Question 17 Chapter 2 of +2-A
17. Kamal and Kapil are partners having fixed capitals of ₹ 5,00,000 each as on 31st March 2018. Kamal introduced further capital of ₹ 1,00,000 on 1st October 2018 whereas Kapil withdrew ₹ 1,00,000 on 1st October 2018 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned a net profit of ₹ 6,00,000 for the year ended 31st March 2019.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.
The solution of Question 17 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| April 1 | Profit and Loss Appropriation A/c | Dr | 1,00,000 | ||
| To Kamal’s Capital A/c | 55,000 | ||||
| To Kapil’s Capital A/c | 45,000 | ||||
| (Being interest on capital credited to partners capital account) | |||||
| Profit and Loss Appropriation Account A/c for the year ended 31st March 2019 |
||||||
| Particulars |
Amount | Particulars |
Amount | |||
| To Interest on Capital A/c *1 | By Profit and Loss Adjustment A/c | 6,00,000 | ||||
| Kamal’s Capital A/c | 55,000 | |||||
| Kapil’s Capital A/c | 45,000 | 1,00,000 | ||||
| To X’s Capital A/c | 2,50,000 | |||||
| 5,00,000 × 1/2 | ||||||
| To Y’s Capital A/c | 2,50,000 | |||||
| 5,00,000 × 1/2 | ||||||
| 6,00,000 | 6,00,000 | |||||
Working Note: –
*1: -Calculation of Total Interest on Kamal’s Capital, and Kapil’s Capital
Note: – In this case, the partners introduced and withdrawal their capital during the year, so that’s why we have to calculate the interest on capital according to period.
Interest on Capital = Capital X Rate of Interest X Period
Kamal’s Capital
from the 01/04/2019 to 30/09/2019= 5,00,000
on 1st oct 2019 he introduced new capital of Rs. 1,00,000, So his Total capital will be 6,00,000 (5,00,000+1,00,000)
from the 01/10/2019 to 31/03/2020= 6,00,000
Rate of Interest = 10%
So, we have to calculate the depreciation of two periods of 6 months each as shown follows
= (5,00,000 X 10/100 X 6/12) + (6,00,000 X 10/100 X 6/12)
= 25,000 + 30,000
Total Interest on Kamal’s Capital = 55,000/-
Kapil’s Capital
from the 01/04/2019 to 30/09/2019= 5,00,000
on 1st oct 2019 he withdrawal capital of Rs. 1,00,000, So his Total capital will be 4,00,000 (5,00,000 – 1,00,000)
from the 01/10/2019 to 31/03/2020= 4,00,000
Rate of Interest = 10%
So, we have to calculate the depreciation of two periods of 6 months each as shown follows
= (5,00,000 X 10/100 X 6/12) + (4,00,000 X 10/100 X 6/12)
= 25,000 + 20,000
Total Interest on Kapil’s Capital = 45,000/-
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Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
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