General query on accounts

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RAJESH KHANNA

SALES CUM ACCOUNT EXECUTIVE

148 Points Joined August 2014

A New Partnership firm has been formed by the Name Aaditya Engineering on 01.04.2016 with Two Partener A the Husband and B the Wife with 90% share of A and 10% share of B. The capital Introduced in Business on 01.04.2016 is Rs. 1,00,000/-. When the Interest on Capital Entry will be passed and at what rate of iNTEREST. and what will be the Journal entry for Interest on Capital. Furthermore Partnership Firm has got loan of about 5,00,000/- from A'S Personal Account from 01.04.2016 till 31.05.2016. When we will pass journal entry for Interest on Loan and at what rate .What will be the journal entry for Interest on Loan Account. Kindly clarify this issue immediately as I have recently joined this New Partnership firm as Jr. Account Assistant.

Replies (2)

CMA Poornima Madhava

CMA

13117 Points Joined May 2009

Rate of interest (on capital/loan) shall be as per partnership deed. However, maximum deduction of interest that will be allowed for firm under income tax act shall be @ 12% pa.
Journal entry for interest on capital/loan: Interest on capital/loan Dr To Capital (or current/loan) a/c as you maintain
You may pass journal for interest on loan for 2 months (apr & may) after 31st May at any time before end of FY or payment of interest, whichever is earlier.

Hope this is clear.