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

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/cfor 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/-

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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. 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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