Question

Hemant and Sameer are partners in a firm. On 1st December 2023, Hemant gave a loan to the firm of ₹ 5,00,000. On the same date, the firm gave a loan of ₹ 2,00,000 to Sameer. They do not have an agreement as to interest.

The firm earned a profit of ₹ 3,70,000 (before any interest) for the year ended 31st March, 2024. Pass journal entries for interest on loans and distribution of profit for the year ended 31st March, 2024.

Hints:

1. Interest on a loan by Hemant will be provided @ 6% p.a.
2. Interest on loan by Sameer will not be charged.

Answer 1

Journal Entries for the year ended 31st March, 2024.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Interest on Hemant’s loan A/c   ...Dr.		10,000	-
	To Hemant’s loan A/c		-	10,000
	(Being interest on loan provided by Hemant to the firm.)
2.	Profit and Loss A/c   ...Dr.		10,000	-
	To Interest on Hemant’s loan A/c		-	10,000
	(Being transfer of interest on Hemant’s loan to his loan account.)
3.	Profit and Loss A/c   ...Dr.		3,60,000	-
	To Profit and Loss Appropriation A/c		-	3,60,000
	(Being transfer of profit from Profit and Loss Account to Profit and Loss Appropriation Account for distribution among partners.)
4.	Profit and Loss Appropriation A/c   ...Dr.		3,60,000	-
	To Hemant’s Capital A/c		-	1,80,000
	To Sameer’s Capital A/c		-	1,80,000
	(Being the distribution of profit among Hemant and Sameer as per their agreed profit-sharing ratio.)

Working Note:

Dr.	Profit and Loss A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Interest on Hemant’s loan A/c	10,000	By Profit before interest A/c	3,70,000
To Profit and Loss Appropriation A/c	3,60,000
	3,70,000		3,70,000

 

Dr.	Profit and Loss Appropriation A/c		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Hemant’s Capital A/c	1,80,000	By Profit and Loss A/c	3,60,000
To Sameer’s Capital A/c	1,80,000
	3,60,000		3,60,000