12th | Accounting for Partnership Firms – Fundamentals| Question No. 21 To 25 | Ts Grewal Solution 2024-2025

Amit and Sumit entered into partnership on 1st April, 2023 contributing`1,50,000 and  ` 2,50,000 respectively towards capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of `1,00,000 for the year ended 31st March,2024.
Pass the Journal entry for interest on capital.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit ( `)
2024
March 31	Profit & Loss Appropriation A/c	Dr.		40,000
	To Amit’s Current A/c				15,000
	To Sumit’s Current A/c				25,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Working Notes:

 

WN1: Calculation of Interest on Capital:
Amit's Interest on Capital=1,50,000×10/100=` 15,000

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

 

Kamal and Kapil are partners having fixed capitals of  ` 5,00,000 each as on 1st April, 2023. Kamal introduced further capital of  ` 1,00,000 on 1st January, 2024 whereas Kapil withdrew  ` 1,00,000 on 1st January, 2024 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned net profit of  ` 6,00,000 for the year ended 31st March 2024.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
2024
March 31	Profit & Loss Appropriation A/c	Dr.		1,00,000
	To Kamal’s Current A/c				55,000
	To Kapil’s Current A/c				45,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Profit and Loss Appropriation Account for the year ended 31 March 2024
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on Capital A/c:			Profit and Loss A/c	6,00,000
Kamal’s Current  A/c	52,500
Kapil’s Current  A/c	47,500	1,00,000
Profit transferred to:
Kamal’s Current  A/c	2,50,000
Kapil’s Current  A/c	2,50,000	5,00,000
		6,00,000		6,00,000

 

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of Interest on Capital:

Kamal = (5,00,000×10÷100×9÷12) + (6,00,000×10÷100×3÷12) = `. 52,500

Kapil=(5,00,000×10÷100×9÷12)+ (4,00,000×10÷100×3÷12) = `. 47,500 

 

 

 

Simran and Reema are partners sharing profits in the ratio of 3 : 2. Their capitals as on 1^st April, 2023 were ` 2,00,000 each whereas Current Accounts had balances of  ` 50,000 and  ` 25,000 respectively interest is to be allowed @ 5% p.a. on balances in Capital Accounts. The firm earned net profit of  ` 3,00,000 for the year ended 31st March 2024.
Pass the Journal entries for interest on capital and distribution of profit. Also prepare Profit and Loss Appropriation Account for the year.

Answer:

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
	Profit & Loss Appropriation A/c	Dr.		20,000
	To Simran’s Current A/c				10,000
	To Reema’s Current A/c				10,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)
	Profit & Loss Appropriation A/c			2,80,000
	To Simran’s Current A/c				1,68,000
	To Reema’s Current A/c				1,12,000
	(Profit transferred to Partners’ Current A/c)

 

Profit and Loss Appropriation Account for the year ended 31 March 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on Capital A/c:			Profit and Loss A/c	3,00,000
Simran’s Current  A/c	10,000
Reema’s Current  A/c	10,000	20,000
Profit transferred to:
Simran’s Current  A/c	1,68,000
Reema’s Current  A/c	1,12,000	2,80,000
		3,00,000		3,00,000

 

Working Notes:

WN1: Calculation of Interest on Capital

Simran's Interest on Capital = 2,00,000×5÷100=` 10,000

Reema's Interest on Capital = 2,00,000×5÷100=` 10,000

 

Anita and Ankita are partners sharing profits equally. Their capitals, maintained following Fluctuating Capital Accounts Method, as on 1st April, 2023 were ` 5,00,000 and  ` 4,00,000 respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. The firm earned net profit of  ` 2,00,000 for the year ended 31st March, 2024.
Pass the Journal entry for interest on capital.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
2023
March 31	Profit & Loss Appropriation A/c	Dr.		90,000
	To Anita’s Capital A/c				50,000
	To Ankita’s Capital A/c				40,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Working Notes:

WN1: Calculation of Interest on Capital

Anita's Interest on Capital = 5,00,000×10÷100=` 50,000

Ankita's Interest on Capital = 4,00,000×10÷100=` 40,000

 

Ashish and Aakash are partners sharing profit in the ratio of 3 : 2. Their Capital Accounts showed a credit balance of  ` 5,00,000 and  ` 6,00,000 respectively as on 31st March, 2024 after debit of drawings during the year of  ` 1,50,000 and  ` 1,00,000 respectively. Net profit for the year ended 31st March, 2024 was ` 5,00,000. Interest on capital is to be allowed @ 10% p.a.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
2023
March 31	Profit & Loss Appropriation A/c	Dr.		1,35,000
	To Ashish’s Capital A/c				65,000
	To Aakash’s Capital A/c				70,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)
				3,65,000
	Profit & Loss Appropriation A/c				2,19,000
	To Ashish’s Capital A/c				1,46,000
	To Akash’s Capital A/c
	(Profit transferred to Partners’ Capital A/c)

 

Profit and Loss Appropriation Account for the year ended 31 March 2024
Dr.					Cr.
Particulars			( `)	Particulars	( `)
Interest on Capital A/c:				Profit and Loss A/c	5,00,000
Ashish		65,000
Aakash		70,000	1,35,000
Profit transferred to:
Ashish’s Capital  A/c	2,19,000
Aakash’s Capital  A/c	1,46,000		3,65,000
			5,00,000		5,00,000

 

Working Notes:

WN1: Calculation of Opening Capital:

Particulars	Ashish	Aakash
Capital at the end	5,00,000	6,00,000
Add: Drawings made	1,50,000	1,00,000
Capital at the beginning	6,50,000	7,00,000

 

WN2: Calculation of Interest on Capital

Ashish's Interest on Capital = 6,50,000×10/100=` 65,000

Aakash's Interest on Capital = 7,00,000×10/100=` 70,000