A and B are partners, sharing profits equally. Their fixed capitals were Rs 2,00,000 and Rs 3,00,000 respectively. Interest on capital as provided under partnership deed @10% p.a was omitted. Select the correct option from the following:
A and B are partners, sharing profits equally. Their fixed capitals were Rs 2,00,000 and Rs 3,00,000 respectively. Interest on capital as provided under partnership deed @10% p.a was omitted. Select the correct option from the following:
Solution
✅ Correct Option: 2
Interest on Capital omitted:
- A: 10% × 2,00,000 = Rs. 20,000
- B: 10% × 3,00,000 = Rs. 30,000
- Total = Rs. 50,000
Since profits are shared equally, each partner received Rs. 25,000 extra profit due to the omission.
Net effect:
| Partner | Interest Not Credited | Extra Profit Received | Net Effect |
|---|---|---|---|
| A | -20,000 | +25,000 | +5,000 (gained) |
| B | -30,000 | +25,000 | -5,000 (lost) |
Rectification Entry
- A's Current Account — Debit Rs. 5,000 (A gained extra)
- B's Current Account — Credit Rs. 5,000 (B was shortchanged)
Journal Entry:
| Particulars | Debit (Rs.) | Credit (Rs.) |
|---|---|---|
| A's Current A/c | 5,000 | — |
| To B's Current A/c | — | 5,000 |
Answer: Option 2
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