Question

Tanuj and Ravi are partners in a business with capital balances of ₹ 1,50,000 and ₹ 1,00,000 respectively on 1^st April, 2022.

Their partnership deed contains the following clauses:

1. Interest on capital to be allowed @ 10% per annum.
2. Interest on drawings to be charged @ 4% per annum.
3. Tanuj to be allowed a commission @ 5% of the trading profit after charging his commission.
4. Ravi to be allowed an annual commission of ₹ 10,000.

Additional information:

During the year 2022-23:

• Tanuj withdrew ₹ 6,000 at the end of every quarter.
• The trading profit of the firm was ₹ 84,000.
• The firm’s divisible profit was ₹ 46,360.
• On 1st October, 2022, Ravi permanently withdrew ₹ 20,000 from his capital.

You are required to do the following:

1. Pass the journal entries to record:
   
   1. The permanent withdrawal made by Ravi.
   2. The distribution of the divisible profits between the partners.
   3. The adjusting entry for commission due to Ravi.
2. Calculate the interest on capital allowed to:
   1. Tanuj
   2. Ravi
3. Calculate the commission allowed to Tanuj.
4. Calculate the interest on drawings charged from Tanuj.

Answer 1

i.

Journal Entries
Date	Particulars	L. F.	Dr. (₹)	Cr. (₹)
(a)	Ravi’s Capital A/c   ...Dr.		20,000	-
	To Bank A/c		-	20,000
	(Being entry for permanent withdrawal made by Ravi from his capital.)
(b)	Profit and Loss Appropriation A/c   ...Dr.		46,360	-
	To Tanuj’s Capital A/c		-	23,180
	To Ravi’s Capital A/c		-	23,180
	(Being the distribution of divisible profits among partners.)
(c)	Ravi’s Commission A/c   ...Dr.		10,000	-
	To Ravi’s Capital A/c		-	10,000
	(Being adjusting entry passed for commission due to Ravi.)

ii. Calculation of interest on capital allowed to:

a. Tanuj

Interest on capital of Tanuj = `1,50,000 xx 10/100`

=15,000

b. Ravi

Interest on capital of Ravi:

From 1^st April to 30th September 2022:

= `1,00,000 xx 10/100 xx 6/12`

= 5,000

From 30^th September 2022 to 31^st March 2023:

= `80,000 xx 10/100 xx 6/12`

= 4,000

Total Interest on Ravi’s capital = 5,000 + 4,000

= ₹ 9,000

iii. Calculation of commission allowed to Tanuj:

Trading profit = ₹ 84,000

Commission allowed to Tanuj = `84,000 xx 5/105`

= ₹ 4,000

iv. Calculation of interest on drawings charged from Tanuj:

Average period = `("Time left after first drawings + Time left after last drawings")/2`

`= (9 + 0)/2`

= 4.5 months

Total drawings = 6,000 × 4

= ₹ 24,000

Interest on drawings = 4% p.a.

Interest on Tanuj drawings = `24,000 xx 4/100 xx 4.5/12`

= ₹ 360