Amit and Sumit entered into a partnership on 1st April 2022 and invested ₹ 1,50,000 and ₹ 2,50,000 respectively as capital

Amit and Sumit entered into a partnership on 1st April 2022 and invested ₹ 1,50,000 and ₹ 2,50,000 respectively as capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following the Fixed Capital Accounts Method. The firm earned a net profit of ₹ 1,00,000 for the year ended 31st March 2023.

Pass the Journal entry for interest on capital.

[Ans: Dr. Profit and Loss Appropriation A/c by ₹ 40,000; Cr. Amit’s Current A/c by ₹ 15,000 and Sumit’s Current A/c by ₹ 25,000.]