P, Q and R were partners in a firm sharing profits in the ratio of 1: 2:2. After division of the profits for year ended 31st March, 2015, their capitals were: P Rs.1, 50,000; Q Rs.1, 80,000 and R Rs.2,10,000. During the year, they withdrew Rs.20,000 each. The profit for the year was Rs.60,000. The Partnership Deed provides that the interest on capital will be allowed @ 10% p.a. While preparing final accounts, interest partners’ capital was not allowed. You are required to calculate capital of P, Q and R as at 1st April, 2014 and pass necessary adjustment entry for providing interest on capital. Show your working clearly.
