A and B entered into partnership on 1st April, 2014 without any partnership deed. They introduced capitals of Rs. 5,00,000 and Rs. 3,00,000 respectively. On 31st October, 2014, A advanced Rs. 2,00,000 by way of loan to the firm without any agreement as to interest.
The Profit and Loss Account for the year ended 31-03-2015 showed a profit of Rs. 4,30,000 but the partners could not agree upon the amount of interest on Loan to be charged and the basis of division of profits. Pass a Journal Entry for the distribution of the Profits between the partners and prepare the Capital A/cs of both the partners and Loan A/c of ‘A’.
Answers
Answer:
Profit and loss Appropriation A/c Dr. 4,25,000
To A's capital A/c 2,12,500
To B's capital A/c 2,12,500
(Being profit distributed equally)
PARTNERS CAPITAL ACCOUNTS
Particulars A B Particulars A B
To bal c/d 7,12,500 5,12,500 By bank a/c 5,00,000 3,00,000
By profit and loss App A/c 2,12,500 2,12,500
Total 7,12,500 5,12,500 Total 7,12,500 5,12,500
A's Loan Account
Particulars Amount Particulars Amount
To bal c/d 2,05,000 By bank A/c 2,00,000
By interest on A's loan 5000
Total 2,05,000 Total 2,05,000
Calculation of Interest on Loan
Interest on A's loan = 2,00,000*6%*5/12=5000
Interest on A's Loan A/c Dr. 5000
To A's loan A/c 5000
(Being interest on loan paid)
Profit and loss A/c Dr. 5000
To Interest on A's loan A/c 5000
(Being interest transferred to p&l A/c)
Explanation: