Question

Saanvi and Jigyasu were partners sharing profits in the ratio of 3 : 2. The Current Account balances of partners on 1st April, 2025 were as follows:

Saanvi	₹ 15,000 (Cr.)
Jigyasu	₹ 6,500 (Dr.)

The terms of their partnership agreement were as follows:

1. Partners are allowed or charged interest on their Current Account balances @ 6% per annum.
2. Interest on Drawings to be charged @ 7% p.a.
3. Commission @ 4% on net profit after charging such commission is to be allowed to Jigyasu.

Saanvi withdrew ₹ 10,000 per month at the beginning of each month for 1st 3 months and then increased it to ₹ 20,000 p.m.

Jigyasu withdrew ₹ 40,000 each three times during the year at an interval of 4 months between each drawing starting from 1st April, 2025.

Saanvi brought her personal car in the firm for business purposes on 1st August, 2025 at a valuation of ₹ 3,00,000, but this transaction was not recorded in the books. The firm has a policy of charging depreciation @ 20% p.a. on written down value method.

Rent account included ₹ 60,000 paid for Jigyasu's residential house on 1st January, 2026.

The firm earned a profit of ₹ 1,75,000 for the year ended 31st March 2026 before considering the above mentioned transactions.

You are required to:

1. Calculate correct Net Profit of the Firm for the year 2025-26.
2. Pass Journal Entries for appropriation of profit among the partners as per their agreement.

Answer 1

(a)

Ascertainment of Correct Net Profit
Particulars	₹
Net Profit (As given)	1,75,000
Less: Depreciation of Car
\[(300,000 \times \frac{20}{100} \times \frac{8}{12})\]	40,000
	1,35,000
Add: Rent for Residential house of Jigyasu	60,000
Correct Net Profit	1,95,000

(b)                                                  JOURNAL ENTRIES

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2026
March 31	Profit & Loss A/c                                          Dr.		1,95,000
	To Profit & Loss Appropriation A/c			1,95,000
	(Net profit transferred)
"	Interest on Saanvi’s Current A/c                      Dr.		900
	To Saanvi’s Current A/c			900
	(Interest allowed on Saanvi’s Current A/c)
"	Profit & Loss Appropriation A/c                      Dr.		900
	To Interest on Saanvi’s Current A/c			900
	(Interest on Saanvi’s Current A/c closed)
"	Jigyasu’s Current A/c                                  Dr.		390
	To Interest on Jigyasu’s Current A/c			390
	(Interest charged on Jigyasu’s Current A/c)
”	Interest on Jigyasu’s Current A/c                      Dr.		390
	To Profit & Loss Appropriation A/c			390
	(Interest on Jigyasu’s Current A/c closed)
”	Commission to Partners A/c                          Dr.		7,500
	To Jigyasu’s Current A/c			7,500
	(Commission to Jigyasu provided)
”	Profit & Loss Appropriation A/c                      Dr.		7,500
	To Commission to Partners A/c			7,500
	(Commission to Partners A/c closed)
”	Saanvi’s Current A/c (1)                                Dr.		7,175
	Jigyasu’s Current A/c (1)                            Dr.		6,650
	To Interest on Drawings A/c			13,825
	(Interest on Drawings charged)
”	Interest on Drawings A/c                              Dr.		13,825
	To Profit & Loss Appropriation A/c			13,825
	(Interest on Drawings closed)
”	Profit & Loss Appropriation A/c                      Dr.		2,00,815
	To Saanvi’s Current A/c			1,20,489
	To Jigyasu’s Current A/c			80,326
	(Divisible profit transferred to partners Current Accounts in their profit sharing ratio 3 : 2)

Working Note:
(1) Interest on Drawings

For Saanvi : Average Period : (For Drawings of ₹ 10,000 p.m.)

$$\text{For first 3 months } \frac{3 + 1}{2} = \text{ 2 months}$$

$$\text{For next 9 months } = \text{ 9 months}$$

11 months

Average Period (For Drawings of ₹ 20,000 p.m.)

$$\frac{9 + 1}{2} = \text{5 months}$$

$$\begin{align*} \text{Interest on Drawings : } \quad &(₹10,000 \times 3) \times \frac{7}{100} \times \frac{11}{12} &= \quad 1,925 \\ &(₹20,000 \times 9) \times \frac{7}{100} \times \frac{5}{12} &= \quad \underline{5,250} \\ & &= \quad {7,175} \end{align*}$$

For Jigyasu : Average Period:

$$\frac{\text{Time Left After First Drawing + Time Left After Last Drawing}}{2}$$

$$\frac{12 + 4}{2} = \text{8 months}$$

$$\begin{align*} \text{Interest on Drawings : } \quad &(₹40,000 \times 3) \times \frac{7}{100} \times \frac{8}{12} &= \quad 5,600 \\ &60,000 \times \frac{7}{100} \times \frac{3}{12} &= \quad \underline{1,050} \\ & &= \quad {6,650} \end{align*}$$

Dr.	PROFIT & LOSS APPROPRIATION A/C			Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Intt. on Saanvi’s Current A/c	900	By Profit & Loss A/c
To Comm. to Partners A/c		(Net Profit)		1,95,000
- Jigyasu		By Intt. on Jigyasu’s
$(4/104 \times 1,95,000)$	7,500	Current A/c		390
To Saanvi’s Current A/c		By Intt. on Drawings A/c
$(3/5 \times 2,00,815)$	1,20,489	Saanvi	7,175
To Jigyasu’s Current A/c		Jigyasu	6,650	13,825
$(2/5 \times 2,00,815)$	80,326
Total	2,09,215	Total		2,09,215