Question

X and Y entered into a partnership business on 1st June, 2025 with profit sharing ratio of 2: 1. As per their partnership deed interest on drawings is to be charged @ 6% p.a. X withdrew ₹ 5,000 per month for 6 months starting from 1st August in the beginning of every month. Y withdrew ₹ 8,000 per month at the end of every month starting from 31st August, 2025.

Pass adjusting and closing entries for Interest on Drawings.

Answer 1

Calculate Interest on Drawings

Interest is calculated using:

Interest = `"Total Drawings × Rate × Average Period"/12`

X's Drawings

• ₹ 5,000 per month
• 6 months from 1st August to 1st January
• Drawings made at the beginning of every month

Average period for drawings at the beginning of each month = 5.5 months

Interest = ₹ 30,000 × 6% × `5.5/12`

= ₹ 30,000 × 0.06 × `5.5/12`

= ₹ 825

Y's Drawings

• ₹ 8,000 per month
• 7 months from 31st August to 28th February
• Drawings made at the end of every month

Total Drawings = ₹ 8,000 × 7 = ₹ 56,000

Average period for drawings at the end of every month = 4 months

Interest = ₹ 56,000 × 6% × `4/12`

= ₹ 1,120

Adjusting Entry

Particulars	L.F.	Dr.	Cr.
X's Current A/c   ...Dr.		825
Y's Current A/c   ...Dr.		1,120
To Interest on Drawings A/c			1,945
(Being interest on drawings charged to partners)

Closing Entry

Particulars	L.F.	Dr.	Cr.
Interest on Drawings A/c   ...Dr.		1,945
To Profit & Loss Appropriation A/c			1,945
(Being interest on drawings transferred to Profit & Loss Appropriation Account)