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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Simran and Reema are partners sharing profits in the ratio of 3 : 2. Their capitals as on 1st April, 2024 were ₹2,00,000 each, whereas their Current Accounts had balances of ₹50,000 and ₹25,000 respectively. Interest is to be allowed @ 5% p.a. on the balances in the Capital Accounts. Net profit for the year ended 31st March, 2025 was ₹3,00,000. Pass the Journal entries for allowing interest on capital and distribution of profit. Also prepare the Profit & Loss Appropriation Account for the year.
JOURNAL
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| 2025 Mar 31 | Interest on Capital A/c Dr. | 20,000 | ||
| To Simran’s Current A/c | 10,000 | |||
| To Reema’s Current A/c | 10,000 | |||
| (Interest on capital allowed @ 5% p.a.) | ||||
| 2025 Mar 31 | Profit & Loss Appropriation A/c Dr. | 20,000 | ||
| To Interest on Capital A/c | 20,000 | |||
| (Interest on capital transferred to Profit & Loss Appropriation A/c) | ||||
| 2025 Mar 31 | Profit & Loss Appropriation A/c Dr. | 2,80,000 | ||
| To Simran’s Current A/c | 1,68,000 | |||
| To Reema’s Current A/c | 1,12,000 | |||
| (Profit distributed in the ratio 3 : 2) |
Profit & Loss Appropriation Account (for the year ended 31st March, 2025)
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Interest on Capital: | By Profit & Loss A/c (Net Profit) | 3,00,000 | |
| Simran’s Current A/c | 10,000 | ||
| Reema’s Current A/c | 10,000 | ||
| To Profit transferred to Current A/cs: | |||
| Simran (2,80,000 × 3/5) | 1,68,000 | ||
| Reema (2,80,000 × 2/5) | 1,12,000 | ||
| Total | 3,00,000 | Total | 3,00,000 |
Interest is allowed only on Capital Account balances (₹2,00,000 each × 5% = ₹10,000 each); Current Account balances are ignored.
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.
This guide covers "T.S. Grewal Class 12 Chapter 1 Q.22 - Accounting for Partnership Firm Fundamentals", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 1 - Accounting for Partnership Firm – Fundamentals.
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