Multiple Choice Questions on X and A are partners in the ratio of 3 2 Their fixed capitals are rs2 00 000 and rs1 00 000 respecti........... for Commerce 12th Preparation

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Multiple Choice Questions

X and A are partners in the ratio of 3 2 Their fixed capitals are rs2 00 000 and rs1 00 000 respecti...........

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    X and A are partners in the ratio of 3 : 2. Their fixed capitals are rs2,00,000 and rs1,00,000 respectively. After clsoing the accounts for the year ending 31st March 2019, it was discovered that interest on capital was allowed @ 12% instead of 10% per annum. By how much amount A will be debited/credited in the adjustment entry :

    rs600 (Debit)

    Incorrect Answer

    rs400 (Credit)

    Incorrect Answer

    rs400 (Debit)

    Correct Answer

    rs600 (Credit)

    Incorrect Answer
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    Explanation:

    - Interest on Capital should have been at 10%, not 12%.

    - X's capital = Rs 2,00,000.

    - Correct Interest = 2,00,000 x 10% = Rs 20,000

    - Incorrect Interest = 2,00,000 x 12% = Rs 24,000

    - Over-credit = Rs 4,000

    - A's capital = Rs 1,00,000.

    - Correct Interest = 1,00,000 x 10% = Rs 10,000

    - Incorrect Interest = 1,00,000 x 12% = Rs 12,000

    - Over-credit = Rs 2,000

    - Difference to adjust = Total Over-credit / Profit-Sharing Ratio

    - Adjusted for A = (4,000 + 2,000) x 2/5 = Rs 2,400.

    - So A will be debited Rs 400 to adjust the excess interest.

    By: santosh
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