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1.10 Double Entry Book Keeping (Section A)—ISC XII

Dr. PARTNERS’ CURRENT ACCOUNTS Cr.
Particulars Precious Noble Perfect Particulars Precious Noble Perfect
` ` ` ` ` `
To Drawings A/c 16,000 16,000 16,000 By Interest on Capital A/c 3,600 3,000 1,800
To Interest on Drawings A/c 360 360 360 By Partners’ Salary A/cs 2,400 3,600 ...
To Balance c/d 38,767 19,367 4,566 By P and L App. A/c (Profit) 49,127 29,127 19,126
55,127 35,727 20,926 55,127 35,727 20,926
Notes: 1. Interest on Drawings of each Partner: On ` 4,000 for 9 months: ` 180 + on ` 4,000 for 6 months:
` 120 + on ` 4,000 for 3 months: ` 60.
Total Interest on Drawings = ` 180 + ` 120 + ` 60 = ` 360.
No Interest will be charged on last drawings since it is at the end of the accounting year.
2. Interest on Loan by Perfect ` 300 should be credited to Loan by Perfect Account.
Illustration 9.
A, B and C are partners in a firm. Their terms of agreement are:
Particulars A B C
Interest on Capital @ 6% p.a. @ 6% p.a. @ 6% p.a.
Interest on drawings (except salary) is to be charged @ 6% p.a. @ 6% p.a. @ 6% p.a.
Salary @ ` 500 p.m. ... ...
C is entitled to receive commission on the profits after charging such
commission and making above adjustments ... ... 5%

On 1st April, 2019, A, B and C had capitals of ` 15,000; ` 20,000 and ` 12,000 respectively. B
withdrew ` 2,000 on 31st December, 2019 and C introduced ` 2,000 on 1st March, 2020. A had
no drawings except salary of ` 500 per month. B’s drawings were ` 500 on 1st August and
` 700 on 30th November, 2019. C regularly drew at the rate of ` 200 at the end of each month.
The profit before making above adjustments for the financial year ended 31st March, 2020 was
` 22,245. Prepare Profit and Loss Appropriation Account. (ISC, Modified)

Solution: PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2020 Cr.
Particulars ` Particulars `
To Interest on Capital A/cs (WN 1): By Profit and Loss A/c (Net Profit) 22,245
A 900 By Interest on Drawings A/cs:
B 1,170 B (` 500 × 8/12 × 6/100) 20
C 730 2,800 (` 700 × 4/12 × 6/100) 14 34
To Salary A/c (A) 6,000 C (` 2,400 × 5.5/12 × 6/100) (WN 2) 66 100
To Commission A/c (C) (` 13,545 × 5/105) 645
To Profit trfd. to Capital A/cs:
A 4,300
B 4,300
C 4,300 12,900
22,345 22,345
Working Notes:
1. Calculation of Interest on Capitals: `
Interest on A’s Capital for 1 year @ 6% p.a. 900
Interest on B’s Capital of ` 20,000 for 9 months @ 6% p.a. 900
Interest on B’s Capital of ` 18,000 for 3 months @ 6% p.a. 270 1,170
Interest on C’s Capital of ` 12,000 for 11 months @ 6% p.a. 660
Interest on C’s Capital of ` 14,000 for 1 month @ 6% p.a. 70 730
2. Interest on C’s drawings is calculated for 5.5 months on total drawings because he regularly drew at
the rate of ` 200 at the end of each month.