A and B contribute Rs.80,000 and Rs.40,000 respectively by way of capital on which they agree to pay interest @ 6% p.a. Their respective share of profit is 2:3 and the business profit(before interest) for the year is 6,000 . Show the relevant accountto allocate interest aboutthe treatment of interest on capital.

Hello,

The solution to your query is provided below:

Profit and Loss Appropriation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital A/c:

 

Profit and Loss A/c

6,000

A

4,000

 

 

 

B

2,000

6,000

 

 

 

 

 

 

 

6,000

 

6,000

 

 

 

 

 

Partners’ Capital Account

Dr.

Cr.

Particulars

A

B

Particulars

A

B

 

 

 

Balance b/d

80,000

40,000

Balance c/d

84,000

42,000

Interest on Capital

4,000

2,000

 

84,000

42,000

 

84,000

42,000

 

 

 

 

 

 

 

Hope this answers your query.

Keep posting for further doubts!!

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