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Question
Amit and Iqbal are partners in a business. Their partnership deed contained the following clauses:
- Interest on drawings to be charged @ 6% per annum.
- Amit to get a salary of ₹ 1,000 per month.
- Iqbal to get an annual commission of ₹ 10,000.
- 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:
- Give the closing journal entry for interest on loan due from Amit.
- Find the opening capital balance of the partners on 1st April, 2022, by preparing the Partners' Capital Accounts for the year 2022-23.
Solution
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
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