Question

Akhil, Nitin and Suraj are partners in a firm. Their terms of agreement are as follows:

Particulars	Akhil	Nitin	Suraj
Interest on Capital to be allowed @	6% per annum	6% per annum	6% per annum
Interest on Drawings (except salary) to be charged @	4% per annum	4% per annum	4% per annum
Salary @	-	₹ 1,000 per month	-
Commission on the net profits of the firm after charging such commission @	10%	-	-

On 1st April, 2022, their capitals were:

	₹
Akhil	1,50,000
Nitin	2,00,000
Suraj	60,000 (Dr.)

On 1st December 2022, Akhil introduced further capital of ₹ 40,000.

The drawings of the partners were:

• Suraj withdrew	₹ 3,000 on 1st August, 2022
  	₹ 6,000 on 1st December, 2022

• Nitin withdrew only his salary.

Akhil withdrew a certain fixed amount at the beginning of every month, on which he was charged an interest of ₹ 520 at the end of the year, at the rate mentioned in the deed.

The profits of the firm for the financial year 2022-23, before any of the above adjustments, were ₹ 2,75,000.

You are required to:

1. Calculate the drawings made by Akhil every month.
2. Pass the journal entry for capital introduced by Akhil.
3. Prepare the Profit and Loss Appropriation Account of the firm for the year 2022-23.

Answer 1

(i) Let the total drawings during the year be x.

Interest on Drawings = `"Total Drawings" xx "Rate of Interest"/100 xx 6.5/12`

₹ 520 = `x xx 4/100 xx 6.5/12`

₹ 520 = `(26x)/(1,200)`

26x = 1,200 × 520

x = `(1,200 xx 520)/26`

Total Drawings (x) = ₹ 24,000

Monthly Drawings = `(24,000)/12`

= ₹ 2,000

(ii)

Journal entry
Date	Particulars	L.F.	Dr. Amount	Cr. Amount
2022
Dec. 1	Bank A/c    ...Dr.		40,000	-
	To Akhil’s Capital A/c		-	40,000
	(Being Further capital introduced by Akhil.)

(iii)

Dr.	Profit and Loss Appropriation Account For the year ended 31st March, 2023				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		21,800	By Profit and Loss A/c		2,75,000
Akhil	9,800		By Interest on Drawings:		680
Nitin	12,000		Akhil	520
To Salary (Nitin)		12,000	Suraj	160
To Corrimission (Akhil) `(10/110 xx 2,75,000)`		25,000
To profit transferred to capital A/cs:		2,16,880
Akhil	72,293
Nitin	72,293
Suraj	72,294
		2,75,680			2,75,680

Working Note:
1.

Interest on Akhil’s Capital:	₹
6% on ₹ 1,50,000	9,000
6% on ₹ 40,000 for 4 months	800
	9,800

2.

Interest on Suraj’s Drawings:	₹
On ₹ 3,000 for 8 months @ 4% p.a.	80
On ₹ 6,000 for 4 months @ 4% p.a.	80
	160