Question

Amit and Iqbal are partners in a business. Their partnership deed contained the following clauses:

1. Interest on drawings to be charged @ 6% per annum.
2. Amit to get a salary of ₹ 1,000 per month.
3. Iqbal to get an annual commission of ₹ 10,000.
4. Any partner taking a loan from the firm to be charged interest on it @ 8% per annum.

Additional Information	Amit (₹)	Iqbal (₹)
Drawings made on 1st May, 2022		30,000
Borrowed from the firm on 1st July, 2022	10,000
Capital Balances on 31st March, 2023	75,000	10,000 (Dr)
Divisible profits for the year 2022-23 credited to the Partners' Capital Accounts	9,000	9,000

You are required to:

1. Give the closing journal entry for interest on loan due from Amit.
2. Find the opening capital balance of the partners on 1^st April, 2022, by preparing the Partners' Capital Accounts for the year 2022-23.

Answer 1

i.

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2023 31st Mar.	Interest on Amit's Ioan A/c   ...Dr.		600
	To Profit & Loss A/c			600
	(Being closing entry for interest on Amit's loan)

Calculation on Interest on Amit's loan:

`10,000xx8/100xx9/12` = ₹ 600

ii.

Dr.	Partners' Capital Accounts for the year ended on 31st March 2023				Cr.
Particulars	Amit (₹)	Iqbal (₹)	Particulars	Amit (₹)	Iqbal (₹)
To Drawings A/c	-	30,000	By Balance b/d (balancing figure)	54,600	2,650
To Interest on Drawings A/c `(30,000xx6/12xx11/12)`	-	1,650	By P/L Appropriation A/c	9,000	9,000
To Interest on loan from Firm	600	-	By Amit's Salary A/c	12,000	-
			By Iqbal's Commission A/c	-	10,000
To Balance c/d	75,000	-	By Balance c/d	-	10,000
	75,600	31,650		75,600	31,650

Thus, The opening capital balances of Amit and Iqbal as on 1st April 2022 are:

Amit: ₹ 54,600

Iqbal: ₹ 2,650