Illustration 5. Vijay, Ajay and Suresh are partners sharing profits equally. Vijay had given loan to firm on 1st September, 2022 of 2,00,000. It was agreed that interest will be paid @ 12% p.a. Interest was paid by cheque up to February, 2023 on 1st March, 2023 and balance was paid on 5th April, 2023. Pass the Journal entries for interest on loan by partner for the year ended 31st March, 2023.
Question
Illustration 5. Vijay, Ajay and Suresh are partners sharing profits equally. Vijay had given loan to firm on 1st September, 2022 of 2,00,000. It was agreed that interest will be paid @ 12% p.a. Interest was paid by cheque up to February, 2023 on 1st March, 2023 and balance was paid on 5th April, 2023. Pass the Journal entries for interest on loan by partner for the year ended 31st March, 2023.
Solution
The journal entries for the interest on the loan given by Vijay to the firm would be as follows:
-
Calculation of Interest for the period from 1st September 2022 to 28th February 2023:
The time period is 6 months. So, the interest for this period would be:
= Principal amount * Rate of interest * Time period = 2,00,000 * 12/100 * 6/12 = Rs. 12,000
The journal entry on 1st March 2023 would be:
Interest on Vijay's Loan A/c Dr. 12,000 To Bank A/c 12,000 (Interest paid by cheque to Vijay for the period from 1st September 2022 to 28th February 2023)
-
Calculation of Interest for the period from 1st March 2023 to 31st March 2023:
The time period is 1 month. So, the interest for this period would be:
= Principal amount * Rate of interest * Time period = 2,00,000 * 12/100 * 1/12 = Rs. 2,000
The journal entry on 31st March 2023 would be:
Interest on Vijay's Loan A/c Dr. 2,000 To Vijay's Capital A/c 2,000 (Interest accrued but not yet paid to Vijay for the period from 1st March 2023 to 31st March 2023)
-
The journal entry on 5th April 2023 would be:
Vijay's Capital A/c Dr. 2,000 To Bank A/c 2,000 (Interest paid by cheque to Vijay for the period from 1st March 2023 to 31st March 2023)
Please note that the interest on Vijay's loan is charged to the Profit and Loss Appropriation Account at the end of the accounting year.
Similar Questions
Krish and Shail entered into a partnership on 1st October, 2022, with capital contributions of₹ 48,000 and ₹ 36,000 respectively.On 1st January, 2023, Shail advanced a loan of ₹ 12,000 to the firm.The terms of the partnership agreement are as follows:(a) Interest on Capital to be allowed at 12% per annum.(b) Interest on Drawings to be charged @ 10% per annum.(c) Krish to be entitled to a commission of 2% on the turnover.(d) Each partner to get a salary of ₹ 1,200 per month.(v) Profits and losses to be shared in the ratio of 4:3.The turnover for the period under consideration was ₹ 2,00,000.The drawings of the partners were: Krish ₹ 4,000; Shail ₹ 2,000.The profit of the firm for the year ended 31st March, 2023, before providing for any interestwas ₹ 1,10,000.You are required to prepare for the year 2022-23:(i) Profit and Loss Appropriation Account.
If Suresh borrows Rs. 36000 from Mahesh at rate of interest 6% S.I, at the end of four years how much interest Suresh has to pay along with principal amount?Rs. 13500Rs. 13960Rs. 12960Rs. 12500
On May 1, 2018, D borrowed P100,000.00 from C. The loan is payable on or before April 30, 2019 and bears interest at 12% per annum. Which of the following statements is incorrect?1 pointD may pay before April 30, 2019.C may demand payment on April 30, 2019.D may pay on April 30, 2019.C may demand payment before April 30, 2019.
Interest on Partner’s loan is credited to:a) Partner’s Fixed capital account.b) Partner’s Current account.c) Partner’s Loan Account.d) Partner’s Drawings Account
Ajay and Vijay’s investment is in ratio 5 : 2. Ajay gets Rs.3420 as profit after donating 9% of total profit to orphanage.What is Vijay’s share?Rs.4788Rs.3420Rs.5320Rs.1900
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.