Question 18 Chapter 2 of +2-A
18. Simran and Reema are partners sharing profits in the ratio of 3: 2. Their capitals as on 31st March 2018 were ₹ 2,00,000 each whereas Current Accounts had balances of ₹ 50,000 and ₹ 25,000 respectively interest is to be allowed @ 5% p.a. on balances in Capital Accounts. The firm earned a net profit of ₹ 3,00,000 for the year ended 31st March 2019.
Pass the Journal entries for interest on capital and distribution of profit. Also, prepare Profit and Loss Appropriation Account for the year
The solution of Question 18 Chapter 2 of +2-A:
| Date | Particulars |
L.F. | Debit | Credit | |
| April 1 | Profit and Loss Appropriation A/c | Dr | 20,000 | ||
| To Simran’s Current A/c | 10,000 | ||||
| To Reema’s Current A/c | 10,000 | ||||
| (Being interest on capital credited to partners capital account) | |||||
| Profit and 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 share transferred among partners) | |||||
| 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 | 3,00,000 | ||||
| Simran’s Current A/c | 10,000 | |||||
| Reema’s Current A/c | 10,000 | 20,000 | ||||
| To Profit Transferred to *2 | 2,50,000 | |||||
| Simran’s Current A/c | 1,68,000 | |||||
| Reema’s Current A/c | 1,12,000 | 2,80,000 | ||||
| 3,00,000 | 3,00,000 | |||||
Working Note:
*1: -Calculation of Total Interest on Simran’s Capital, and Reema’s Capital
Interest on Capital = Capital X Rate of Interest X Period
Simran’s Capital = 2,00,000
Rate of Interest = 5%
Period = Whole year(So we don’t need to add period in the formula)
= 2,00,000 X 5/100
Total Interest on Simran’s Capital = 10,000/-
Reema’s Capital = 2,00,000
Rate of Interest = 5%
Period = Whole year(So we don’t need to add period in the formula)
= 2,00,000 X 5/100
Total Interest on Reema’s Capital = 10,000/-
*2: -Calculation of share of profit of Simran’s and Reema’s
Profit Sharing Ratio = 3: 2
Net Profit after interest = 2,80,000
= 2,80,000 X 3/5
Profit share of Simran’s = 1,68,000/-
= 2,80,000 X 2/5
Profit share of Reema’s = 1,12,000/-
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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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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