Question

Kamal and Kapil are partners having fixed capitals of ₹ 5,00,000 each as on 31st March, 2018. Kamal introduced further capital of ₹ 1,00,000 on 1st October, 2018 whereas Kapil withdrew ₹ 1,00,000 on 1st October, 2018 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned net profit of ₹ 6,00,000 for the year ended 31st March 2019.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019
March 31	Profit & Loss Appropriation A/c	Dr.		1,00,000
	To Kamal’s Current A/c				55,000
	To Kapil’s Current A/c				45,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

Profit and Loss Appropriation Account for the year ended 31 March 2019
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Interest on Capital A/c:			Profit and Loss A/c	6,00,000
Kamal	55,000
Kapil	45,000	1,00,000
Profit transferred to:
Kamal’s Current A/c	2,50,000
Kapil’s Current A/c	2,50,000	5,00,000
		6,00,000		6,00,000

Working Notes:

WN1: Calculation of Interest on Capital:

$\begin{array}{l}\mathrm{Kamal}=\left(\frac{5,00,000\times 10\times 6}{100\times 12}\right)+\left(\frac{6,00,000\times 10\times 6}{100\times 12}\right)=\mathrm{Rs}55,000\\ \mathrm{Kapil}=\left(\frac{5,00,000\times 10\times 6}{100\times 12}\right)+\left(\frac{4,00,000\times 10\times 6}{100\times 12}\right)=\mathrm{Rs}45,000\end{array}$