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Question
Give the word / term or phrase which can substitute the following statement.
The amount withdrawn by the partners from the business for their personal use.
Solution
Drawings
Explanation: Drawings are the amount withdrawn (in cash or in kind) by the partners from the business for their personal use. In case of fixed capital method, it is recorded in the Partners’ Current Account, while in case of fluctuating capital method, it is shown in the Partners’ Capital Account.
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Tanuj and Ravi are partners in a business with capital balances of ₹ 1,50,000 and ₹ 1,00,000 respectively on 1st April, 2022.
Their partnership deed contains the following clauses:
- Interest on capital to be allowed @ 10% per annum.
- Interest on drawings to be charged @ 4% per annum.
- Tanuj to be allowed a commission @ 5% of the trading profit after charging his commission.
- Ravi to be allowed an annual commission of ₹ 10,000.
Additional information:
During the year 2022-23:
- Tanuj withdrew ₹ 6,000 at the end of every quarter.
- The trading profit of the firm was ₹ 84,000.
- The firm's divisible profit was ₹ 46,360.
- On 1st October, 2022, Ravi permanently withdrew ₹ 20,000 from his capital.
You are required to do the following:
- Pass the journal entries to record:
- The permanent withdrawal made by Ravi.
- The distribution of the divisible profits between the partners.
- The adjusting entry for commission due to Ravi.
- Calculate the interest on capital allowed to:
- Tanuj
- Ravi
- Calculate the commission allowed to Tanuj.
- Calculate the interest on drawings charged from Tanuj.
Krish and Tarun are partners in a firm with capitals of ₹ 40,000 and ₹ 60,000. As per their partnership deed:
- Interest on capital is to be allowed to them @ 5% per annum.
- Profits are to be shared in the ratio of 3 : 2.
The trading profits for the year 2023-24 was ₹ 3,600. You are required to calculate the interest on capital allowed to the partners in the year 2023-24.
Deepa, Ridhi and Adit are partners in a firm. Following are the particulars of their Capital and Drawings Accounts for the year 2023-24:
| Particulars | Deepa (₹) | Ridhi (₹) | Adit (₹) |
| Capital as on 1st April, 2023 | 1,00,000 | 80,000 | 20,000 (Dr.) |
| Drawings (in two instalments of ₹ 7,500 each made at the end of every half year) | - | 15,000 | - |
| Interest free loan from the firm | - | - | 5,000 |
According to their partnership deed:
- Profits were to be shared in the ratio of 2 : 2 : 1
- Interest on capital to be allowed @ 5% per annum
- Interest on drawings to be charged @ 8% per annum
The trading profits of the firm for the financial year 2023-24 were ₹ 50,000, before considering the discrepancy of having recorded the inventory at ₹ 10,000 when its realisable value was ₹ 4,000.
- You are required to give:
- The adjusting entry and closing entry for Drawings made by Ridhi
- The adjusting entry and closing entry for Interest on Drawings
- The adjusting entry and closing entry for Interest on Capital
- The entry to close the Adit’s Loan A/c
- The accountant of the firm distributed the divisible profit among the partners in the ratio 2 : 1 : 2 instead of in the ratio mentioned in the deed.
You are required to rectify the lapse in accounting by passing a single adjusting entry.
