Question

Rudra and Dimple were partners in the firm. Rudra had given a guarantee that the firm will earn a minimum profit of ₹ 4,50,000 annually.

Rudra advanced a loan of ₹ 3,50,000 to the firm on 1st April, 2025, which was settled on 30th November, 2025.

Dimple took a loan of ₹ 1,00,000 from the firm on 1st January, 2026.

Manager of the firm, Raja is to be allowed a commission of 5% on net profit earned by the firm after charging his commission. Dimple was allowed a Rent of ₹ 7,000 per month for the office space provided by her to the firm alongwith a salary of ₹ 72,000 per Quarter.

The salary of Rudra was fixed at ₹ 16,000 per month.

The profit earned by the frim for the year ending 31st March, 2026 before considering any of the above provisions was ₹ 5,44,250.

Pass Journal Entries for the above mentioned transactions.

Answer 1

Books of Rudra and Dimple JOURNAL ENTRIES
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2025
April 1	Bank A/c    ....Dr.		3,50,000
	To Loan from Rudra A/c			3,50,000
	(Loan taken from Rudra)
Nov. 30	Interest on Loan from Rudra A/c      ....Dr.		14,000
	To Loan from Rudra A/c			14,000
	(Interest provided on Loan from Rudra)
"	Loan from Rudra A/c   ....Dr.		3,64,000
	To Bank A/c			3,64,000
	(Loan from Rudra A/c settled)
2026
Jan. 1	Loan to Dimple A/c  ....Dr.		1,00,000
	To Bank A/c			1,00,000
	(Loan taken by Dimple from the firm)
March 31	Rent A/c    .....Dr.		84,000
	To Dimple's Capital A/c			84,000
	(Rent provided for the whole year)
"	Profit & Loss A/c    ....Dr.		84,000
	To Rent A/c			84,000
	(Rent A/c closed)
"	Profit & Loss A/c  ....Dr.		14,000
	To Interest on Loan from Rudra A/c			14,000
	(Interest on loan from Rudra A/c closed)
"	Manager's Commission A/c \[(4,46,250 \times \frac{5}{105})\]    ....Dr.		21,250
	To Outstanding Manager's Commission A/c			21,250
	(Manager's commission allowed)
"	Profit & Loss A/c   ...Dr.		4,25,000
	To Profit & Loss Appropriation A/c			4,25,000
	(Net profit transferred)
"	Rudra's Capital A/c .  ....Dr.		25,000
	To Profit & Loss Appropriation A/c			25,000
	(Shortfall in guaranteed profit debited to Rudra's Capital A/c)
"	Salary to Partners A/c    ...Dr.		4,50,000
	To Rudra's Capital A/c			1,80,000
	To Dimple's Capital A/c			2,70,000
	(Salary to Partners allowed)
"	Profit & Loss Appropriation A/c      .....Dr.		4,50,000
	To Salary to Partners A/c			4,50,000
	(Salary to Partners A/c closed)

Working Note:

(i) In the absence of special agreement, No interest will be charged on loan given to Dimple.

(ii)                                                                                                  

Dr.	PROFIT & LOSS A/C		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Rent A/c	84,000	By Balance b/d
To Interest on Loan from Rudra A/c	14,000	(Profit for the year)	5,44,250
To Manager’s Commission A/c	21,250
To Profit & Loss Appropriation A/c	4,25,000
Total	5,44,250	Total	5,44,250

                                                                        

Dr.	PROFIT & LOSS APPROPRIATION A/C			Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)
To Salary to Partners A/c			By Profit & Loss A/c (Net Profit)	4,25,000
Rudra	1,80,000		By Rudra’s Capital A/c (shortfall in guarantee)	25,000
Dimple	2,70,000	4,50,000
Total		4,50,000	Total	4,50,000

(iii) Since net profit earned by the firm is ₹ 4,25,000 and minimum profit of the firm as guaranteed by Rudra is ₹ 4,50,000, the shortfall of ₹ 25,000 was made up by debiting Rudra’s Capital A/c.

(iv) The amount of salary of both the partners is ₹ 4,80,000 (i.e., ₹ 1,92,000 + ₹ 2,88,000) which is more than the profit available for distribution ₹ 4,50,000. Hence, the profit will be distributed in the ratio of salary i.e., 1,92,000 : 2,88,000 or 2 : 3.

Therefore, Rudra will get

$4,50,000 \times \frac{2}{5} = ₹ 1,80,000$

= $4,50,000 \times \frac{3}{5} = ₹ 2,70,000$