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Question
What is the journal entry to be passed for providing interest on capital to a partner?
Solution
(a) For providing interest on capital
| Date | Particulars | L.F. | Debit (₹) |
Credit (₹) |
| Interest on Capital A/c ........Dr. To Partner’s Capital current A/c |
xxx - |
- xxx |
(b) For closing interest on capital account
| Date | Particulars | L.F. | Debit (₹) |
Credit (₹) |
| Profit and Loss appropriation A/c ........Dr. To Interest on Capital A/c |
xxx - |
- xxx |
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RELATED QUESTIONS
In the absence of an agreement among the partners, interest on capital is ___________.
When a partner withdraws regularly a fixed sum of money at the middle of every month, the period for which interest is to be calculated on the drawings on an average is ___________.
Which of the following is the incorrect pair?
Pick the odd one out
Jayaraman is a partner who withdrew ₹ 10,000 regularly in the middle of every month. Interest is charged on the drawings at 6% per annum. Calculate interest on drawings for the year ended 31st December, 2018.
Akash, Bala, Chandru and Daniel are partners in a firm. There is no partnership deed. How will you deal with the following?
- Akash has contributed maximum capital. He demands interest on capital at 10% per annum.
- Bala has withdrawn ₹ 3,000 per month. Other partners ask Bala to pay interest on drawings @ 8% per annum to the firm. But, Bala did not agree to it.
- Akash demands the profit to be shared in the capital ratio. But, others do not agree.
- Daniel demands salary at the rate of ₹ 10,000 per month as he spends full time for the business.
- Loan advanced by Chandru to the firm is ₹ 50,000. He demands interest on loan @ 12% per annum.
The capital account of Begum and Fatima on 1st January, 2018 showed a balance of ₹ 50,000 and ₹ 40,000 respectively. On 1st October, 2018, Begum introduced an additional capital of ₹ 10,000 and on 1st May, 2018 Fatima introduced an additional capital of ₹ 9,000.
Calculate interest on capital at 4% p.a. for the year ending 31st December, 2018.
Mani is a partner, who withdrew ₹30,000 on 1st September, 2018. Interest on drawings is charged at 6% per annum. Calculate interest on drawings on 31st December, 2018 and show the journal entries by assuming that fluctuating capital method is followed.
Mani is a partner who withdrew ₹ 30,000 on 1st September, 2018. Interest on drawings is charged at 6% per annum. Calculate interest on drawings on 31st December, 2018 and show the journal entries by assuming that the fluctuating capital method is followed.
Mani is a partner, who withdrew ₹ 30,000 on 1st September, 2018. Interest on drawings is charged at 6% per annum. Calculate interest on drawings on 31st December, 2018 and show the journal entries by assuming that fluctuating capital method is followed.
