,00,000 respectively as on 1st April, 2022. According to the partnership deed, they were entitled to an interest on capital at 10% p.a. For the year ended 31st March 2022, a profit of ₹ 78,000 was distributed among the partners without providing for interest on capital.

Pass the necessary adjusting entry and show the working clearly.

[Ans.: Dr. Karan’s Capital A/c and Cr. Rahim’s Capital A/c by ₹ 2,600]

[Hint: Profit will be distributed in the ratio of interest on capital due to insufficient amount]

Anurag Pathak Changed status to publish April 11, 2023