Ankit, Bhanu and Charu are partners in a firm sharing profits and losses equally with capital of  `2,50,000 each. On 1st October, 2024, Ankit and Bhanu gave loans of  `2,50,000 each to the firm whereas Charu took a loan of  `1,00,000 from the firm on 1^ST Novermber 2024. It was agreed among the partners that Charu will be charged Interest @ 6% pa. Interest on loan from partners was paid on 10th April, 2025.The firm closes its books on 31st March each year.

Pass the Journal entries in the books of the firm for the year ended 31st March, 2025.

Answer;

Date	Particulars		L.F.	Dr.`	Cr. `
31 March	Interest  on loan     A/c          To Akhil’s loan A/c      To Bhanu’s loan A/c (Being interest on loan provided @ 6% p.a. on 2,50,000 for six month)	Dr.         Dr.		15,000         2,500	7,500 7,500       2,500
	Charu’s capital      A/c      To  Interest  on loan     A/c     (Being interest on loan allowed to Charu@ 6% p.a. on 1,00,000 for 5 month) (1,00,000×6÷100×5÷12)
				17,500	17,500

 

(a) Rate of interest is not agreed; and

(b) Rate of interest to be charged is agreed @ 10% p.a?

 

Answer:

Case-A: No entry will be passed, in the absence of agreement, interest will not be charged on Loan to Partner.

 

Case-B

JOURNAL
Date	Particulars		LF	Dr. (Rs.)	Cr. (Rs.)
2025
March 31	Jesha's Capital A/c	Dr.		45,000
	To Interest on Loan to Partner A/c				45,000
	(Interest charged for nine months up to March, 2024)
March 31	Interest on Loan to Partner A/c	Dr.		45,000
	To Profit & Loss A/c				45,000
	(Interest on Loan to Prem transferred to the credit of Profit & Loss Account)

Working notes:

Total interest on loan for 9 month = 6,00,000×10× 9/100 × 12= 45,000

 

Pass the Journal entries for interest on loan to partner.

Answer:

JOURNAL
Date	Particulars		LF	Dr. (₹)	Cr. (₹)
2024	Bank Ac	Dr.		3,000
March 5	To Interest on Loan to Partner A/c				3,000
	(Interest paid by Rahul for the  months of February, 2024)
March 31	Rahul's Capital A/c	Dr.		3,000
	To Interest on Loan to Partner A/c				3,000
	(Interest for March 2024 charged)
March 31	Interest on Loan to Partner A/c	Dr.		6,000
	To Profit& Loss A/c				6,000
	(Interest on Loan to Rahul transferred to the credit of Profit & Loss Account)

Working notes:

*Interest for 2 month = 6,00,000×2 × 6/100×12=6000

*Interest for month of February, which is to be paid by cheque = 6000 × 1 / 2= 3,000

Vinod and Mohan are partners. Vinod 's Capital is ` 1,00,000 and Mohan 's Capital is  ` 60,000. Interest on capital is payable @ 6% p.a. Mohan is entitled to a salary of ` 3,000 per month. Profit for the current year before interest and salary to Mohan is ` 80,000.
Prepare Profit and Loss Appropriation Account.

Answer:

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		`	Particulars	`
Interest on Capital:			Profit and Loss A/c (Net Profit)	80,000
Vinod’s Capital A/c	6,000
Mohan’s Capital A/c	3,600	9,600
Salary to B (` 3,000 × 12)		36,000
Profit transferred to:
Vinod’s Capital A/c	17,200
Mohan’s Capital A/c	17,200	34,400
		80,000		80,000

Working Notes:

WN1Calculation of Interest on Capital

Interest on Vinod’s loan=1,00,000×6/100×6/12=6,000

Interest on Mohan's loan=60,000×6/100×6/12=3,600

 

WN 2Calculation of Profit Share of each Partner

Divisible Profit = 80,000 – 9,600 – 36,000 = 34,400

 

Profit share of Vinod and Mohan =34,400×1/2=17,200

 

X, Y and Z are partners in a firm sharing profits in 2 : 2 : 1 ratio. The fixed capitals of the partners were : X  `5,00,000; Y  ` 5,00,000 and Z  ` 2,50,000 respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. Z is to be allowed a salary of  ` 2,000 per month. The profit of the firm for the year ended 31st March, 2025 after debiting Z's salary was  ` 4,00,000.
Prepare Profit and Loss Appropriation Account.

Answer:

Profit and Loss Appropriation Account for the year ended 31st March 2025
Dr.					Cr.
Particulars			`	Particulars	`
Interest on Capital:				Profit and Loss A/c (Net Profit after Z’s salary)	4,00,000
X’s Capital A/c		50,000
Y’s Capital A/c		50,000
Z’s Capital A/c		25,000	1,25000
Profit transferred to:
X’s Capital A/c	1,10,000
Y’s Capital A/c	1,10,000
Z’s Capital A/c	55,000		2,75,000
			4,00,000		4,00,000

Working Notes:

WN 1 Salary to Z has not been debited to Profit and Loss Appropriation Account. This is because Profit of ` 4,00,000 is given after adjusting the Z’s salary.

WN 2Calculation of Interest on Capital

 

Interest on X^' s Capital=5,00,000×10/100=50,000

Interest on Y's Capital=5,00,000×10/100=50,000

Interest on Z' s Capital=2,50,000×10/100=25,000

           
WN 3Calculation of Profit Share of each Partner

Divisible of Profit after Interest on Capital = ` 4,00,000-`1,25,000 = ` 2,75,000

Profit sharing ratio = 2 : 2 : 1

Profit share of  X' s =5,00,000×2/5=1,10,000

Profit share of  Y' s =5,00,000×2/5=1,10,000

Profit share of  Z' s=5,00,000×1/5=55,000