Question

Amit and Iqbal are partners in a business. Their partnership deed contained the following clauses:

1. Interest on drawings to be charged @ 6% per annum.
2. Amit to get a salary of ₹ 1,000 per month.
3. Iqbal to get an annual commission of ₹ 10,000.
4. Any partner taking a loan from the firm to be charged interest on it @ 8% per annum.

Additional Information	Amit (₹)	Iqbal (₹)
Drawings made on 1st May, 2022	-	30,000
Borrowed from the firm on 1st July, 2022	10,000	-
Capital Balances on 31st March, 2023	75,000	10,000 (Dr.)
Divisible profits for the year 2022-23 credited to the Partner’s Capital Accounts	9,000	9,000

You are required to:

1. Give the closing journal entry for interest on the loan due from Amit.
2. Find the opening capital balance of the partners on 1^st April, 2022, by preparing the Partner’s Capital Accounts for the year 2022-23.

Answer 1

i.

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2023
March 31	Interest on Amit’s Ioan A/c   ...Dr.		600	-
	To Profit and Loss A/c		-	600
	(Being the closing entry for interest on Amit’s loan.)

Calculation on Interest on Amit’s loan:

= `10,000 xx 8/100 xx 9/12`

= ₹ 600

ii.

Dr.	Partner’s Capital Accounts				Cr.
Particulars	Amit (₹)	Iqbal (₹)	Particulars	Amit (₹)	Iqbal (₹)
To Drawings A/c	-	30,000	By Balance b/d (balancing figure)	54,600	2,650
To Interest on drawings A/c `(30,000 xx 6/12 xx 11/12)`	-	1,650	By Profit and Loss Appropriation A/c	9,000	9,000
To Interest on loan from the Firm	600	-	By Amit’s Salary A/c	12,000	-
			By Iqbal’s Commission A/c	-	10,000
To Balance c/d	75,000	-	By Balance c/d	-	10,000
	75,600	31,650		75,600	31,650

Thus, the opening capital balances of Amit and Iqbal as of 1st April 2022 are:

Amit = ₹ 54,600

Iqbal = ₹ 2,650