Question 20 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 20 Chapter 2 of +2-A

Question 20  Chapter 2 of +2-A

20. 2019 after debit of drawings during the year of ₹ 1,50,000 and ₹ 1,00,000 respectively. Net profit for the year ended 31st March, 2019 was ₹ 5,00,000. Interest on capital is to be allowed @ 10% p.a.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

 

The solution of Question 20 Chapter 2 of +2-A

Date Particulars
L.F. Debit Credit
April 1 Profit and Loss Appropriation A/c Dr   1,35,000  
  To Ashish’s Capital A/c       65,000
  To Aakash’s Capital A/c       70,000
  (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   5,00,000
Ashish’s Capital A/c 65,000        
Ashish’s Capital A/c 70,000 1,35,000      
           
To Profit Transferred to *2          
Ashish’s Current A/c 2,19,000        
Ashish’s Current A/c 1,46,000 3,65,000      
    5,00,000       5,00,000

Working Note:

*1: -Calculation of Total Interest on Ashish’s Capital, and Aakash’s Capital

In the Question there closing capital is given. So, we have to calculate opening capital balance as shown below: –
Particulars
Amount Amount
Capital Balance at the end of the year 5,00,000 6,00,000
Add: – total drawing during the year 1,50,000 1,00,000
Capital Balance at the beginning of the year 6,50,000 7,00,000

Interest on Capital = Capital X Rate of Interest X Period
Rate of Interest = 10%
Period = Whole year(So we don’t need to add period in the formula)
Ashish’s Capital = 5,00,000
= 6,50,000 X 10/100
Total Interest on Ashish’s Capital = 65,000/-
Aakash’s Capital = 6,00,000
Rate of Interest = 5%
= 7,00,000 X 10/100
Total Interest on Aakash’s Capital = 70,000/-
*2: -Calculation of share of profit of Ashish’s and Aakash’s
Profit-Sharing Ratio = 3: 2
Net Profit after interest= 3,65,000
= 3,65,000 X 3/5
Profit share of Ashish’s = 2,19,000/-
= 3,65,000 X 2/5
The profit share of Aakash’s = 1,46,000/-


Thanks, Please Like and share with your friends  

Comment if you have any questions.

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)

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

2 Book 1 min - Question 20 Chapter 2 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.