Question

Naresh and Sukesh are partners with capitals of ₹ 3,00,000 each as on 31st March, 2019. Naresh had withdrawn ₹ 50,000 against capital on 1st October, 2018 and also ₹ 1,00,000 besides the drawings against capital. Sukesh also had drawings of ₹ 1,00,000.
Interest on capital is to be allowed @ 10% p.a.
Net profit for the year was ₹ 2,00,000, which is yet to be distributed.
Pass the Journal entries for interest on capital and distribution of profit.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2019
March 31	Profit & Loss Appropriation A/c	Dr.		82,500
	To Naresh’s Capital A/c				42,500
	To Sukesh’s Capital A/c				40,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)
	Profit & Loss Appropriation A/c	Dr.		1,17,500
	To Naresh’s Capital A/c				58,750
	To Sukesh’s Capital A/c				58,750
	(Profit transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Opening Capital:

Particulars	Naresh	Sukesh
Capital at the end	3,00,000	3,00,000
Add: Drawings out of capital	50,000	-
Add: Drawings against profit	1,00,000	1,00,000
Capital at the beginning	4,50,000	4,00,000

WN2: Calculation of Interest on Capital

$\begin{array}{l}\text{Naresh}=\frac{4,50,000\times 10\times 6}{100\times 12}+\frac{4,00,000\times 10\times 6}{100\times 12}=\text{Rs 42,500}\\ \text{Sukesh}=\frac{4,00,000\times 10}{100}=\text{Rs 40,000}\end{array}$