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प्रश्न
Illustrate how interest on drawings will be calculated under various situations.
उत्तर
When a partner withdraws any amount, either in cash or in any other form, from the firm for his/her personal use, then it is termed as drawings. The interest charged by the firm on the amount of drawings is termed as interest on drawings. The method of calculating interest on drawings depends on the information available for time and frequency of the drawings made by the partner. The following different situations of drawings made illustrate the calculation of interest charged on drawings.
Situation 1: When information regarding Amount, Date and Rate of Interest on drawings are given.
If a partner withdrew Rs 10,000 on May 01 and interest on drawing is charged at 10% p.a. and the firm closes its books on December 31 every year then interest of drawings amounts to Rs 667.
Interest on drawings = Total Amount x `"Rate of Interest"/100` x `"Period"/12`
Interest on drawings = 10,000 x `10/100` x `8/12` = Rs. 667.
Situation 2: When information regarding Amount, Rate of Interest on drawings is given
Case I: If the Amount and Rate of Interest on drawings (per annumn) is given but date is not mentioned
If the details regarding the amount of drawings and rate of interest of drawings (p.a.) is given but the date of drawings is not mentioned then interest is charged on average basis and the period of drawings is taken as 6 months.
Example- If a partner withdrew Rs 10,000 and rate of interest on drawings is 10% p.a. then the interest of drawings amounts to Rs 500
Interest on drawings = 10,000 x `10/100` x `6/12` = Rs. 500.
Case II: If the Amount and Rate of Interest on drawings is given but the date and per annumn rate of interest is not mentioned. If the date and the rate of interest are given but per annum is not specified, then annual interest is charged.
Example- If a partner withdrew Rs 20,000 and interest rate is 10% , then the interest on drawings amounts to Rs 2,000.
Interest on drawings = 20,000 x `10/100` = Rs. 2000.
Situation 3: When a fixed amount is withdrawn at regular interval
Case I: If a fixed amount is withdrawn at the beginning of each month, then the interest is calculated for 6.5 months.
Example- If a partner withdraws Rs 1,000 in the beginning of every month and the rate of interest is 10% p.a., then the interest on drawings amount to Rs 650.
Interest on drawings = 12,000 x `10/100` x `6.5/12` = Rs.650.
Case II: If a fixed amount is withdrawn at the end of each month, then the interest is calculated for 5.5 months
Example- If a partner withdraws Rs 1,000 at the end of each month and rate of interest is 10% p.a., then the interest on drawings amount to Rs 550.
Interest on drawings = 12,000 x `10/100` x `5.5/12` = Rs. 550.
Case III: If a fixed amount is withdrawn in the middle of every month then assuming that the drawings are made on15th of every month then interest on drawings is calculated for 6 months
Example- If a partner withdraws Rs 1,000 on 15th of every month and the rate of interest is 10% p.a., then the interest on drawings amount to Rs 600.
Interest on drawings = 12,000 x `10/100` x `6/12` = Rs. 600.
Case IV: If a fixed amount is withdrawn in the beginning of every quarter then the interest is calculated for 7.5 months
Example- If a partner withdraws Rs 3,000 in the beginning of every quarter and the rate of interest is 10% p.a. then the interest on drawings amount to Rs 750.
Interest on drawings = 12,000 x `10/100` x `7.5/12` = Rs. 750.
Case V: If a fixed amount is withdrawn at the end of every quarter, then the interest is calculated for 4.5 months
Example- If a partner withdraws Rs 3,000 at the end of every quarter and the rate of interest is 10% p.a., then the interest on drawings amounts to Rs 450.
Interest on drawings = 12,000 x `10/100` x `4.5/12` = Rs. 450.
Situation 4:
When different amount is at different intervals
If different amount is withdrawn by a partner at different points of time then the interest is calculated by Product Method. The period of drawings is calculated from the date of withdrawal to the last date of the accounting year.
Example- A partner withdraws Rs 5,000 on Feb 01, Rs 3000 on May 01, Rs 5,000 on Sep. 30 and Rs 1000 on Dec. 31 and the rate of interest on drawings is 10% p.a. The firm closes its book on December 31.
Calculation of Interest on Drawings by Product Method
|
Interest on Drawings |
|||||
|
Date |
Amount (Rs.) |
Outstanding Period |
Product |
||
|
Feb. 01 |
5,000 |
11 |
5,000 ´ 11 |
= |
55,000 |
|
May. 01 |
3,000 |
8 |
3,000 ´ 8 |
= |
24,000 |
|
Sep. 30 |
5,000 |
3 |
5,000 ´ 3 |
= |
15,000 |
|
Dec. 31 |
1,000 |
0 |
1,000 ´ 0 |
= |
0 |
|
|
|
|
|
|
94,000 |
Interest on drawing = Sum of Product x `"Rate"/100` x `1/12`
Interest on drawing = 94,000 x `10/100` x `1/12` = 783.33.
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संबंधित प्रश्न
Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2020 shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
- Partners capital on April 1, 2019;
Simmi, Rs 30,000; Sonu, Rs 60,000; - Current accounts balances on April 1, 2016,
Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.); - Partners drawings during the year amounted to
Simmi, Rs 20,000; Sonu, Rs 15,000; - Interest on capital was allowed @ 5% p.a.;
- Interest on drawing was to be charged @ 6% p.a. at an average of six months;
- Partners’ salaries: Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current accounts.
X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3 : 2 : 1, respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The net profit for the year ended March 31, 2020 was Rs 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.
Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.
Harshad and Dhiman are in partnership since April 01, 2016. No Partnership agreement was made. They contributed Rs 4,00,000 and 1,00,000 respectively as capital. In addition, Harshad advanced an amount of Rs 1,00,000 to the firm, on October 01, 2016. Due to long illness, Harshad could not participate in business activities from August 1, to September 30, 2017. The profits for the year ended March 31, 2017 amounted to Rs 1,80,000. Dispute has arisen between Harshad and Dhiman.
Harshad Claims:
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in proportion of capital;
Dhiman Claims:
(i) Profits should be distributed equally;
(ii) He should be allowed Rs 2,000 p.m. as remuneration for the period he managed the business, in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.
You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.
Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2017:
|
Balance Sheet as at March 31, 2017 |
|||
|
|
Amount |
|
Amount |
|
Liabilities |
Rs |
Assets |
Rs |
|
Neelkant’s Capital |
10,00,000 |
Sundry Assets |
30,00,000 |
|
Mahadev’s Capital |
10,00,000 |
|
|
|
Neelkant’s Current Account |
1,00,000 |
|
|
|
Mahadev’s Current Account |
1,00,000 |
|
|
|
Profit and Loss Apprpriation |
|
|
|
|
(March 2017) |
8,00,000 |
|
|
|
|
30,00,000 |
|
30,00,000 |
During the year Mahadev’s drawings were Rs 30,000. Profits during 2017 is Rs 10,00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.
Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of Rs 2,50,000 and Rs 1,50,000, respectively. On October 01, 2016, they decided that their capitals should be Rs 2,00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.
Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2018.
| May 01, 2017 | Rs 12,000 |
| July 31, 2017 | Rs 6,000 |
| September 30, 2017 | Rs 9,000 |
| November 30, 2017 | Rs 12,000 |
| January 01, 2018 | Rs 8,000 |
| March 31, 2018 | Rs 7,000 |
Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.
X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3 : 2 : 1, respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The net profit for the year ended March 31, 2017 was Rs 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.
Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of Rs 60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are: (i) Rs 2,50,000; (ii) 3,60,000.
How many members can be there in a partnership firm?
What would be the journal entry for the Share of Profit or Loss after appropriation?
Identify the journal entry for transferring interest on drawings to the Profit and Loss Appropriation A/c.
Which of the following items is not dealt through Profit and Loss Appropriation Account?
Where is the Interest in drawings recorded in the Current Account?
Read the following information and answer the given question:
Krishika alumni of IIM Ahemdabad initiated her startup Krishika Ltd. in 2018. The profits of Krishika Ltd. in the year 2019-20 after all appropriations was ₹ 31,25,000. This profit was arrived after taking into consideration the following items:
| S. No. | Particulars | Amount (₹) |
| 1. | Gain on sale of fixed tangible assets | 12,50,000 |
| 2. | Goodwill written off | 7,80,000 |
| 3. | Transfer to General Reserve | 8,75,000 |
| 4. | Provision for taxation | 4,37,500 |
Additional information:
| Particulars | 31.3.2020 (₹) | 31.3.2019 (₹) |
| Prepaid Expenses | 7,50,000 | 5,00,000 |
| Inventory | 10,50,000 | 8,20,000 |
| Trade Payable | 4,50,000 | 3,50,000 |
| Trade Receivables | 6,20,000 | 5,90,000 |
Cash flow from operating activities will be ₹ ______.
When the profits are guaranteed by the partners on the old profit sharing ratio, which of the following is not true?
Richa and Anmol are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 2,50,000 and ₹ 1,50,000 respectively. Interest on capital is agreed @6% p.a. Anmol is to be allowed an annual salary of ₹ 12,500. During the year ended 31st March 2023, the profits of the year prior to calculation of interest on capital but after charging Anmol’s salary amounted to ₹ 62,000. A provision of 5% of this profit is to be made in respect of manager’s commission.
Following is their Profit & Loss Appropriation Account.
| Particulars | (₹) | Particulars | (₹) |
| To Interest on Capital | By Profit & loss account (After manager’s commission) | ___(2)___ | |
| Richa | ______ | ||
| Anmol | ______ | ||
| To Anmol’s Salary a/c | 12,500 | ||
| To Profit transferred to: | |||
| Richa’s Capital A/C (1) | ___(1)___ | ||
| Anmol’s Capital A/c | ______ | ||
| ______ | ______ |
The amount to be reflected in blank (2) will be:
