Question

Write journal entry
Provide 10% interest on capital Rs 1,00,000

Answer 1

Answer:The journal entry would be as follows:

Date  Particulars                                  L.F.        Dr. (Rs.)          Cr. (Rs.)

          Interest on capital A/c Dr.                      10,000

                       To Capital A/c                                                     10,000

( Being Provide 10% interest on capital Rs 1,00,000)

Explanation:

Providing interest on capital is an expense for the business. According to the modern approach of accounting, Increase in expense is debited with 10% of Rs. 1,00,000 i.e Rs. 10,000.

Also, it would lead to an increase in capital invested by the owner. Capital, being an inside liability, is credited with the same amount.

Hope it helps you :)