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PARTNERSHIP

The document discusses partnership accounting and interest on partner's drawings. It defines interest on drawings as a charge against profits, as drawings are a temporary charge. It provides formulas to calculate interest on drawings in different scenarios, such as regular or irregular drawings. Examples are given to calculate interest on drawings at 12% per annum in various cases involving partners withdrawing different amounts at different frequencies. Finally, an irregular drawings example is provided to calculate interest on drawings for the year ended 31 March 2020.

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Divya Rani
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28 views72 pages

PARTNERSHIP

The document discusses partnership accounting and interest on partner's drawings. It defines interest on drawings as a charge against profits, as drawings are a temporary charge. It provides formulas to calculate interest on drawings in different scenarios, such as regular or irregular drawings. Examples are given to calculate interest on drawings at 12% per annum in various cases involving partners withdrawing different amounts at different frequencies. Finally, an irregular drawings example is provided to calculate interest on drawings for the year ended 31 March 2020.

Uploaded by

Divya Rani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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PARTNERSHIP

Grade 12
4-5-2023
VISION AND MISSION

• VISION: TO BE AN LEADING INSTITUTION PROVIDING


ACADEMIC EXCELLENCE THAT EMPOWERS VALUE BASED
EDUCATION IN UAE .
• MISSION: WE ARE CONTINUALLY INNOVATING
METHODS TO ENHANCE OUR STRENGTHS AND MAXIMIZE
OUR POTENTIALS.
Prior Knowledge:

Explain sole proprietorships and link


to the partnership firm
Chapter : 1

ACCOUNTING FOR PARTNERSHIP


FIRMS
Topic: INTEREST ON PARTNERS
DRAWINGS
Learning Objectives:

 To understand the meaning of partnership.


 To understand the features of partnership
 To analyze the meaning of the partnership deed
 To acquire knowledge about a special aspect of the partnership accounts
Interest on Partner's Capital:
• Interest on capital is to be allowed to the
partners if the same is provided in the
partnership deed and is allowed at the given
rate with reference to time period for which
the capital has been used in the business.
•
Formula: Interest on capital =
Amount of Capital × Rate/100 × Time
Dr Profit and Loss Appropriation Account Cr
.
Particulars The Performa
Amount ofParticulars
Profit and Loss Amount
To Profit and Appropriation
Loss A/c ……. Account is A/c
By Profit and Loss given
(Net as……
(Net loss transferred from Profit transferred from Profit
Profit and follows:
and Loss Account)
By Interest on Drawings:
Loss Account)
A
To Interest on Capitals:
…..
A… B
B… …… ….. ……
To Partners’ Salaries ……
To Partners’ Commissions ……
To Reserve ……
To Profit transferred to:
*A’s Capital A/c …
*B’s Capital A/c … ……
…….. ……..
Note: Interest on partner's loan is to be treated as a charge against
profits
Fixed Capital
Account:
• Under Fixed Capital method, two accounts viz.
capital account and current account for each partner
are maintained. The transactions relating to
introduction or withdrawal of capital are recorded in
Capital Account and other transactions like interest
on capital, salary, interest on drawings, drawings are
recorded in Current Account.
Dr.
,
Partner's Capital Cr.
Account
Particular Rs. Particular Rs.

To cash/bank A/c By balance b / f (OPENING) ****


(withdrawal) **** By cash/bank (additional
To balance **** capital)
****
c/f(CLOSING) By balance c/f
****

**** ****
Dr. .
Partner's Current
Account
Cr.

Particular Rs. Particular Rs.

To balance b/f To **** By balance b/f ****


drawings **** By interest on capital ****
To interest on drawings To **** By salary ****
Profit & Loss A/c (share of By Commission ****
loss) By P&L Appropriation A/c (share of
To balance c/f **** profits)
**** By balance c/f
****
****

**** ****
Fluctuating Capital
Method
• Under the fluctuating capital method, only
one account viz. capital account for each
partner is maintained and all the transactions
relating to a partner are recorded in his
capital account. As a result, the balance in
the Capital Account keeps on fluctuating.
PARTNER’S CAPITAL A/C
Particular Rs. Particular Rs.

To balance b / f **** By balance b/f ****


To cash/bank A/c By cash/bank (additional capital) By
( withdrawl ] interest on capital
**** ****
To drawings By salary
**** ****
To interest on drawings By Commission
**** ****
To Profit & Loss A/c (share By P&L Appropriation A/c (share of
****
of loss) profits)
To balance c/f By balance c/f
****
**** ****
****

**** ****
ASSESSMENT
INTEREST ON PARTNER’S DRAWINGS
• Drawings means the amount withdrawn in cash or in kind, by partners
for their personal use.

• Charge against profit ------Drawings------- interest on drawings---


temporary
• Charge against capital-----withdrawal of capital-----interest on capital----
permanent nature
• When regular drawings are made at regular intervals (1)

I O D----Total drawings *rate/100*average period/12

Average period = Time left after 1st drawings + time left after last drawings
2
Days= average period /365

In the formula of I O D ---- If the average period is in

Weeks =average period /52


WHEN TOTAL DRAWINGS ARE GIVEN AND RATE IS GIVEN P. A
THEN IT IS ASSUMED THAT PARTNER HAS WITHDRAWN THE
AMOUNT IN THE MIDDLE OF EVERY MONTH.

CASE 2
IRREGULAR DRAWINGS
I O D = Total product *rate/100*1/12
Days -1/365
If the calculations are in

Weeks – 1/52
• QUESTUION NO – 1
CALCULATE I OD @ 12 % P.AN IN THE FOLLOWING CASES
CASE-1

Mr. Sonu withdraws Rs .3000 at the end of every second month.


QUESTION NO – 1
CALCULATE I OD @ 12 % P.AN IN THE FOLLOWING CASES

• CASE-2
Mr. Raju withdraws Rs 4000 in the beginning
of the every month only for 8 months
QUESTION NO – 1
CALCULATE I OD @ 12 % P.AN IN THE
FOLLOWING CASES
• CASE-3
• Mr. Shyam withdraws Rs 2000 at the beginning
of every second month only for 8 months and
then Rs 3000 at the end of every month for the
next 4 months.
QUESTION NO – 1
CALCULATE I OD @ 12 % P.AN IN THE FOLLOWING
CASES

• CASE-4
Mr.B withdraws Rs 500 at the beginning of every week for the
first 3 months, Rs 2000 at the end of every quarter for the next 6
months, and Rs 1000 in the middle of every month for the last 3
months
IRREGULAR DRAWINGS
• Calculate IOD @ 12% p.a for the year ended 31.3.2020
DATE AMT WITHDRAWAL

1ST MAY 3000

30TH JUNE 5000

1ST NOV 4000

31ST JAN 6000


HOME WORK
SELF ASSESSMENT
SELF ASSESSMENT YES NO PARTIALLY

I HAVE LEARNED ABOUT THE MEANING OF INTEREST ON


PARTNER’S DRAWINGS
I HAVE LEARNED ABOUT THE PRACTICAL PROBLEMS
ABOUT INTEREST IN PARTNERS DRAWINGS
THANK YOU...........

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