Question

What is the adjustment and closing entry required at the time of finalisation of accounts for interest on capital allowed to partners, assuming that accounts are maintained under a fixed capital system?

Answer 1

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(i)	Adjusting Entry:
	Interest on Capital A/c   ...Dr.		xxx
	To Partner’s Current A/c			xxx
	(Being interest on Capital at .....% p.a.)
(ii)	Closing Entry:
	Profit and Loss Appropriation A/c   ...Dr.		xxx
	To Interest on Capital A/c			xxx
	(Being transfer of interest on capital.)