(a) Piyush withdrew in the beginning of the month;

(b) Harmesh withdrew in the middle of the month; and

(c) Atul withdrew at the end of the month.

Interest on drawings charged for the year ended 31st March, 2026 was 15,600, 14,400 and 13,200 respectively.

Determine the rate of interest charged on drawings.

Answer:

(a) Calculation of the rate of interest charged on drawings made by Piyush in the beginning of the month

Rate of interest on drawing assumed = x

15600 = 240000 × x / 100 × 6.5 / 12

15600= 200 × x × 6.5

15600= 1300×x

x = 15600/1300 = 12%

(b) Calculation of the rate of interest charged on drawings made by Harmesh in the middle of the month

Rate of interest on drawing assumed = x

14,400 = 240000 × x / 100 × 6 / 12

14,400 = 200 × x × 6

14,400 = 1200×x

x = 14,400/1200 = 12%

(a) Calculation of the rate of interest charged on drawings made by Atul at the end of the month

Rate of interest on drawing assumed = x

13,200 = 240000 × x / 100 × 5.5 / 12

13,200= 200 × x × 5.5

13,200= 1,100×x

x = 13,200/1,100 = 12%

Adjusting and Transfer Entries

Aditi, Bobby and Krish were partners in a firm sharing profits and losses in the ratio of 5:3:2. Their capital were 5,00,000, 4,00,000 and 2,00,000 respectively. The partnership deed provided for the following:

(a) Interest on capital @ 10% per annum.

(b) Interest on drawings @ 6% per annum.

(c) Interest on partner's loan to the firm @ 9% per annum.

During the year, Aditi had withdrawn Rs. 60,000 and Bobby 50,000. On 1st September, 2021, Krish had given a loan of 40,000 to the firm.

Pass necessary Journal entries in the books of the firm for the following transactions for the year ended

31st March, 2022

(i) Allowing interest on Bobby's capital.

(ii) Charging interest on Aditi's drawings.

(iii) Providing interest on Krish's loan to the firm.

Also pass transfer entries in the Profit & Loss Account/Profit & Loss Appropriation Account, as the casemay be.

(CBSE 2023)

Answer:

Date	Particulars		(Dr.) ₹	(Cr.) ₹
	Adjusting Entries:
	Interest on Capital A/c	Dr.	40,000
	To Bobby's Capital A/c by			40,000
	(Being interest is allowed on capital)
	Interest on Capital A/c	Dr.	40,000
	To Bobby's Capital A/c			40,000
	(Being interest is allowed on capital)
	Aditi's Capital A/c	Dr.	1,800
	To Interest on Drawings A/c			1,800
	(Being interest is charged on Drawing)
	Interest on Krish's Loan A/c	Dr.	100
	To Krish's Loan A/c			100
	(Being interest is allowed on Loan)
	Transfer Entries:
	Profit & Loss Appropriation A/c	Dr.	40,000
	To Interest on Capital A/c			40,000
	(Being interest is transferred)
	Interest on Drawings A/c	Dr.	1,800
	To Profit & Loss Appropriation A/c			1,800
	(Being interest is transferred)
	Profit & Loss A/c	Dr.	2,100
	To Interest on Krish's Loan A/c			2,100
	(Being interest is transferred)

Working note:

1.     Interest on drawing for six month since date of drawing is not given

2.     Interest on Krish's Loan = 40,000 x 9/100 x 7/12 = 2,100.

Amit and Vijay started a partnership business on 1st April, 2025. Their capital contributions were  ₹ 2,00,000 and  ₹ 1,50,000 respectively. The Partnership Deed provided as follows:
(a) Interest on capital be allowed @ 10% p.a.
(b) Amit to get a salary of  ₹ 2,000 per month and Vijay  ₹ 3,000 per month.
(c) Profits are to be shared in the ratio of 3 : 2.
Net profit for the year ended 31st March, 2026 was  ₹ 2,16,000. Interest on drawings amounted to  ₹ 2,200 for Amit and  ₹ 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.

Answer:

Profit and Loss Appropriation Account for the year ended 31st March, 2026
Dr.					Cr.
Particulars		( ₹)	Particulars		( ₹)
Interest on Capital:			Profit and Loss A/c (Net Profit)		2,16,000
Amit’s Capital A/c	20,000		Interest on Drawings A/c:
Vijay’s Capital A/c	15,000	35,000	Amit’s Capital A/c	2,200
Salary to:			Vijay’s Capital A/c	2,500	4,700
Amit (2,000 × 12)	24,000
Vijay (3,000 × 12)	36,000	60,000
Profit transferred to:
Amit’s Capital A/c	75,420
Vijay’s Capital A/c	50,280	1,25,700
		2,20,700			2,20,700

Working Notes:

WN 1Calculation of Interest on Capital

Interest on Amit’s Capital=2,00,000×10/100=20,000

Interest on Vijay’s Capital=1,50,000×10/100=15,000

 

WN 2Calculation of Profit Share of each Partner

Divisible Profit = 2,16,000 + 4,700 - ₹ 35,000 -₹ 60,000 = ₹ 1, 25,700

Profit sharing ratio = 3 : 2

Amit’s profit share=1,25,700×3/5=75,420

Vijay’s profit share=1,25,700×2/5=50,280

 

 

A, B and C were partners in a firm having capitals of  ₹ 50,000 ;  ₹ 50,000 and  ₹ 1,00,000 respectively. Their Current Account balances were A:  ₹ 10,000; B:  ₹ 5,000 and C:  ₹ 2,000 (Dr.). According to the Partnership Deed the partners were entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of  ₹ 12,000 p.a. The profits were to be  divided as:
(a) The first  ₹ 20,000 in proportion to their capitals.
(b) Next  ₹ 30,000 in the ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm earned net profit of  ₹ 1,72,000 before charging any of the above items.
Prepare Profit and Loss Appropriation Account and pass necessary Journal entry for the appropriation of profits.

Answer:

Profit and Loss Appropriation Account

Dr.

Cr.

Particulars

( ₹)

Particulars

( ₹)

Interest on  Capital:

Profit and Loss A/c (Net Profit)

1,72,000

A’s Current A/c

5,000

B’s Current A/c

5,000

C’s Current A/c

10,000

20,000

Salary to C

12,000

Profit transferred to:

A’s Current A/c

50,000

B’s Current A/c

44,000

C’s Current A/c

46,000

1,40,000

1,72,000

1,72,000

Journal Entries

Date

Particulars

L.F.

Debit  ( ₹)

Credit  ( ₹)

Interest on Capital A/c

Dr.

20,000

To A’s Current A/c

5,000

To B’s Current A/c

5,000

To C’s Current A/c

10,000

(Interest on partners’ capital allowed to partners)

Salary A/c

Dr.

12,000

To C’s Current A/c

12,000

(Salary allowed to C)

Profit and Loss Appropriation A/c

Dr.

1,40,000

To A’s Current A/c

50,000

To B’s Current A/c

44,000

To C’s Current A/c

46,000

(Profit available for distribution transferred to partners’ current accounts)

Working Notes:

WN 1Calculation of Interest on Capital

Interest on A’s capital=50,000×10/100=5,000

Interest on B’s capital=50,000×10/100=5,000

Interest on C’s capital=1,00,000×10/100=10,000

 

WN 2Calculation of Profit Share of each Partner

Profits available for Distribution = 1,72,000-₹ 20,000-₹ 12,000= ₹ 1,40,000

1. Distribution of first ₹ 20,000 in the Capital Ratio i.e. 1:1:2

A’s profit share=20,000×1/4=5,000

B’s profit share=20,000×1/4=5,000

C’s profit share=20,000×2/4=10,000

2. Distribution of Next ₹ 30,000 in the ratio of 5:3:2

A’s profit share=30,000×5/10=15,000

B’s profit share=30,000×3/10=9,000

C’s profit share=30,000×2/10=6,000

3. Remaining Profit available for distribution = ₹ 1,40,000-₹ 20,000 -₹ 30,000 = ₹ 90,000

This profit of ₹ 90,000 is to be shared equally by the partners.

Profir Share of  A,B,C each =90,000×1/3=30,000

Therefore,

Total Profit Share of A = 5,000 + 15,000 + 30,000 = ₹ 50,000

Total Profit Share of B = 5,000 + 9,000 + 30,000 = ₹ 44,000

Total Profit Share of C = 10,000 + 6,000 + 30,000 = ₹ 46,000

Yadu, Vidu and Radhu were partners in a firm sharing profits in the ratio of 4:3:3. Their fixed capitals

1st April, 2018 were ₹ 9,00,000, ₹5,00,000 and ₹ 4,00,000 respectively. On 1st November, 2018, Yadu gave a loan of ₹80,000 to the firm, as per the partnership agreement.

(i) The partners were entitled to an interest on capital @ 6% p.a.

(ii)Interest on partners' drawings was to be charged@ 8% p.a.

The firm earned profit of ₹2,53,000 (after interest on Yadu's Loan) during the year 2018-19. Partners drawings for the year amounted to:

Yadu- ₹80,000, Vidu- ₹70,000 and Radhu- ₹50,000.

Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2019.

 

Answer:

	Profit and Loss Appropriation Account
Dr.							Cr.
Particulars			₹	Particulars			₹
Interest on Capital:				Profit and Loss A/c (Net Profit)			2,53,000
Yadu’s Capital A/c Vidu’s Capital A/c		54,000 30,000		Interest on Capital:
Radhu’s Capital A/c		24,000	1,08,000	Yadu’s Capital A/c Vidu’s Capital A/c		3.200 2,800
				Radhu’s Capital A/c		2,000	8,000
Profit transferred to:
Yadu’s Capital A/c Vidu’s Capital A/c		61,200 45,900
Radhu’s Capital A/c		45,900	1,53,000
			2,61,000				2,61,000

Working notes:

WN1Calculation of Interest on Capital

Yadu =9,00,000×6/100=54,000

Vidu=5,00,000×6/100=30,000

Radhu=4,00,000×6/100=24,000

 

WN2Calculation of Interest on Drawings

Yadu =80,000×8/100×6/12=3,200

Vidu=70,000×8/100×6/12=2,800

Radhu=50,000×8/100×6/12=2,000

 

WN3Distribution of profit (4:3:3)

Yadu =1,53,000×4/10=61,200

Vidu =1,53,000×3/10=45,900

Radhu =1,53,000×3/10=45,900