Question

Kamal and Kapil are partners having fixed capitals of $Rs.5,00,000$ each as on 31st March, 2017. Kamal introduced further captial of $Rs.1,00,000$ on 1st October, 2017 whereas Kapil withdrew $Rs.1,00,000$; on 1st October, 2017 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned net profit of $Rs.6,00,000$ for the year ended 31st March, 2018.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account

Particulars	Amount	Particulars	Amount
To Interest on Capital Kamal = 55,000 Kapil = 45,000	1,00,000	By Net Profit	6,00,000
To Partners Capital A/c Kamal = 2,50,000 Kapil = 2,50,000	5,00,000
	6,00,000		6,00,000

Calculation of Interest on Capital

Kamal:- Interest on 5,00,000 = 50,000

(5,00,000*10%)

Add: Interest on additional capital

(1,00,000*10%*1/2) = 5,000

Total Interest on Capital = 55,000

Kapil: Interest on 4,00,000 = 40,000

(4,00,000*10%)

Add:Interest on 1,00,000 from 1.4.2017

to 1/10/2017 = 5,000

Total interest on capital = 45,000