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Answer:- Basis Fixed Capital Account Fluctuating Capital Account No. of Accounts maintained Each partner has two accounts: i) Capital Account and ii) Current Account Each Partner has only one account, i.e., Capital Account. Frequency of Change Under this method, the…
Capital Account shows the transactions relating to the introduction or withdrawal of capital whereas Current Account shows the transactions sich as interest on capital, drawings, salary, commission, the share of profit/Loss, etc.
Answer:- Interest allowed on capital is debited to Profit and Loss Appropriation Account because it is an appropriation of profit and not a charge against profit.
Yes, it is debited to Profit and Loss Account if the Partnership Deed provides that it is to be paid whether the firms earns profit on not.
Answer:- Interest on Capital means the interest on the partner’s capital. It is a distribution of part of the profit in the capital ratio. Interest on capital is allowed to compensate those partners who have contributed more capital than the…
Answer:- Adjusting Entry:- Interest on Capital A/c …Dr. To Partner’s Capital A/c (Being the interest on capital allowed to partner)
Answer:- When the amount of available profit is less than the total amount of interest on capital, the available profit will be distributed in the ratio of interest on capital of each partner.
Answer:- Interest on Saloni’s Capital = ₹ 20,000 * 6/100 = ₹ 1,200 Interest on Shrishti’s Capital = ₹ 10,000 * 6/100 = ₹ 600 Since the amount of available profit ₹ 1,500 is less than the total amount of…
Answer:- Rent paid to a partner for the use of his premises is a charge against profit and thus, is treated as an expense of the firm to be debited to the Profit and Loss Account and credited to his…
Answer:- Interest on a Loan by the Partner is debited to the Profit and Loss Account since it is a charge against profit and credited to Partner’s Loan Account since it is a gain to a partner as a lender…