Question

4. Ram and shyam are partners in a firm whose capitals on 1*
junuary 2018 were rs. 25000 and rs. 20000 respectively, They
are allowed intrest on capital @ 8% and intrest on drawing is
charged @ 12% p.a.Ram gave rs. 10000 to the firm as loan on
1 july 2018 shyam is entitled to get an annual salary of rs.
5000 intrests charged on their drawings were rs. 600 and rs.
respectively. The profit for the year ended on 31*
500
December 2018 before making above adjustments was rs
25000. Prepare profit and lose appropriation account for th
year 2018.​

Answer 1

Answer:

As the partners capital are fixed,we have to pass entry for additional 1% through current Account.

The following entries should be passes:-

Profit and Loss Appropriation A/c    Dr.   6000

    To Interest on Capital A/c                                 6000

(Interest of additional 1% debited to P&L Appropriation Account)

Interest On capital A/c Dr.  6000

     To Ram's Current A/c                3000

     To Shyam's Current A/c            1000

     To Mohan's Current A/c            2000

(Being interest credited to Current account of partners)

Profit and Loss Appropriation A/c Dr (Notes)   1,90,000

        To Ram's Current A/c                                                  76,000

        To Shyam's Current A/c                                              38,000

        To Mohan's Current A/c                                              76,000

(Being profits distributed to partners)

 

Notes: Profit before Interest      = 2,50.000

           Less:Interest on Capital  = (60,000)

       Profit after interest              = 1,90,000