Question

Vishu, Rahul and Kirti are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. Their capitals on 1st April, 2024, were:

Vishu	₹ 3,00,000
Rahul	₹ 40,000 (Dr.)
Kirti	₹ 5,00,000

The terms of the partnership deed are as follows:

Interest on Drawings (except on commission withdrawn) @ 6% p.a.

Interest on Capital @ 10% p.a.

Kirti is allowed a commission of 2% on sales after charging her commission. Sales for the year amounted to ₹ 5,10,000.

The drawings of the partners were:

• Vishu withdrew ₹ 3,000 p.m. at the end of each month starting from 31st August, 2024.
• Kirti withdrew @ 25,000 during the year (including her commission).
• Rahul had withdrawn at the beginning of every month a certain fixed amount on which he was charged interest of ₹ 1,365.

Net profit for the year ended 31st March, 2025, amounted to ₹ 1,47,765 before taking into account the above adjustments.

1. Find out about the drawings made by Rahul every month.
2. Pass the journal entries for commission.
3. Prepare the Profit and Loss Appropriation A/c.

Hints:

i. Interest on Vishu’s drawings will be charged for 3.5 months.

ii. Entries for commission:

(i)	Commission to Kirti   ...Dr.		10,000
	To Kirti’s Capital A/c			10,000
(ii)	Profit and Loss Appropriation A/c   ...Dr.		10,000
	To Commission to Kirti			10,000

Answer 1

i. Given: Interest on Rahul’s drawings = ₹ 1,365 @ 6% p.a.

Rahul withdraws a fixed amount at the beginning of every month (12 months).

Let monthly drawings = ₹ x

Total drawings = 12 x

Average period (beginning of each month) = `(12 + 1)/2`

= 6.5 months

Interest on drawings = `"Total drawings" × "Rate of interest"/100 × "Average period"/12`

`1,365 = 12x  xx 6/100 xx 6.5/12`

`1,365 = x xx 6/100 xx 6.5`

1,365 = x × 0.39

x = `1365/0.39`

x = 3500

ii.

Journal Entries In the books of Vishu, Rahul and Kirti
Date	Particulars	L.F	Debit (₹)	Credit (₹)
2025
March 31	Commission to Kirti   ...Dr.		10,000	−
	To Kirti’s Capital A/c		−	10,000
	(Being Kirti’s Commission credited to her Capital A/c.)
March 31	Profit and Loss Appropriation A/c   ...Dr.		10,000	−
	To Commission to Kirti A/c		−	10,000
	(Being Kirti’s Commission transferred to Profit and Loss Appropriation Account.)

iii.

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 2025						Cr.
Date	Particulars	Amount (₹)	Amount (₹)	Date	Particulars	Amount (₹)	Amount (₹)
2025				2025
March 31	To Commission (Kirti)		10,000	March 31	By Profit and Loss A/c		1,47,765
March 31	To Interest on Capital:		80,000	March 31	By Interest on Drawings:		2,235
	Vishu	30,000			Vishu	420
	Kirti	50,000			Rahul	1,365
March 31	To Profit transferred to:				Kirti	450
	Vishu’s Capital A/c	24,000	60,000
	Rahul’s Capital A/c	24,000
	Kirti’s Capital A/c	12,000
			1,50,000				1,50,000

Working Notes:

1. Calculation of Kirti’s commission:

Kirti’s commission on sales (after charging such commission) = `5,10,000 xx 2/102`

= ₹ 10,000

2. Calculation of interest on drawings:

(i) Vishu:

Interest on drawings = `"Total drawings" × "Rate"/100 × "Average period"/12`

= `24,000 xx 6/100 xx 3.5/12`

= `1440 xx 3.5/12`

= ₹ 420

(ii) Kirti:

As drawings should exclude commission withdrawn, total drawings by Kirti.

= 25,000 – 10,000

= ₹ 15,000

As no specific period of withdrawal is given, we will calculate drawings for 6 months, based on even withdrawals.

Interest on drawings = `"Total drawings" × "Rate"/100 × "Average period"/12`

= `15,000 xx 6/100 xx 6/12`

= ₹ 450

3. Calculation of interest on capital:

(i) Vishu:

Interest on capital = `3,00,000 xx 10/100`

= ₹ 30,000

(ii) Rahul:

No interest on a negative balance of capital will be calculated.

(iii) Kirti:

Interest on capital = `5,00,000 xx 10/100`

= ₹ 50,000