Question

Julie, Jenny, and Sadiq were partners in a firm. On 1^st April, 2024, the firm’s book showed the following balances:

Particulars	Julie (₹)	Jenny (₹)	Sadiq (₹)
Capital Account	4,50,000	1,50,000	2,50,000
Current Account	50,000 (Cr)	20,000 (Cr)	30,000 (Dr)

• On 1^st July, 2024, Julie gave a loan of ₹ 1,00,000 to the firm.
• On 1^st October, 2024, the firm took Jenny’s premises on a rental basis and agreed to pay ₹ 5,000 per month.

Their Partnership Deed provided the following:

1. Interest on Capital to be allowed @ 8% per annum.
2. Interest on Current Account to be allowed/charged @ 10% per annum.
3. Interest on Drawings to be charged @ 6% per annum.
4. 10% of the net profit is to be transferred to the General Reserve.

Jenny withdrew ₹ 4,000 at the end of each month starting 30^th from April, 2024, and Sadiq withdrew ₹ 4,000 at the beginning of each month starting from 1^st October, 2024.
After considering interest on Julie’s loan and rent allowed to Jenny, the net profit of the firm for the year ended 31^st March, 2025, stood at ₹ 2,60,000.

You are required to:

1. Prepare Profit and Loss Appropriation Account for the year ended 31^st March, 2025.
2. Prepare Julie’s Loan Account.
3. Record the closing entry for rent allowed to Jenny.

Answer 1

(i)

Dr.	Profit and Loss Appropriation Account For the year ended 31st March, 2025				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		68,000	By Profit & Loss A/c		2,60,000
Julie	36,000		By Interest on Sadiq’s Current A/c		3,000
Jenny	12,000		By Interest on Drawings:		1,740
Sadiq	20,000		Jenny	1,320
To Interest on Current A/c:		7,000	Sadiq	420
Julie	5,000
Jenny	2,000
To General Reserve		26,000
To Profit transferred to Current A/c		1,63,740
Julie	54,580
Jenny	54,580
Sadiq	54,580
		2,64,740			2,64,740

(ii)

Dr.	Julie’s Loan Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2025			2024
Mar 31	To Balance c/d	1,04,500	Jul 1	By Bank A/c	1,00,000
			2025
			Mar 31	By Interest on Loan A/c	4,500
		1,04,500			1,04,500

(iii) Closing Entry for Rent allowed to Jenny

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
Mar 31	Profit and Loss Account   ... Dr.		30,000	-
	To Rent Account		-	30,000
	(Being the rent for 6 months @ ₹ 5,000 pm closed by transfer to P&L A/c)

Working Note:

1. Interest on Capital:

Julie = `4,50,000 xx 8/100`

= 36,000

Jenny = `1,50,000 xx 8/100`

= 12,000

Sadiq = `2,50,000 xx 8/100`

= 20,000

Total = 36,000 + 12,000 + 20,000

= ₹ 68,000

2. Interest on Current Account (Allowed/Charged @ 10%):

Julie = `50,000 xx 10/100`

= 5,000

Jenny = `20,000 xx 10/100`

= 2,000

Sadiq = `30,000 xx 10/100`

= 3,000

3. Interest on Drawings @ 6%:

Jenny:

Total Drawings = 4,000 × 12

= 48,000

Average Period (End of month for 12 months) = 5.5 months

`48,000 xx 6/100 xx 5.5/12`

= 1,320

Sadiq:

Total Drawings = 4,000 × 6 (From Oct to March)

= 24,000

Average Period ((Beginning of month for 6 months) = 3.5 months

`24,000 xx 6/100 xx 3.5/12`

= 420

Total Interest on Drawings = 1,320 + 420

= ₹ 1,740

4. General Reserve = `2,60,000 xx 10/100`

= 26,000