1.

Ashish and Aakash are partners sharing profit in the ratio of 3 : 2. Their Capital Accounts showed a credit balance of ₹ 5,00,000 and ₹ 6,00,000 respectively as on 31st March, 2018 after debit of drawings during the year of ₹ 1,50,000 and ₹ 1,00,000 respectively. Net profit for the year ended 31st March was ₹ 5,00,000. Interest on capital is to be allowed @ 10% p.a. Pass the journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Answer»

Entry and Profit and Loss APPROPRIATION calculation is calculated belowExplanation:Ashish’s capital at the END of the year = Rs. 5,00,000 DRAWINGS by Ashish = 1,50,000 Total capital for Ashish = 6,50,000 (5,00,000 + 1,50,000) Aakash’s capital at the end of the year = Rs. 6,00,000 Drawings = 1,00,000 Total capital for Aakash = Rs. 7,00,000 Calculation of Interest:Interest will be calculated for each one of them at the RATE of 10% per annum. Ashish’s interestAakash’s interest Total interest = 1,35,000 (65,000 + 70,000) Net profit of the company is 5,00,000. Interest on capital will be deducted by this amount to calculate the profit that will be transferred to each one’s account.  5,00,000 – 1,35,000 = Rs. 3,65,000 which will be DIVIDED with the ratio of 3:2 between the two. Calculation of Profit:Ashish’s Profit Aakash’ Profit



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