Question

Ram and shyam are partners in a firm whose capitals on 1st

junuary 2018 were rs. 25000 and rs. 20000 respectively, They

are allowed intrest on capital @ 8% and intrest on drawing is

charged @ 12% p.a.Ram gave rs. 10000 to the firm as loan on

1

st july 2018 shyam is entitled to get an annual salary of rs.

5000 intrests charged on their drawings were rs. 600 and rs.

500 respectively. The profit for the year ended on 31st

December 2018 before making above adjustments was rs.

25000. Prepare profit and lose appropriation account for the

year 2018.​

Answer 1

Explanation:

Calculation of Capital balance in the beginning:

Particulars Ram Mohan

Capitals at the end of the year 24000 18000

Less: Profit already credited (8000) (8000)

Add: Drawings already debited 4000 6000

Capital at the beginning of the year 20000 16000

Note: Interest on capital is always calculated on the opening balance of the partner's capital.

Ram's interest on capital= 20000 * 5/100

= 1000

Mohan's interest on capital= 16000 * 5/100

= 800