Question

Amar and Bimal entered into partnership on 1st April, 2017 contributing ₹ 1,50,000 and ₹ 2,50,000 respecitvely towards capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of ₹ 1,00,000 for the year ended 31st March 2018.
Pass the Journal entry for interest on capital.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Profit & Loss Appropriation A/c	Dr.		40,000
	To Amar’s Current A/c				15,000
	To Bimal’s Current A/c				25,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

Working Notes:

WN1: Calculation of Interest on Capital:

$\begin{array}{l}\text{Amar's\hspace{0.17em}Interest\hspace{0.17em}on\hspace{0.17em}Capital\hspace{0.17em}=\hspace{0.17em}1,50,000}\times \frac{10}{100}=\text{Rs 15,000}\\ \text{Bimal's\hspace{0.17em}Interest\hspace{0.17em}on\hspace{0.17em}Capital\hspace{0.17em}=\hspace{0.17em}}2\text{,50,000}\times \frac{10}{100}=\text{Rs 25,000}\end{array}$