A and B are partners sharing profits and losses in the ratio of 3:1.Their capitals at the end of the year 2005-2006 were RS. 150000 and 75000.During the year 2005-2006 ,A drawings were 20000 and B drawings were 5000 , which had been duly debited to partners capitals account. profit before charging interest on capital for the year was 16000.The same had also been debited in their profit sharing ratio. B had brought additional capital of 16000 on October 1,2005.Calculate interest on capital,@12 percent for the year 2005.2006.
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PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars AmountTo Int on capital
A=50000*6%
= 3000
B=30,000*6%
= 1800 4800 By net profit 50000To Commission
A=300000*2% 6000 To Salary
B=500*12 6000 To Commission
B(notes) 1581 To profits t/f to
A's Capital A/c= 23714
B's Capital A/c=7905 31619 Total 50000 Total 50000 PARTNERS CAPITAL ACCOUNT Particulars A B ParticularsA B To drawings 8000 6000 By bal b/d 50000 30000 By Int on
capital3000 1800 By commission 6000 1581 To bal c/d 74714 35286 By P/L app A/c 23714 7905 Total 82714 41286 Total 82714 41286 Notes:- Commission to B= 5% of profits after all expenses including such commission
= 50,000-4800-6000-6000
= 33,200*5/105 = 1581.
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