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Question
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.
Solution
Given: Profit = ₹ 3,600
Krish's capital ratio = `(₹ 40,000)/(₹ 1,00,000)` = 40%
Tarun's capital ratio = `(₹ 60,000)/(₹ 1,00,000)` = 60%
We know,
Interest = Profit × Capital Ratio
Krish's Share of Profit:
Interest = `3,600 xx 40/100`
∴ Krish's Share of Profit = ₹ 1,440
Tarun's Share of Profit:
Interest = `3,600 xx 60/100`
∴ Tarun's Share of Profit = ₹ 2,160
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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
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- Calculate the commission allowed to Tanuj.
- Calculate the interest on drawings charged from Tanuj.
