Smt.

Rukmanrani Education Foundation

WISDOM HIGH INTERNATIONAL SCHOOL – NASHIK

Revision worksheets/Worksheets/Question Bank

Academic year- 20 21 DI No. ACA/CMN/DI/12
Location: GOC Rev: 00 Date:01.01.2020 Section: All Boards

FUNDAMANTALS OF PARTNERSHIP
Journal Entries for various items shown in profit and loss Appropriation accounts
 For interest on capital:
a) Interest on capital A/c Dr.
To Partners Capital / Current A/c
(Being Interest allowed @ ----% P.a.) [Adjustment Entry]
b) Profit and Loss Appropriation A/c Dr.
To Interest on Capital A/c
(Being interest transferred to Profit and loss App A/c) [closing entry]
 For Interest on drawings:
a) Partner’s capital/current Account Dr
To Interest on drawings A/c.
(Being interest on drawings charged @----% P.a.) [Adjustment Entry]
b) Interest on drawings A/c Dr.
To Profit and Loss Appropriation A/c
(Being interest on Drawings transferred to P & L App A/c) [closing entry]
 For salary or commission payable to partner:
a) Partners salary/commission A/c Dr
To Partners Capital/current A/c
(Being salary / commission allowed to partners) [Adjustment Entry]
b) Partner’s capital/current Account Dr
To Partners salary/commission A/c.
(Being salary/commission transferred ) [closing entry]
 Transferring profit to reserve
a) Profit and Loss Appropriation A/c Dr
To Reserve A/c
(Being profit transferred to reserve)
 Transferring residual profit to Partners a/c
a) Profit and Loss Appropriation A/c Dr
To Partners Capital / Current A/c

Basis Fixed Capital Accounts Fluctuating Capital Accounts

Change in The balance of capital account The balance of capital changes due to
capital normally remains fixed except in appropriations.
case of withdrawal of capital
Accounts Capital account and current account Only capital account is maintained
maintained

Basis Drawings against Capital Drawings against Profits

debit Debited to capital account Debited to drawings account
Part Part of capital account Part of current accounts
Effect Reduces the capital of the firm Reduces the profit of the firm
Note: in absence of any instruction the partners capital account should be prepared under
fluctuating capital account method.
Interest on loan advanced by Partners:
 Interest on partners loan A/c Dr
To Partners Loan A/c
(Being interest allowed to partner)
 Profit and loss A/c Dr
To interest on partners loan A/c
(Being interest on loan transferred to P & L A/c)