Toggle website search

Blog

Home>
Doubts>
Accountancy

Give one reason why partners are charged interest on drawings.

Post category:Accountancy
Reading time:1 mins read

SOLUTION

Interest on drawings is charged to compensate the partners with less drawings because interest credited to Profit and Loss Appropriation Account will be distributed in profit sharing ratio.

Share this content

Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window
Opens in a new window

Previous PostWhat is the purpose of allowing interest on partners’ capital?

Next PostState the provisions of the Indian Partnership Act., 1932, regarding charging of interest on drawings from a partner when: (a) The firm has a partnership deed; (b) The firm does not have a partnership deed.

If total assets of a firm are Rs. 12,00,000 and total liabilities are Rs. 2,40,000, what will the capitals of P, Q and R if they share profits in the ratio of their capitals and profit-sharing ratio is 1: 2: 3.

September 27, 2022

P and Q were partners in a firm sharing profits and losses equally. Their fixed capitals were Rs. 2,00,000 and Rs. 3,00,000 respectively. The partnership deed provided for interest on capital @ 12% per annum. For the year ended 31st March, 2016, the profits of the firm were distributed without providing interest on capital. Pass necessary adjustment entry to rectify the error. (C.B.S.E. 2017, Outside Delhi)

September 26, 2022

Pass Journal entries in the following cases? (a) Expenses of realisation Rs. 1,500. (b) Expenses of realisation Rs. 600 but paid by Mohan, a partner. (c) Mohan, one of the partners of the firm, was asked to look into the dissolution of the firm for which he was allowed a commission of Rs. 2,000. (d) Motor car of book value Rs. 50,000 taken over by Creditors of the book value of Rs. 40,000 in full settlement.

July 25, 2022

Please Share This Share this content

You Might Also Like

If total assets of a firm are Rs. 12,00,000 and total liabilities are Rs. 2,40,000, what will the capitals of P, Q and R if they share profits in the ratio of their capitals and profit-sharing ratio is 1: 2: 3.

Leave a Reply Cancel reply

Share this content