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A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.?
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A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00...
Journal Entries for Division of Profit in a Partnership Firm
The following are the journal entries that need to be passed for division of profit in a partnership firm:
1. Interest on Capital
A and B are entitled to receive interest on their capitals at the rate of 6% p.a. The journal entry for the same is:
Interest on A's Capital Account Dr. 18,000
Interest on B's Capital Account Dr. 12,000
To A's Capital Account 18,000
To B's Capital Account 12,000
2. Salary to B
As per the partnership deed, B is entitled to a salary of Rs. 5,000 per month. The journal entry for the same is:
Salary to B Account Dr. 60,000
To B's Capital Account 60,000
3. Profit Sharing Ratio
The profit earned by the firm is to be shared between A and B in the ratio of 5:3. The journal entry for the same is:
Profit and Loss Account Dr. 2,50,000
To A's Capital Account 1,50,000
To B's Capital Account 90,000
To General Reserve Account 10,000
Explanation
The above journal entries represent the division of profit in a partnership firm. The first entry represents the interest on capital that is to be paid to A and B based on their respective capital contributions. The second entry represents the salary to be paid to B as per the partnership deed. The third entry represents the division of profit between A and B in the ratio of 5:3.
The profit and loss account is debited with the total profit earned by the firm during the year. The profit is then divided between A and B based on their profit sharing ratio. A's capital account is credited with his share of profit, and B's capital account is credited with his share of profit and salary.
Finally, a portion of the profit is transferred to the general reserve account to provide for future contingencies and business expansion.
The following are the journal entries that need to be passed for division of profit in a partnership firm:
1. Interest on Capital
A and B are entitled to receive interest on their capitals at the rate of 6% p.a. The journal entry for the same is:
Interest on A's Capital Account Dr. 18,000
Interest on B's Capital Account Dr. 12,000
To A's Capital Account 18,000
To B's Capital Account 12,000
2. Salary to B
As per the partnership deed, B is entitled to a salary of Rs. 5,000 per month. The journal entry for the same is:
Salary to B Account Dr. 60,000
To B's Capital Account 60,000
3. Profit Sharing Ratio
The profit earned by the firm is to be shared between A and B in the ratio of 5:3. The journal entry for the same is:
Profit and Loss Account Dr. 2,50,000
To A's Capital Account 1,50,000
To B's Capital Account 90,000
To General Reserve Account 10,000
Explanation
The above journal entries represent the division of profit in a partnership firm. The first entry represents the interest on capital that is to be paid to A and B based on their respective capital contributions. The second entry represents the salary to be paid to B as per the partnership deed. The third entry represents the division of profit between A and B in the ratio of 5:3.
The profit and loss account is debited with the total profit earned by the firm during the year. The profit is then divided between A and B based on their profit sharing ratio. A's capital account is credited with his share of profit, and B's capital account is credited with his share of profit and salary.
Finally, a portion of the profit is transferred to the general reserve account to provide for future contingencies and business expansion.
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A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.?
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A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.?.
A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A and B started a business on 1⁰ April, 2016 with capitals of Rs. 3,00,000 and Rs. 2,00,000 and interest is to be allowed on capitals @ 6% p.a. Profit sharing ratio between the two respectively. According to the Partnership Deed, B is entitled to salary of Rs.5,000 per month partners is 5:3. During the year, the firm earned a profit of Rs. 2,50,000. Pass Journal entries for division of profits. The firm closes its accounts on 31st March every year.?.
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