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Question
Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs 50,000 and Rs 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of Rs 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to Rs 12,500. A provision of 5% of profits is to be made in respect of manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.
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Solution
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Profit and Loss Adjustment Account |
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Dr. |
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Cr. |
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Particulars |
Amount |
Particulars |
Amount |
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Interest on Capital : |
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By Profit and Loss (12,500 + 2,500) |
15,000 |
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Lokesh |
3,000 |
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Azad |
1,800 |
4,800 |
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Partner’s Salaries : |
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Azad |
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2,500 |
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Provision for Manager’s Commission |
750 |
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Profit transferred to : |
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Lokesh Capital |
4,170 |
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Azad Capital |
2,780 |
6,950 |
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15,000 |
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15,000 |
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Partners’ Capital Account |
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Dr. |
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Cr. |
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Particulars |
Lokesh |
Azad |
Particulars |
Lokesh |
Azad |
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Balance b/d |
50,000 |
30,000 |
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Interest on Capital |
3,000 |
1,800 |
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Balance c/d |
57,170 |
37,080 |
Partner’s Salaries |
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2,500 |
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Profit and Appropriation |
4,170 |
2,780 |
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57,170 |
37,080 |
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57,170 |
37,080 |
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|
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|
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Rs |
|
|
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|
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|
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|
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During the year Rudra withdrew ₹ 50,000 at the end of each quarter; Dev withdrew ₹ 50,000 in the beginning of each half year and Shiv withdrew ₹ 70,000 at the end of each half year. The profit of the firm for the year ended 31-3-2022 before allowing interest on Shiv's loan was ₹ 7,06,750. |
What will the amount of interest on drawings of the partners?
