T.S. Grewal Class 12 Chapter 1 Q.56 - Accounting for Partnership Firm Fundamentals

Question 56

Aditi, Bobby and Krish were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their capitals were ₹5,00,000, ₹4,00,000 and ₹2,00,000 respectively. The Partnership Deed provided for: (a) interest on capital @ 10% p.a.; (b) interest on drawings @ 6% p.a.; (c) interest on a partner’s loan to the firm @ 9% p.a. During the year, Aditi withdrew ₹60,000 and Bobby ₹50,000. On 1st September, 2021, Krish gave a loan of ₹40,000 to the firm. Pass the necessary Journal entries for the year ended 31st March, 2022 for: (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 the transfer entries. (CBSE 2023)

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Interest on Capital A/c    Dr.		40,000
	To Bobby’s Capital A/c			40,000
	(Interest allowed on Bobby’s capital @ 10%)
	Aditi’s Capital A/c    Dr.		1,800
	To Interest on Drawings A/c			1,800
	(Interest charged on Aditi’s drawings, ₹60,000 × 6% × 6/12)
	Interest on Krish’s Loan A/c    Dr.		2,100
	To Krish’s Loan A/c			2,100
	(Interest on loan @ 9% for 7 months, ₹40,000 × 9% × 7/12)
	Profit & Loss Appropriation A/c    Dr.		40,000
	To Interest on Capital A/c			40,000
	(Interest on capital transferred)
	Interest on Drawings A/c    Dr.		1,800
	To Profit & Loss Appropriation A/c			1,800
	(Interest on drawings transferred)
	Profit & Loss A/c    Dr.		2,100
	To Interest on Krish’s Loan A/c			2,100
	(Interest on loan transferred to Profit & Loss A/c)

Note: Interest on a partner’s loan is a charge (transferred to the Profit & Loss A/c); interest on capital and on drawings are appropriations (transferred to the Profit & Loss Appropriation A/c).