Question

Naresh and Sukesh are partners with capitals of ₹ 3,00,000 each as on 31st March, 2018. Naresh had withdrawn ₹ 50,000 against capital on 1st October, 2017 and also ₹ 1,00,000 besides the drawings against capital. Sukesh also had drawings of ₹ 1,00,000. Interest on capital is to be allowed @ 10% p.a. Net profit for the year was ₹ 2,00,000, which is yet to be distributed. Pass the journal entries for interest on capital and distribution of profit.

Answer 1

Journal entries are given below.

Explanation:

For Naresh:

Capital at the year-end = Rs. 3,00,000

Amount he withdrew = Rs, 50,000

Net profit is 2,00,000 which is distributed equally, so Naresh’s amount will be = Rs, 1,00,000

Total = 4,50,000 (3,00,000 + 50,000 + 1,00,000)

For Sukesh:

Capital at the year-end = Rs. 3,00,000

Net profit is 2,00,000 which is distributed equally, so Sukesh’s amount will be = Rs, 1,00,000

Total = 4,00,000 (3,00,000 + 1,00,000)

For calculation of interest:

Naresh

$= 4,50,000 \times \frac {10}{100} \times \frac {6}{12}+ 4,00,000 \times \frac {10}{100}\times \frac {6}{12}\\\\ = Rs, 42,500$

Sukesh

$= 4,00,000 \times \frac {10}{100} \times \frac {6}{12}\\\\= Rs. 40,000$