1. Mukut, Kirit and Rahul are partners. They have no deed of partnership, but agree, after the division
of profits, that the capital of each be credited with interest at 5% per annum for the year which has
just elapsed.
The capitals are fixed at : 37,500 for Mukut, 75,000 for Kirit and * 4,500 for Rahul.
Show how the interest on capital may be accounted for by entries in the partners' current accounts
only.
Answers
Explanation:
ANSWER
Profit & Loss Appropriation A/c
For the year ended 31st March 2017
Particulars
Rs.
Rs.
Particulars
Rs.
Rs.
To Interest on capital
By Profit
3,06,000
Moli
25,000
Interest on B’s loan
6,000
3,00,000
Bhola
40,000
By Interest on Drawings
Raj
20,000
85,000
Moli
1,800
To Salary (Moli)
4,000
Bhola
3,300
To Commission (Bhola)
30,000
Raj
2,400
7,500
To Profit transferred to:
Moli’s Current
19,250
Bhola’s Current
19,250
Raj Current
1,50,000
1,88,500
3,07,500
3,07,500
Partner’s Current A/c
Particulars
Moli
Bhola
Raj
Particulars
Moli
Bhola
Raj
To Drawings
40,000
60,000
80,000
By Int. on capital
25,000
40,000
20,000
To Int. on draw.
1,800
3,300
2,400
By Salary
4,000
-
-
To Balance c/d
6,450
25,950
87,600
By Commission
-
30,000
-
By P/L App (Profit)
19,250
19,250
1,50,000
48,250
89,250
1,70,000
48,250
89,250
1,70,000
Partner’s Capital A/c
Particulars
Moli
Bhola
Raj
Particulars
Moli
Bhola
Raj
To Balance c/d
5,00,000
8,00,000
4,00,000
By Balance b/d
5,00,000
8,00,000
4,00,000
5,00,000
8,00,000
4,00,000
5,00,000
8,00,000
4,00,000
Working Note:
Mukut= 5,00,000 X 5/100 = 25,000
kirit = 8,00,000 X 5/100 = 40,000
Rahul = 4,00,000 X 5/100 = 20,000
Calculation of interest on Bhola’s loan:
1,00,000 X 6/100 = 6,000
Calculation of interest on drawings:
Mukut = (10,000 X 4) X 12/100 X 4.5/12 = 40,000 X 12/100 X 4.5/12 = 1,800
kirit = (5,000 X 12) X 12/100 X 5.5/12 = 60,000 X 12/100 X 5.5/12 = 3,300
Rahul = (40,000 X 2) X 12/100 X 3/12 = 80,000 X 12/100 X 3/12 = 2,400
Calculation of commission of kirit:
(3,06,000 – 6,000) X 10/100 = 30,000
Distribution of Profit:
Moli = 1,88,500 X 3/10 = 56,550 -37,300 = 19,250
Bhola = 1,88,500 X 3/10 = 56,550 – 37,300 = 19,250
Raj = 1,88,500 X 4/10 = 75,400 + 74, 600 = 1,50,000
Deficiency of Raj’s Profit Rs. 74,600 borne by Moli and Bhola in 3 : 3 (1 : 1).
Moli = 74,600 X ½ = -37,300
Bhola = 74,600 X ½ = 37,300