Question

Naresh and Sukesh are partners with capitals of $Rs.3,00,000$ each as on 31st March, 2018. Naresh had withdrawn $Rs.50,000$ against capital on 1st October, 2017 and also $Rs.1,00,000$ besides the drawings against capital. Sukesh also had drawings of $Rs.1,00,000$.
Interest on capital is to be allowed @ 10% p.a.
Net profit for the year was $Rs.2,00,000$, which is yet to be distributed.
Pass the Journal entries for interest on capital and distribution of profit.

Answer 1

Journal entries for Interest on Capital

Profit and Loss Appropriation A/c Dr.52,500

To Naresh Capital A/c 27,500

To Sukesh Capital A/c 25,000

(Being Interest on capital paid on partner's capital)

Assuming that there is no provision regarding interest on drawings.

Profit and Loss Appropriation A/c Dr 1,47,500

To Naresh Capital A/c 73,750

To Sukesh Capital A/c 73,750

(Being distribution of remaining profit equally)

Calculation of Interest On capital

Naresh : Interest On 2,50,000*10% = 25,000

Interest on 50,000*10%*1/2 = 2500

Sukesh : Interest on 2,00,000*10% = 20,000

Interest on 1,00,00*10%*1/2 = 5,000