Question

The capital accounts of Moli and Golu showed balances of Rs 40,000 and Rs 20,000 as on April 01, 2006. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% pa and interest on drawings, @ 12 pa. Golu advanced a loan of Rs 10,000 to the firm on August 1, 2006.

During the year, Moli withdrew Rs 1,000 per month at the beginning of every month whereas Golu withdrew Rs 1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was Rs 20,950. Calculate interest on drawings show distribution of profits and prepare partner's capital accounts.

Answer 1

$\begin{array}{cccccccccccccccc}\text{Dr}& & & & & & \text{Profit and Loss Appropriation Account}& & & & & & & & & \text{Cr}\end{array}$
$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Interest on Capital}& & & \text{Profit and Loss}& & 20,950\\ \text{Moli's Capital A/c}& 4,000& & \text{Interest on Drawings}& & \\ \text{Golu's Capital A/c}& \underset{–}{2,000}& 6,000& \text{Moli's Capital A/c}& 780& \\ \text{Interest on Golu's Loan}& & & \text{Golu's Capital A/c}& \underset{–}{660}& 1,140\\ 10,000\times \frac{6}{100}\times \frac{8}{12}& & 400& & & \\ \text{Profit Transferred to}& & & & & \\ \text{Moli's Capital A/c}& 9,594& & & & \\ \text{Golu's Capital A/c}& 6,396& \underset{–}{15,990}& & & \\ & & \underset{–}{\underset{–}{22,390}}& & & \overline{\underset{–}{\underset{–}{22,390}}}\end{array}$
$\begin{array}{ccccccccccccccccc}\text{Dr}& & & & & & & \text{Partners' Capital Account}& & & & & & & & & \text{Cr}\end{array}$
$\begin{array}{cccccc}\text{Particulars}& \text{Moli}& \text{Golu}& \text{Particulars}& \text{Moli}& \text{Golu}\\ \text{Drawings}& 12,000& 12,000& \text{Balance B/d}& 40,000& 20,000\\ \text{Interest on Drawings}& 780& 660& \text{Interest on Capital}& 4,000& 2,000\\ \text{Balance c/d}& 40,814& 15,736& \text{Profit and Loss}& 9,594& 6,396\\ & & & \text{Appropriation A/c}& & \\ & \underset{–}{\overline{\underset{–}{53,594}}}& \underset{–}{\overline{\underset{–}{28,396}}}& & \underset{–}{\overline{\underset{–}{53,594}}}& \underset{–}{\overline{\underset{–}{28,396}}}\end{array}$
Working Note
Calculation of Interest on Drawings
$\Rightarrow \text{Total Drawings}\times \text{Rate}\times \frac{\text{Average Period}}{12}$
Moli $\Rightarrow 12,000\times \frac{12}{100}\times \frac{6\frac{1}{2}}{12}=Rs780$
Golu $\Rightarrow 12,000\times \frac{12}{100}\times \frac{5\frac{1}{2}}{12}=Rs660$
Note If drawings is done at the beginning of every month, then interest on drawings is calculated of $6\frac{1}{2}$ months.
If drawings is done at the ending of every month, then interest on drawings is calculated of $5\frac{1}{2}$ months.
If rate of interest on loan is not given, then it will be charged always 6%.