X, Y and Z are partners in a firm sharing profits in 2
: 2 : 1 ratio. The fixed capitals of the partners were : X `5,00,000; Y ` 5,00,000 and
Z ` 2,50,000
respectively. The Partnership Deed provides that interest on capital is to be
allowed @ 10% p.a. Z is to be allowed a salary of `
2,000 per month. The profit of the firm for the year ended 31st March, 2023
after debiting Z's salary was
`
4,00,000.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and
Loss Appropriation Account 

Dr.



Cr. 

Particulars 
` 
Particulars 
` 

Interest on Capital: 

Profit and Loss A/c 
4,00,000 

X’s Capital A/c 
50,000 




Y’s Capital A/c 
50,000 




Z’s Capital A/c 
25,000 
1,25000 



Profit transferred to: 




X’s Capital A/c 
1,10,000 




Y’s Capital A/c 
1,10,000 




Z’s Capital A/c 
55,000 
2,75,000 




4,00,000 

4,00,000 






Working Notes:
WN 1 Salary to Z
has not been debited to Profit and Loss Appropriation Account. This is because
Profit of ` 4,00,000 is given after adjusting the Z’s salary.
WN 2Calculation
of Interest on Capital
Interest on X^' s
Capital=5,00,000×10/100=50,000
Interest on Y's Capital=5,00,000×10/100=50,000
Interest on Z' s
Capital=2,50,000×10/100=25,000
WN 3Calculation
of Profit Share of each Partner
Divisible of Profit after Interest on Capital = ` 4,00,000`1,25,000 = ` 2,75,000
Profit sharing ratio = 2 : 2 : 1
Profit share of
X' s =5,00,000×2/5=1,10,000
Profit share of
Y' s =5,00,000×2/5=1,10,000
Profit share of
Z' s=5,00,000×1/5=55,000
Question 17:
X and Y are partners sharing profits in the ratio of 3
: 2 with capitals of ` 8,00,000 and ` 6,00,000
respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an
annual salary of ` 60,000 which
has not been withdrawn. Profit for the year ended 31st March, 2023 before
interest on capital but after charging Y's salary amounted to `
2,40,000.
A provision of 5% of the profit is to be made in respect commission to the
manager. Prepare an account showing the allocation profits.
Answer:
Profit and
Loss Account 

Dr. 


Cr. 
Particulars 
( `) 
Particulars 
( `) 
Manager’s Commission (3,00,000×5%) 
15,000 
Profit and Loss A/c 
2,40,000 


Y’s Salary 
60,000 
Profit transferred to Profit and Loss 



Appropriation A/c 
2,85,000 



3,00,000 

3,00,000 




Profit and
Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
( `) 
Particulars 
( `) 

Salary to Y 
60,000 
Profit and Loss Adjustment A/c 
2,85,000 

Interest on Capital: 

(After manager’s commission) 


X’s Capital A/c 
40,000 



Y’s Capital A/c 
30,000 
70,000 


Profit transferred to: 




X’s Capital A/c 
93,000 



Y’s Capital A/c 
62,000 
1,55,000 



2,85,000 

2,85,000 





Working Notes:
WN 1Calculation of
Manager’s Commission
Profit for making Managers’ Commission = 2,40,000
+ 60,000 (Y’s Salary) = `3,00,000
Manager's Commission=₹3,00,000×5/100=₹15,000
WN 2Calculation
of Interest on Capital
Interest on X's Capital A/c=₹8,00,000×5/100=₹40,000Interest on Y's Capital A/c=₹6,00,000×5/100=₹30,000
WN 3Calculation of
Profit Share of each Partner
Profit available for distribution = 2,85,000 ` 60,000  ` 70,000 = `1,55,000
X's Share of Profit=₹1,55,000×3/5=₹93,000
Y's Share of Profit=₹1,55,000×2/5=₹62,000
Question
18;
Atul and Mithun
are partners sharing profits in the ratio of 3: 2
Balances as on 1st April 2022 were as follows:
Capital Accounts (fixed): Atul `5,00,000
and Mithun `6,00,000
Loan Accounts: Atul  `3,00,000
(Cr.) and Mithun  `2,00,000 (Dr.)
It was agreed to allow and charge interest @ 8% p.a. Partnership Deed
provided to allow interest on capital @ 10% p.a. Interest on Drawings was
charged `5,000 each.
Profit before giving effect to above was `2,28,000
for the year ended 31st March, 2023.
Prepare Profit and Loss Appropriation Account.
Answer;

Profit and Loss Appropriation Account 

Dr. 



Cr. 

Particulars 
` 
Particulars 
` 

Interest on Capital: 

Profit and Loss A/c (Net Profit) 
2,20,000 

Atul’s Current A/c 
50,000 

Interest on Drawings: 


Mithul’s Current A/c 
60,000 
1,10,000 
Atul’s Current A/c 
5,000 




Mithul’s Current A/c 
5,000 
10,000 

Profit transferred to: 




Atul’s Current A/c 
72,000 



Mithul’s Current A/c 
48,000 
1,20,000 



2,30,000 
2,30,000 





Working Notes:
WN1Profit After
allowed and charged Atul and Mithul
Respectively
2,28,000 24,000 +16,000 =
2,20,000
WN2interest
allowed on loan given by Atul
Interest on
loan =3,00,000×8/100 = 24,000
WN3interest Charged
on loan given to Mithul
Interest on
loan=2,00,000×8/100=16,000
WN4Calculation of
Interest on Capital
Interest on Atul’s loan=5,00,000×10/100=50,000
Interest on Mithul's loan=6,00,000×10/100=60,000
WN5 Calculation of
Profit Share of each Partner
Profit Share ofAtul =1,20,000×3/5=72,000
Profit Share ofMithul =1,20,000×2/5=48,000
Question 19:
Reema and Seema
are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly
salary of ` 15,000 each,
Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be
charged @ 10% p.a. Their capitals were ` 5,00,000 each and drawings during the year were ` 60,000 each.
The firm incurred a loss of ` 1,00,000 during the year ended 31st March, 2023.
Prepare Profit and Loss Appropriation Account for the year ended 31st March,
2023
Answer:
Profit and
Loss Appropriation Account for the year
ended March 31, 2023 

Dr. 

Cr. 

Particulars 
` 
Particulars 
` 


Profit and Loss A/c (loss) 
1,00,000 
Interest on Drawings A/c: 





Reema’s Capital A/c 
3,000 





Seema’s Capital A/c 
3,000 
6,000 




Loss transferred to 





Reema’s Capital A/c 
47,000 





Seema’s Capital A/c 
47,000 
94,000 



1,00,000 

1,00,000 

















Note: Since the firm has incurred loss,
no interest on capital and salary will be allowed to the partners. However,
interest on drawings will be charged from each of them @ 10% p.a. on the
amounts withdrawn by them for an average period of six months.
Question 20:
Bhanu and Partab
are partners sharing profits equally. Their fixed capitals as on 1st April,
2022 are ` 8,00,000 and ` 10,00,000
respectively. Their drawings during the year were `
50,000 and ` 1,00,000
respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a.
and interest on drawings is to be charged @ 15% p.a. Net Profit for the year
ended 31st March, 2023was ` 1,20,000.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and
Loss Appropriation Account for the year
ended March 31, 2023 

Dr. 


Cr. 

Particulars 
( `) 
Particulars 
( `) 

Interest on Capital A/c: 

Profit and Loss A/c 
1,20,000 

Bhanu’s Current A/c 
80,000 

Interest on Drawings A/c: 


Partap’s Current A/c 
1,00,000 
1,80,000 
Bhanu’s Current A/c 
3,750 




Partap’s Current A/c 
7,500 
11,250 



Loss transferred to 




Bhanu’s Current A/c 
24,375 




Partap’s Current A/c 
24,375 
48,750 







1,80,000 

1,80,000 






Ts Grewal Solution 20232024
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Class 12 / Volume – I