On 1st April, 2023, Jain and Gupta started a partnership firm with fixed capitals of ₹15,00,000 and ₹12,00,000 respectively. They decided to share profits and losses in the ratio of 3 : 2. On 1st July, 2023, Jain withdrew ₹1,00,000 from his capital and Gupta introduced further capital of ₹2,00,000. Partnership deed provided for interest on capital @ 10% p.a.
During the year Jain withdrew ₹50,000 and Gupta withdrew ₹60,000 for their personal use. Interest on drawings was to be charged @ 18% p.a.
After preparing Profit and Loss Appropriation Account for the year ended 31st March, 2024, ₹72,000 and ₹48,000 were credited respectively to the current accounts of Jain and Gupta as their share of divisible profit.
Prepare Current Accounts of Jain and Gupta.
During the year Jain withdrew ₹50,000 and Gupta withdrew ₹60,000 for their personal use. Interest on drawings was to be charged @ 18% p.a.
After preparing Profit and Loss Appropriation Account for the year ended 31st March, 2024, ₹72,000 and ₹48,000 were credited respectively to the current accounts of Jain and Gupta as their share of divisible profit.
Prepare Current Accounts of Jain and Gupta.
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Solution and Explanation
Step 1: Interest on Capital
Jain:
Capital before withdrawal = ₹15,00,000
Withdrawal on 1st July = ₹1,00,000
Capital from 1st April to 30th June (3 months) = ₹15,00,000
Capital from 1st July to 31st March (9 months) = ₹14,00,000
Interest = \( (15,00,000 \times 10% \times \frac{3}{12}) + (14,00,000 \times 10% \times \frac{9}{12}) \)
⇒ ₹37,500 + ₹1,05,000 = ₹1,42,500
Gupta:
Original capital = ₹12,00,000
Additional capital on 1st July = ₹2,00,000
Interest = \( (12,00,000 \times 10% \times \frac{12}{12}) + (2,00,000 \times 10% \times \frac{9}{12}) \)
⇒ ₹1,20,000 + ₹15,000 = ₹1,35,000
Step 2: Interest on Drawings
Drawings of Jain = ₹50,000
Assumed withdrawn evenly → interest for 6 months
Interest = \( 50,000 \times 18% \times \frac{6}{12} = ₹4,500 \)
Drawings of Gupta = ₹60,000
Interest = \( 60,000 \times 18% \times \frac{6}{12} = ₹5,400 \)
Step 3: Profit Share (already given)
Jain = ₹72,000
Gupta = ₹48,000
Step 4: Prepare Current Accounts
Jain’s Current Account
| Credit Side | Debit Side |
|---|---|
| By Interest on Capital: ₹1,42,500 | To Drawings: ₹50,000 |
| By Share of Profit: ₹72,000 | To Interest on Drawings: ₹4,500 |
| Total Cr = ₹2,14,500 | Total Dr = ₹54,500 |
| Closing Balance = ₹1,60,000 | |
Gupta’s Current Account
| Credit Side | Debit Side |
|---|---|
| By Interest on Capital: ₹1,35,000 | To Drawings: ₹60,000 |
| By Share of Profit: ₹48,000 | To Interest on Drawings: ₹5,400 |
| Total Cr = ₹1,83,000 | Total Dr = ₹65,400 |
| Closing Balance = ₹1,17,600 | |
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