Ashok and Akash are partners with capitals of Rs.80,000 and 100,000 respectively. Their Partnership deed provided for the following. (a) They will share profits equally. (b) Interest will be allowed on capital @12%p.a (c) Interest will be charged on drawings@6% pa (d) Salary to be paid to Akash @Rs.600 per month. (e)Ashok and Akash withdrew Rs.8000 and Rs.6000 respectively during the year. Profit for the year ending 31st March 2016 was 56,000. Prepare Profit and Loss Appropriation Account.
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Account
Interest on capital
Ashish = 50,000
Aakash = 60,000 1,10,000 Net Profit 5,00,000
Share of profits
Ashish = 2,43,000
Aakash = 1,62,000 405000 Interest on Drawings
Ashish = 1,50,000*6% = 9,000
Aakash = 1,00,000*6% = 6,000 15,000
Total 5,15,000 Total 5,15,000
Journal Entry for Interest on Capital
Profit and Loss Appropriation Account Dr. 1,10,000
To Ashish Capital A/c 50,000
To Aakash Capital A/c 60,000
(Being Interest on capital credited to partner's capital account)
Assuming that partnership deed exist and it contains provision regarding charge of interest on drawings @ 6%p.a.
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