Dear Teachers,
These slides have been prepared based on the NCERT syllabus to support you in teaching Plus One and Plus Two Accountancy and Computerised Accounting.
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Mujeeb Rahiman C
HSST Commerce
GHSS Pattikkad
Malappuram Dt.
✉️ mujeebchemmala@gmail.com
9995983075 �
Chapter -1
Accounting for Partnership
Basic Concepts
Interest on Capital
It is the interest provided by a business to partners on their capital contributed.
If the deed provides for interest on capital, it should be paid only out of profit.
Capital കൊണ്ടുവന്നതിന്റെ അടിസ്ഥാനത്തില്
Business partnersinu കൊടുക്കുന്ന interest ാണ് interest on capital
If Loss, No interest is paid
It is an expense for the firm
Journal Entries
Interest on capital A/c Dr.
Partner’s Capital / Current Account
Profit and Loss Appn. A/c Dr.
Interest on capital
Journal entry
Interest on capital is credited to the partner’s Capital / Current Account at the agreed rate.
In Final Account it is debited to PL Appn account
1. When there is no addition to or withdrawal from capital during the year
Calculation of Interest on Capital
Interest is calculated for the whole year on the opening balance of the capital accounts of partners,
A and B are partners sharing profits and losses equally. Their capitals on 1st Jan 2019 were Rs. 20,000 and Rs. 30,000 respectively.
Calculate interest on capital at 6% per annum for the year ending 31st Dec 2019.
Solution
A 20,000 x 6 = 1,200
100
B 30,000 x 6 = 1,800
100
There is no additional capital or withdrawal out of capital
2. In case there is additional capital contributed
1. On the opening balance of the capital accounts of partners, interest is calculated for the whole year.
2. On the additional capital brought in by any partner during the year, interest is calculated from the date of introduction of additional capital to the last day of the financial year.
3. These two together constitute the total interest on capital.
Calculation of Interest on Capital
A and B are partners in a firm. Their capital account showed the balance on 1st Jan 2019 were A Rs. 30,000 and B Rs. 20,000. During the year 2019 A introduced an additional capital of Rs. 10,000 on 1st June 2019 and B brought in Rs. 15,000 on 1st July 2019.
The interest on capital is allowed at 6% p.a. Accounts are closed on Dec 31 every year. Calculate interest on capital to be allowed to A and B for the year 2019.
Solution
A 30,000 x 6 (for full year) = 1,800
100
10,000 x 6 x 7 (for 7 months) = 350
100 12
B 20,000 x 6 (for full year) = 1,200
100
15,000 x 6 x 6 (for 6 months) = 450
100 12
2150
1650
3. In case there are withdrawals out of capital
1. Calculate the interest on the opening capital up to the date of withdrawal out of capital.
2. Then calculate interest for the remaining period on the amount left after the withdrawal out of capital.
3. These two together constitute the total interest on capital.
Calculation of Interest on Capital
A and B are partners in a firm. Their capital account showed the balance on 1st Jan 2019 were Rs. 40,000 and Rs. 30,000 respectively. On 1st July 2019 A had withdrawn Rs. 10,000 and on 1st Sep 2019 B had withdrawn Rs. 6,000 out of capital.
Calculate interest on capital @ 6% p.a for the year ending 31st Dec 2019.
Solution
A 40,000 x 6 x 6 (for 6 months Jan-Jun) = 1,200
100 12
30,000 x 6 x 6 (for 6 months Jul-Dec) = 900
100 12
B 30,000 x 6 x 8 (for 8 months Jan-Aug) = 1,200
100 12
24,000 x 6 x 4 (for 4 months Sep-Dec) = 480
100 12
2100
1680
MUJEEB RAHIMAN C
HSST COMMERCE
GHSS PATTIKKAD
MALAPPURAM DT
Calculation of Interest on Capital
If Opening capital is not given
illustration
1. op capital
2. addional cap if any
3. drawngs out of cap ifany
4. interest rate
Of op cap not given we have to find it first
Given closing capital
Capital at the end of the year xxxx
Add: Drawings xxx
Interest on Drawings xxx
Share of loss if any xxx xxxx
Less: Partner’s Salary xxx
Partner’s Commission xxx
Share of profit if any xxx xxxx
Opening Capital xxxx
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Statement Showing Calculation of Capital at the Beginning
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xxxx
A and B are partners in a business. Their capital at the end of the year were Rs. 46,000 and Rs. 34,000 respectively. During the year 2019 A’s drawings and B’s drawings were Rs. 6,800 and Rs. 10,700 respectively. Interest on drawings charged was, A Rs. 200 and B Rs. 300. A had been credited with a salary of Rs. 3,000 and B with a commission of Rs. 4,000.
Profits during the year after making the above mentioned adjustments were Rs. 30,000. Calculate interest on capital @ 6% for the year ending 31st Dec 2019
Calculation of A’s capital in the beginning of the year
A and B are partners in a business. Their capital at the end of the year were Rs. 46,000 and Rs. 34,000 respectively. During the year 2019 A’s drawings and B’s drawings were Rs. 6,800 and Rs. 10,700 respectively. Interest on drawings charged was, A Rs. 200 and B Rs. 300. A had been credited with a salary of Rs. 3,000 and B with a commission of Rs. 4,000.
Profits during the year after making the above mentioned adjustments were Rs. 30,000. Calculate interest on capital @ 6% for the year ending 31st Dec 2019
Capital at the end of the year 46,000
Add: Drawings 6,800
Interest on Drawings 200
53,000
Less: Salary 3,000
Share of profit 30,000 x 1 15,000 18,000
2
Opening Capital 35,000
Interest on capital = 35,000 x 6 = 2,100
100
Calculation of B’s capital in the beginning of the year
A and B are partners in a business. Their capital at the end of the year were Rs. 46,000 and Rs. 34,000 respectively. During the year 2019 A’s drawings and B’s drawings were Rs. 6,800 and Rs. 10,700 respectively. Interest on drawings charged was, A Rs. 200 and B Rs. 300. A had been credited with a salary of Rs. 3,000 and B with a commission of Rs. 4,000.
Profits during the year after making the above mentioned adjustments were Rs. 30,000. Calculate interest on capital @ 6% for the year ending 31st Dec 2019
Capital at the end of the year 34,000
Add: Drawings 10,700
Interest on Drawings 300
45,000
Less: Commission 4,000
Share of profit 30,000 x 1 15,000 19,000
2
Opening Capital 26,000
Interest on capital = 26,000 x 6 = 1,560
100
MUJEEB RAHIMAN C
HSST COMMERCE
GHSS PATTIKKAD
MALAPPURAM DT
20700
= 6900
27300
MUJEEB RAHIMAN C
HSST COMMERCE
GHSS PATTIKKAD
MALAPPURAM DT
MUJEEB RAHIMAN C
HSST COMMERCE
GHSS PATTIKKAD
MALAPPURAM DT