Question
If 6% interest is to be allowed on a capital of
₹10,00,000, what will the adjusting entry be for this will in the books of the partnership firm?Solution
Interest = ₹10,00,000 × 6% Interest = ₹60,000 So, the adjusting entry in the books of the partnership firm would be: Debit: Interest Expense [Interest on capital] & Credit: Partner’s capital account as the firm needs to pay partners so there is an increase in liability.
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