QUESTION NO 15 DK GOEL BACK EXERCISE | PARTNERSHIP FUNDAMENTALS | CLASS 12TH |ACCOUNTS. IN THIS VIDEO YOU WILL LEARN TO CALCULATE THE INTEREST ON CAPITAL
INTEREST ON DRAWINGS
INTEREST ON LOAN.
AND
THEIR JOURNAL ENTRIES.
THANKS AND REGARDS.
DO SHARE WITH YOUR FRIENDS.
INTEREST ON DRAWINGS
INTEREST ON LOAN.
AND
THEIR JOURNAL ENTRIES.
THANKS AND REGARDS.
DO SHARE WITH YOUR FRIENDS.
Category
📚
LearningTranscript
00:00Hello guys, good evening, this is Sonia Setia, your accounts and equity tutor. Again, I am
00:14here in front of you with the question number 15 of D.K. Goyal back exercise partnership
00:21fundamentals. So, this video belongs to class 12 account students and who are having D.K.
00:33Goyal as their textbook for accountancy. So, we were doing back exercise of D.K. Goyal
00:41up to question number 14, we have completed. We have completed questions up to 14. So,
00:49we are starting with the question number 15 that is here in front of you people. Hope the screen
00:57is visible to everyone. So, first of all, we will read the statement and you can read the
01:07statement from your book as well. And otherwise, who don't have D.K. Goyal, they can take the
01:14screenshots from here. So, I am starting with the question number 15. So, Raj, Mehak and Divya
01:23were partners in a firm sharing profits and losses in the ratio of 2 is to 2 is to 1. So,
01:30there were three partners Raj, Mehak and Divya and their peers are 1, 2 is to 2 is to 1. So,
01:42their respective capitals were 6 lakh, 4 lakh and 2 lakh. So, Raj's capital was 6 lakhs and Mehak's
01:52capital was 4 lakhs and Divya's capital was 2 lakhs. The partnership did provide it for the
02:00following. So, number 1, what they are saying, we have to provide IOC at the rate of 8% per annum
02:09interest on capital, rate is 8% and second one, what they are saying interest on drawing, firm
02:19will charge interest on drawing at the rate of 6% per annum, right? And third, thirdly they are
02:27saying interest on partner's loan to the firm at the rate of 5% per annum, right? And during the
02:38year, Raj had withdrawn Rs. 12,000 on 1st October 2021. So, Raj has drawn. So, drawings of Raj are
02:5312,000 which were withdrawn on 1st October. You have to keep in mind the date and the month.
03:02Accordingly, we will calculate IOD, interest on drawings, right? While Mehak withdrew Rs. 60,000
03:12on 1st December. So, Mehak's drawings are here, Rs. 60,000. Again, you have to keep in mind the
03:22proper date which they have provided in the question. On 1st Jan 2022, Divya had given a
03:28loan of Rs. 1,20,000 to the firm. Divya has given a loan of Rs. 1,20,000 on 1st Jan, right? So, what
03:42we are asked to do? Pass the necessary journal entries in the books of the firm for the following
03:49transactions for the year ended 31st March 2022, right? Hope you understood the statement. Firstly,
03:59we will write everything what is given in the question, right? So, let me share the whiteboard
04:06just in a second. We are starting with the answer. So, you can do side by side with me.
04:21So, just give me a second. Yeah. So, good to go. So, first of all, I am writing what is given in
04:36the question. So, there are three partners. Write the name of the three partners. This is question
04:44number 15. Raj, Mehak and Divya. If you note down everything that is given on one page, it will make
05:06the things easier for you people in the exam. So, their PSR is 2, is to 2, is to 1, right?
05:14Profit sharing ratio, right? And their capitals are 6 lakhs, 4 lakhs and 2 lakhs. And rate of
05:32IOC, interest on capital, you will write the full forms in the exams. Interest on capital is 8%
05:43per annum and interest on drawings, IOD is 6% and interest on partner's loan, interest on partner's
06:00loan to the firm is 5%, right? And drawings, write the drawings also. Drawings of Raj, that is 12,000,
06:21rupees 12,000 and date is 1st October 2021, right? And drawings of Mehak, everything is there in the
06:44question. Rupees 60,000 and the date is 1st December 2021, right? And on 1st Jan, on 1st Jan
07:012022, Divya gave loan to the firm of rupees 1,20,000. Now, we will see what all has been said to Gatne.
07:24So, once you can, okay. We have not seen the whole question, just let me go back. So, let us see what all has been asked.
07:50Okay. What all journal entries have been asked from us? Just give me a second guys, give me a second. Yeah.
08:10So, what they are saying, allowing interest on Raj's capital. And on 2nd part, they are saying charging interest on Mehak's drawings.
08:32So, we have to calculate IOD on Mehak's drawings, providing interest on loan given to the firm by Divya. Divya has given loan to the firm, we have to calculate interest on it and give journal entries.
08:47And also pass transfer entries in Profit & Loss account or Profit & Loss appropriation account as the case may be. So, you must be aware that which thing you have to write
09:00in the Profit & Loss account and in the Profit & Loss appropriation account accordingly. Where you have to transfer, IOC, IOD and interest on loan, whether you have to transfer in Profit & Loss or Profit & Loss appropriation, as the case may be.
09:22So, you must be aware that where you have to transfer. So, we have given everything that is given in the question, Raj, Mehak, Divya. Again, I am repeating, the ratio is 2 is to 2 is to 1 and their capitals are 6 lakhs, 4 lakhs and 2 lakhs.
09:49And IOC rate is 8% and IOD rate is 6% and interest on partner's loan to the firm, that is 5%, right? And drawings, Dedi Raj's 12,000, drawings Mehak's 60,000 and Divya has given loan to the firm of 1,20,000, right?
10:09So, we are starting with the first part. They have asked, giving interest on Raj's capital, allowing interest on Raj's capital. So, first we have to calculate the amount before passing the journal entry, right?
10:29So, let's calculate IOC on Raj's capital. So, Raj's capital we have, Raj's capital is 6 lakhs, right? And rate of IOC we know 8%. So, how do we calculate IOC?
10:576 lakhs into 8 by 100, right? Here you don't do anything for months, you will give IOC for full year. So, if you calculate this and you will get 46 is of 48, 48,000.
11:17So, successfully we have calculated interest on capital of Raj's capital, that is 48,000. So, here we will pass the journal entry, whatever we are calculating.
11:39So, interest, when you provide interest on capital, what journal entry will be there? First journal entry will be there, so we will pass the journal entry on the next page. Because we have to pass two journal entries, one of providing interest on Raj's capital and the other one is transferring it, right?
12:01So, first journal entry for providing interest on capital, this you will think from the viewpoint of the firm, right? So, interest on capital is an expense for the firm, interest, right? Interest, account, debit.
12:17Interest on capital, account, debit to Raj's capital. Hope everyone is clear with the journal entries that why we have debited interest on capital. I have told you so many times that how do we pass the journal entries.
12:41Again, if you are not clear with this journal entries, I am repeating again, because interest is an expense for the firm, that's why we have debited this, right? So, interest on capital, account, debit and to Raj's capital.
12:59We know when capital is increasing, we always credit it, right? Remember the rules of passing the journal entries. If not, if you are not aware, you can write me in the comment section. I have made video also on the rules of debit and credit.
13:21You can see that video. Otherwise, we can see it in detail if still if there is an issue, right? So, write the amount 48,000, 48,000. Narration you can write provided interest on capital. Narration is must here in every journal entry.
13:43Otherwise, examiner will deduct your marks. Provided interest on capital of Raj or you can say on Raj's capital, right? So, this was journal entry where we have provided interest on capital on Raj's capital, right?
14:08And further, we are passing the, we are moving towards the second journal entry where we are going to transfer this interest to the profit and loss or profit and loss appropriation account. So, what do you think?
14:25Interest on capital, where do we transfer it? Do we transfer it in the profit and loss account? No, you are wrong. Profit and loss appropriation account is made in partnership. So, you give interest on capital in profit and loss appropriation account, right?
14:56Debit to interest on capital, right? 48,000 amount is same, 48,000. Here, we will write the narration.
15:20Interest on capital, interest on capital transferred to profit and loss appropriation account. I am using the short forms but in exam, you will write the full forms, right?
15:42Hope it's clear. So, we are moving towards the IOD. So, we are moving towards IOD. You can take the screenshot of this slide, this page where we have provided interest on capital on Raj's capital.
16:06Interest on capital debit to Raj's capital and we have transferred this interest on capital to profit and loss appropriation account because remember, we write interest on capital in the debit side of the profit and loss appropriation account because we write all the expenses in the debit side of profit and loss appropriation account
16:32and we write all the incomes on the credit side of the profit and loss appropriation account. So, let's move towards the second part. Second part was charging interest on Mehak's drawings.
16:56This is the second part, right? Here, we are charging interest on Mehak's drawings. First of all, we need to calculate the IOD, interest on drawings. So, Mehak's drawings are of 60,000 and rate of drawings is given that is 6%
17:23and period because Mehak's drawings were drawn on 1st December. So, 1, 12, 2021, 2, 31, March, 2022. So, how many months? You can count the months. December, 10, 12 and March, 4 months, right?
17:50So, here we are going to calculate interest on drawings that is for the 4 months, right? So, let's calculate 60,000 into 6 by 100 into 4 by 12. If you solve this, you will get 1200, right?
18:14So, this we have calculated interest on drawings. Now, let's pass the journal entries for the interest on drawings. So, our first journal entry would be Mehak's capital account debit to interest on drawings.
18:45Account. How much we have calculated? 1200, right? So, right here, 1200, 1200. So, why we have debited Mehak's capital account here? Because we know very well, we are well versed with the concept that whenever our capital is decreasing, we debit it, right?
19:09That's why we have debited Mehak's capital because interest on drawing is decreasing Mehak's capital, right? So, why we have credited interest on drawings here? Because we are thinking, we are doing the accounting from the viewpoint of the firm.
19:31So, interest on drawings is the firm's income and we know, do you remember the rules that whatever our debit all expenses and losses and credit all incomes and gains according to the traditional rule, right?
19:50And if you see according to the modern rule, the incomes and revenues are always credited when they are increasing or when they are accruing to the firm, right?
20:20And what would be the second journal entry? We have been told to transfer it. So, we will transfer it, right? So, let's pass the second journal entry, interest on drawings.
20:37So, where will you write? In profit and loss or in profit and loss appropriation? Where are you going to transfer? Yeah, this time you are right. So, profit and loss appropriation account.
21:07So, we have written interest on drawings in the credit side of profit and loss appropriation because we know all the incomes are written in the credit side of profit and loss appropriation account because this is the income of the firm.
21:23So, this time also you are done, you are clear.
21:53So, we are moving towards the part number 3 that is providing interest on Divya's loan to the firm. Divya had given loan to the firm. We have to calculate interest on it.
22:17So, Divya's loan amount is 120,000 and rate of interest is 5% and period for which we need to provide interest from 1-1-2022 because she has given loan to the first gen.
22:46So, 1-1-2022 and this will become Gen-Feb-March 3 months. So, for 3 months we will calculate interest.
23:08So, calculate here. We can calculate here only. 120,000 into 5 by 100 into 3 by 12. If you solve this, you will get 1500. So, 1500 we have calculated interest on loan.
23:33Now, we are going to pass the journal entries. So, first journal entry would be interest. Again, interest on capital is also expense for the firm. Interest on loan is also expense for the firm.
23:51But can you tell me, can anyone of you tell me the difference? Where will we transfer interest on loan? Ok, let me pass the first journal entry.
24:21So, first of all check here. Interest, as we know, is an expense for the firm. That's why we have debited. Whether it's IOC, interest on capital, whether it's interest on loan, whether it's any type of expense, we'll debit it as per the rules.
24:45So, that's why we have debited interest on loan account. But now, what we have written here. We have not written here Divya's capital account.
24:56Because it will not be credited in Divya's capital account. Whenever the partner gets interest from the firm, it goes to his loan account.
25:10You have to take care of this concept that whatever interest on loan is provided to the partner, it goes to his loan account, not in the capital account.
25:24So, we are increasing Divya's loan account. The firm's liability is increasing towards Divya. So, we have credited Divya's loan account.
25:36So, we have credited Divya's loan account. So, we have credited Divya's loan account. So, we have credited Divya's loan account.
25:55So, what we are going to do in the second journal entry? It will be transferred. But where? Will we do it in profit and loss or in profit and loss appropriation?
26:09We know, we had read three things which we put as a charge in profit and loss. I have made this video. If you are not aware of this concept, you can watch that video.
26:28What is charge and what is appropriation? Because interest on loan is a charge, we are going to transfer it in profit and loss account, not in the profit and loss appropriation account.
26:44So, profit and loss account debit to interest on loan account, 1500, 1500, right? Let's give its narration also. Write the narration.
27:04Interest on loan of Divya transferred to profit and loss account.
27:26So, guys, we have completed this question. I am giving a recap. Again, whatever we have done, just let me go to the first slide.
27:41So, what was the question we had? Raj, Mehak and Divya, they were partners. In 2-2-1 PSR, they have provided and their capitals are also mentioned here.
27:56The rate of IOC is given as 8%, the rate of IOD is 6% and the rate of interest on loan is 5%.
28:11What did we do next? We saw that Raj's drawings were 12,000, the date is given and Mehak's drawings were 60,000 on 1st December.
28:31Divya gave a loan of 1,20,000 to the firm on 1st January. They have asked us to do entries on Raj's capital. For that, we have to calculate IOC which we have calculated directly on Raj's capital.
28:50We have passed the journal entries. First, we have passed two journal entries of interest. One was to provide and the other was to transfer.
29:04Second, we have charged interest on drawings of Mehak which was 60,000 and we have calculated 1200. Then we have passed two journal entries of drawings.
29:19Next, we have calculated interest on loan of 1,500 and accordingly we have passed two journal entries.
29:36Hope the things are clear to everyone. If anyone from you having any doubt, any issue, you can write me in the comment section and guys please subscribe to this channel so that I can bring more informative and meaningful videos for you.
30:01See you in the next video. Till then, stay tuned, take care, bye-bye.