Question

A and Bare parmers sharing profits equally their capitals at end of 2020 are 3.50,000 and 32,20,000
respectively. During the year ended 31 Dec. 2020, A's and B's drawing were 320,000 and 15,000
respectively: Interest on drawing debited to them ware 1,000 and 750 respectively. Profits (before
allowing interest on capital but after charging interest on drawings) during the year were 40,000.
Calculate interest on capital @ 10% pa for year ended 31 Dec 2020.​

Answer 1

Explanation:

Profit And Loss Account

Particulars Amount Particulars Amount

To Manager;s

commission

(15000*5/100) 750 By profit before B's Salary

(12500+2500) 15000

To Net profit T/f to

P/L Appropriation

Account 14250

Total 15000 Total 15000

Profit And Loss Appropriation Account

Particulars Amount Particulars Amount

To Interest on capital

A = 50000*6% = 3000

B=30000*6% = 1800 4800 By net profit 14250

B's Salary 2500

To profit T/f to

A's Capital A/c = 4170

B's Capital A/c = 2780 6950

Total 14250 Total 14250