Question

Anita and Ankita are partners sharing profits equally. Their capitals, maintained following Fluctuating Capital Accounts Method, as on 31st March, 2017 were ₹ 5,00,000 and ₹ 4,00,000 respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. The firm earned net profit of ₹ 2,00,000 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.		90,000
	To Anita’s Capital A/c				50,000
	To Ankita’s Capital A/c				40,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

Working Notes:

WN1: Calculation of Interest on Capital

$\begin{array}{l}\text{Anita's\hspace{0.17em}Interest\hspace{0.17em}on\hspace{0.17em}Capital\hspace{0.17em}=\hspace{0.17em}}5\text{,00,000}\times \frac{10}{100}=\text{Rs 50,000}\\ \text{Ankita's\hspace{0.17em}Interest\hspace{0.17em}on\hspace{0.17em}Capital\hspace{0.17em}=\hspace{0.17em}}4\text{,00,000}\times \frac{10}{100}=\text{Rs 40,000}\end{array}$