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A Partner (or partners) may be guaranteed minimum share of profit from the business. It is the minimum profit that the guaranteed partner (or Parnters0 will get. Thus, if the guaranteed partner’s share of profit is more than the guaranteed…
Average Month would be 12 + 3/2 = 7.5 Months For example A withdraw ₹ 2,000 at the begening of each quarter. The rate of interest @ 10% p.a. is charged on drawings. A’s interest on drawings would be as…
Average Months in case of drawings withdrawn at the beginning of each quarter. 12 + 3/2 = 7.5 Months. Interest on Amit’s drawing would be as follows:- 7000 * 4 * rate of interest * 7.5/12 =
The average Method to calculate interest on drawings is used in the following two conditions. a) The amount of drawings is uniform; and b) the time interval between the two drawings is also uniform.
The profit & Loss Appropriation Account is an extension of the Profit and Loss Account. Net Profit for the year, as per the Profit and Loss Account is transferred to the credit of the Profit & Loss Appropriation Account. It…
In the case of the Fixed Capital Method Withdrawal out of capital is recorded at the debit side of the Partner’s capital account.
Items at the debit side of Partner’s Fixed Capital Account 1. Withdrawal out of capital Journal Entries Partner’s Capital A/c To Bank A/c
Ans – Fluctuating Capital Method Under the Fluctuating Capital Method, the interest on the partner’s capital is recorded on the credit of side of the Partner’s Current Account.
The following are the reasons for allowing Interest on Capital: 1) When the Capitals of Partners are different but Profit Sharing Ratio is Equal:- If a partner invests more capital as compared to other partners and the profit-sharing ratio is…
Items that appear on the debit side of a Partner’s Current Account. 1) Drawings out of Profit by Partner’s 2) Interest on Drawings out of profit