CBSE 2025, Set 2

Question

Sun and Moon were partners in a firm sharing profits and losses equally. Their fixed capitals were ₹5,00,000 each. After the accounts for the year ended 31st March, 2024 were prepared, it was discovered that interest on capital @ 10% p.a. was not credited to the partners' current accounts as provided in the partnership deed. The rectifying adjustment entry for the same will be :
| Particulars | Debit Amount (₹) | Credit Amount (₹) | |---|---|---| | **(A) No Entry** | | | | **(B)** Sun's Current A/c Dr.
To Moon's Current A/c | 50,000 |
50,000 | | **(C)** Moon's Current A/c Dr.
To Sun's Current A/c | 50,000 |
50,000 | | **(D)** Sun's Current A/c Dr.
Moon's Current A/c Dr.
To Profit and Loss Appropriation A/c | 50,000
50,000 |

1,00,000 | A). No Entry B). Sun's Current A/c Dr 50,000; To Moon's Current A/c 50,000 C). Moon's Current A/c Dr 50,000; To Sun's Current A/c 50,000 D). Sun's Current A/c Dr 50,000, Moon's Current A/c Dr 50,000; To P&L App A/c 1,00,000

Edvaya · Accepted Answer

The correct answer is No Entry. (A) No Entry **Explanation:** Interest on Capital to be credited: Sun = 50,000, Moon = 50,000. Total = 1,00,000. When this interest was omitted, the profits were overstated by 1,00,000. This 1,00,000 was distributed in their profit sharing ratio (equally: 1:1), so Sun received 50,000 and Moon received 50,000 as profit. Since the amount they wrongfully received (50,000 each) is exactly equal to the interest on capital they should have received (50,000 each), the net effect for both partners is zero. Hence, no rectifying entry is required.

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Accountancy > Accounting For Partnership Firms > Fundamentals Of Partnership

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Particulars	Debit Amount (₹)	Credit Amount (₹)
(A) No Entry
(B) Sun's Current A/c Dr. To Moon's Current A/c	50,000	50,000
(C) Moon's Current A/c Dr. To Sun's Current A/c	50,000	50,000
(D) Sun's Current A/c Dr. Moon's Current A/c Dr. To Profit and Loss Appropriation A/c	50,000 50,000	1,00,000