Question

Raj, Mehak, and Divya were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. Their respective capitals were ₹ 6,00,000, ₹ 4,00,000 and ₹ 2,00,000. The partnership deed provided for the following:

1. Interest on capital @ 8% per annum.
2. Interest on drawings @ 6% per annum.
3. Interest on the partner’s loan to the firm @ 5% per annum.

During the year, Raj had withdrawn ₹ 12,000 on 1st October, 2021, while Mehak withdrew ₹ 60,000 on 1st December, 2021.

On 1st January, 2022, Divya had given a loan of ₹ 1,20,000 to the firm.

Pass the necessary journal entries in the books of the firm for the following transactions for the year ended 31st March, 2022:

1. Allowing interest on Raj’s capital.
2. Charging interest on Mehak’s drawings.
3. Providing interest on a loan given to the firm by Divya.

Also pass transfer entries in the Profit and Loss Account/Profit and Loss Appropriation Account, as the case may be.

Answer 1

i. Interest on Raj’s capital = `6,00,000 xx 8/100`

= ₹ 48,000

ii. Interest on Mehak’s drawings = `60,000 xx 6/100 xx 4/12`

= ₹ 1,200

iii. Interest on a loan = `1,20,000 xx 5/100 xx 3/12`

= ₹ 1,500

Journal Entries
Date	Particulars	L.F.	Amount (₹)	Amount (₹)
1.	Profit and Loss A/c   ...Dr.		1,500	-
	To Interest on loan from Divya A/c		-	1,500
	(Being interest on Divya’s loan to the firm at 5% per annum on ₹ 1,20,000 for 3 months.)
2.	Interest on capital A/c   ...Dr.		48,000	-
	To Raja’s Capital A/c		-	48,000
	(Being interest on Raj’s capital at 8% per annum on ₹ 6,00,000 for 12 months.)
3.	Profit and Loss Appropriation A/c   ...Dr.		48,000	-
	To Interest on capital A/c		-	48,000
	(Being the transfer of interest on Raj’s capital to Profit and Loss Appropriation Account.)
4.	Mehak’s Capital A/c   ...Dr.		1,200	-
	To Interest on Drawings A/c		-	1,200
	(Being interest on Mehak’s drawings at 6% per annum on ₹ 60,000 for 3 months.)
5.	Interest on Drawings A/c   ...Dr.		1,200	-
	To Profit and Loss Appropriation A/c		-	1,200
	(Being Transfer of interest on Mehak’s drawings to Profit and Loss Appropriation Account.)
6.	Interest on loan by Divya A/c   ...Dr.		1,500	-
	To Loan by Divya A/c		-	1,500
	(Being Interest on loan provided @ 5% p.a. for 3 months.)