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In this scenario, A and B are equal partners, and the capital amounts are missing. However, based on the information provided, they are allowed interest on their capital at 8% p.a. Let’s go step by step:
Calculate Interest on Capital:
Determine Profit Distribution:
Journal Entries in the Books of A and B:
Interest on Capital:
Debit: Profit and Loss Account (Interest on A’s Capital)
Credit: A’s Capital Account (Interest on Capital)
Debit: Profit and Loss Account (Interest on B’s Capital)
Credit: B’s Capital Account (Interest on Capital)
Distribution of Remaining Profit:
Make sure to calculate the exact interest and remaining profit to pass the correct entries. For more guidance, feel free to visit our website.
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