Question 16;
Atul and Mithun are partners sharing profits in the ratio of 3: 2
Balances as on 1st April 2021 were as follows:
Capital Accounts (fixed): Atul- `5,00,000 and Mithun- `6,00,000
Loan Accounts: Atul - `3,00,000 (Cr.) and Mithun - `2,00,000 (Dr.)
It was agreed to allow and charge interest @ 8% p.a. Partnership Deed provided to allow interest on capital @ 10% p.a. Interest on Drawings was charged `5,000 each.
Profit before giving effect to above was `2,28,000 for the year ended 31st March, 2022.
Prepare Profit and Loss Appropriation Account.
Answer;
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Profit and Loss
Appropriation Account |
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Dr. |
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Cr. |
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Particulars |
` |
Particulars |
` |
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Interest on Capital: |
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Profit and Loss A/c (Net
Profit) |
2,20,000 |
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Atul’s Current
A/c |
50,000 |
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Interest on Drawings: |
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Mithul’s
Current A/c |
60,000 |
1,10,000 |
Atul’s Current A/c |
5,000 |
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Mithul’s Current A/c |
5,000 |
10,000 |
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Profit transferred to: |
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Atul’s Current
A/c |
72,000 |
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Mithul’s
Current A/c |
48,000 |
1,20,000 |
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2,30,000 |
2,30,000 |
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Working Notes:
WN1 Profit After allowed and
charged Atul and Mithul Respectively
2,28,000 -24,000 +16,000 =
2,20,000
WN2 interest allowed on loan
given by Atul
Interest
on loan =3,00,000×8/100 = 24,000
WN3 interest Charged on loan
given to Mithul
Interest
on loan=2,00,000×8/100=16,000
WN4 Calculation of Interest on
Capital
Interest on Atul’s loan=5,00,000×10/100=50,000
Interest on Mithul's loan=6,00,000×10/100=60,000
WN5 Calculation of Profit Share of each Partner
Profit Share of Atul =1,20,000×3/5=72,000
Profit Share of Mithul =1,20,000×2/5=48,000
Question 17:
Reema and Seema
are partners sharing profits equally. The Partnership Deed provides that both
Reema and Seema will get monthly salary of `
15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on
Drawings will be charged @ 10% p.a. Their capitals were ` 5,00,000 each and drawings during the year were ` 60,000 each.
The firm incurred a loss of ` 1,00,000 during the year ended 31st March, 2022.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2022.
Answer:
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Profit and Loss
Appropriation Account for the year ended March 31, 2022 |
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Dr. |
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Cr. |
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Particulars |
` |
Particulars |
` |
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Profit
and Loss A/c (loss) |
1,00,000 |
Interest
on Drawings A/c: |
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Reema’s
Capital A/c |
3,000 |
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Seema’s
Capital A/c |
3,000 |
6,000 |
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Loss
transferred to |
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Reema’s
Capital A/c |
47,000 |
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Seema’s
Capital A/c |
47,000 |
94,000 |
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1,00,000 |
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1,00,000 |
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Note: Since the firm has incurred loss, no interest on capital and salary will be allowed to the partners. However, interest on drawings will be charged from each of them @ 10% p.a. on the amounts withdrawn by them for an average period of six months.
Question 18:
Bhanu and Partab
are partners sharing profits equally. Their fixed capitals as on 1st April, 2021
are ` 8,00,000 and ` 10,00,000
respectively. Their drawings during the year were ` 50,000 and ` 1,00,000
respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a.
and interest on drawings is to be charged @ 15% p.a. Net Profit for the year
ended 31st March, 2022 was ` 1,20,000.
Prepare Profit and Loss Appropriation Account.
Answer:
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Profit and Loss Appropriation Account for the year ended March 31, 2022 |
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Dr. |
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Cr. |
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Particulars |
( `) |
Particulars |
( `) |
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Interest on Capital A/c: |
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Profit and Loss A/c |
1,20,000 |
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Bhanu’s Current A/c |
80,000 |
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Interest on Drawings A/c: |
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Partap’s Current A/c |
1,00,000 |
1,80,000 |
Bhanu’s Current A/c |
3,750 |
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Partap’s Current A/c |
7,500 |
11,250 |
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Loss transferred to |
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Bhanu’s Current A/c |
24,375 |
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Partap’s Current
A/c |
24,375 |
48,750 |
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1,80,000 |
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1,80,000 |
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Question 19:
Amit and Sumit
entered into partnership on 1st April, 2021 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 2022.
Pass the Journal entry for interest on capital.
Answer:
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Journal |
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Date |
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
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2023 |
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March
31 |
Profit & Loss Appropriation A/c |
Dr. |
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40,000 |
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To Amit’s Current A/c |
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15,000 |
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To Sumit’s Current A/c |
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25,000 |
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(Interest on capital transferred to Profit & Loss
Appropriation A/c) |
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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
Question 20:
Kamal and Kapil
are partners having fixed capitals of ` 5,00,000 each as on 31st March, 2021. Kamal introduced further
capital of ` 1,00,000 on 1st
October, 2021 whereas Kapil withdrew ` 1,00,000 on 1st October, 2021 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 2022.
Pass the Journal entry for interest on capital and prepare Profit and Loss
Appropriation Account.
Answer:
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Journal |
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Date |
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
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2023 |
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March
31 |
Profit & Loss Appropriation A/c |
Dr. |
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1,00,000 |
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To Kamal’s Current A/c |
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55,000 |
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To Kapil’s Current A/c |
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45,000 |
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(Interest on capital transferred to Profit & Loss
Appropriation A/c) |
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Profit and Loss Appropriation Account for
the year ended 31 March 2022 |
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Dr. |
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Cr. |
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Particulars |
( `) |
Particulars |
( `) |
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Interest on Capital A/c: |
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Profit and Loss A/c |
6,00,000 |
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Kamal’s Current A/c |
55,000 |
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Kapil’s Current A/c |
45,000 |
1,00,000 |
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Profit transferred to: |
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Kamal’s Current A/c |
2,50,000 |
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Kapil’s Current A/c |
2,50,000 |
5,00,000 |
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6,00,000 |
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6,00,000 |
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Working Notes:
WN1: Calculation of
Interest on Capital:
Kamal = (5,00,000×10×6÷100×12) + (6,00,000×10×6÷100×12) = `. 55,000
Kapil=(5,00,000×10×6÷100×12)
+ (4,00,000×10×6÷100×12) = `. 45,000