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Question
Sonu and Rajat started a partnership firm on April 1, 2017. They contributed ₹ 8,00,000 and ₹ 6,00,000 respectively as their capitals and decided to share profits and losses in the ratio of 3: 2.
The partnership deed provided that Sonu was to be paid a salary of ₹ 20,000 per month and Rajat a commission of 5% on turnover. It also provided that interest on capital be allowed at 8% p.a. Sonu withdrew ₹ 20,000 on 1st December 2017 and Rajat withdrew ₹ 5,000 at the end of each month. Interest on drawings was charged at 6% p.a. The net profit as per Profit and Loss Account for the year ended 31st March 2018 was ₹ 4,89,950. The turnover of the firm for the year ended 31st March 2018 amounted to ₹ 20,00,000. Pass necessary journal entries for the above transactions in the books of Sonu and Rajat.
Solution
Journal of Sonu and Rajat
| Date | Particulars | L.F. |
Dr. Amount(₹) |
Cr. Amount(₹) |
|
| 2018 | |||||
| March 31 | Profit & Loss Appropriation A/c | Dr. | 2,40,000 | ||
| To Sonu’s Capital A/c | 2,40,000 | ||||
| (Being salary for the year payable to Sonu) | |||||
|
March 31 |
Profit & Loss Appropriation A/c | Dr. | 1,00,000 | ||
|
|
To Rajat’s Capital A/c | 1,00,000 | |||
|
|
(Being commission on turnover @ 5% payable to Rajat) | ||||
|
|
|||||
| March 31
|
Profit & Loss Appropriation A/c | Dr. | 1,12,000 | ||
| To Sonu’s Capital A/c | 64,000 | ||||
| To Rajat’s Capital A/c | 48,000 | ||||
| (Being interest on capital @ 8% p.a.) | |||||
| March 31 | Sonu’s Capital A/c | Dr. | 400 | ||
| Rajat’s Capital A/c | Dr. | 1,650 | |||
| To Profit & Loss Appropriation A/c | 2,050 | ||||
| (Being interest on drawings of partners charged @ 6% p.a.) | |||||
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. | 40,000 | ||
|
|
To Sonu’s Capital A/c |
24,000 | |||
|
|
To Rajat’s Capital A/c |
16,000 | |||
|
|
(Being divisible profit in 3: 2 distributed) |
Working Notes:
(1) Computation of interest on drawings of partners
Drawings of Sonu = 20,000
Drawings of Rajat = 12 × 5,000 = 60,000
Interest on Sonu’s drawings = `20,000 xx (6)/(100) xx (4)/(12) = 400`
Interest on Rajat’s drawings = `60,000 xx (6)/(100) xx (5.5)/(12) = 1,650`
2) Computation of divisible profit and its distribution between partners
Profit as per the Profit and Loss Account = 4,89,950
Divisible Profit = Net profit + Interest on Drawings – Interest on Capital – Salary to Sonu – Commission to Rajat
Divisible Profit = 4,89,950 + 2,050 – 1,12,000 – 2,40,000 – 1,00,000 = 40,000
Sonu’s share in divisible profit = `40,000 xx (3)/(5) = 24,000`
Rajat’s share in divisible profit = `40,000 xx (2)/(5) = 16,000`
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