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Question
Chhavi and Neha were partners in firm sharing profits and losses equally. Chhavi withdrew a fixed amount at the beginning of each quarter. Interest on drawings is charged @ 6% p.a. At the end of the year, interest on Chhavi's drawings amounted to ₹ 900. Pass necessary journal entry for charging interest on drawings.
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Solution
In the books of Chhavi and Neha
Journal
| Date | Particulars | L.F. |
Debit Amount ₹ |
Credit Amount ₹ |
|
| Chhavi’s Capital A/c | Dr. | 900 | |||
| To Interest on Drawings A/c | 900 | ||||
| (Being interest on drawings charged) | |||||
| Interest on Drawings A/c | Dr. | 900 | |||
| To Profit & Loss Appropriation A/c | 900 | ||||
| (Being interest on drawings transferred to profit & loss account) |
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