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Atul, Jetha and Tarak are partners sharing profits equally. Jetha was given a loan by the firm on 1st July, 2024 of ₹6,00,000. Books are closed on 31st March. What Journal entries will be passed if: (a) the rate of interest is not agreed; and (b) the rate of interest to be charged is agreed @ 10% p.a.?
Case (a) – Rate of interest not agreed: No entry is passed. In the absence of an agreement, no interest is charged on a loan given to a partner.
Case (b) – Interest agreed @ 10% p.a.:
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 2025 Mar 31 | Jetha’s Loan A/c Dr. | 45,000 | ||
| To Interest on Loan to Partner A/c | 45,000 | |||
| (Interest charged @ 10% p.a. for 9 months on the loan to Jetha) | ||||
| 2025 Mar 31 | Interest on Loan to Partner A/c Dr. | 45,000 | ||
| To Profit & Loss A/c | 45,000 | |||
| (Interest on loan to Jetha transferred to the credit of Profit & Loss Account) |
Working Note: Interest for 9 months (1st July, 2024 to 31st March, 2025) = ₹6,00,000 × 10/100 × 9/12 = ₹45,000.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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