X and Y are partners in a firm. X is entitled to a salary of  ` 10,000 per month and commission of 10% of the net profit after partners' salaries but before charging commission. Y is entitled to a salary of  ` 25,000 p.a. and commission of 10% of the net profit after charging all commission and partners' salaries. Net profit before providing for partners' salaries and commission for the year ended 31st March, 2023 was ` 4,20,000. Show distribution of profit.

Answer:

Profit and Loss Appropriation Account for the year ended March 31, 2023
Dr.				Cr.
Particulars			( `)	Particulars	( `)
Partners’ Salary:				Profit and Loss A/c (Net Profit)	4,20,000
X (10,000 × 12)	1,20,000
Y	25,000		1,45,000
Partners’ Commission:
X’s Capital A/c		27,500
Y’s Capital A/c		22,500	50,000
Profit transferred to:
X’s Capital A/c	1,12,500
Y’s Capital A/c	1,12,500		2,25,000
			4,20,000		4,20,000

Working Notes:

WN 1Calculation of Commission

Commission to X = 10% of Net Profit after partners’ salaries but before charging such commission

Profit after Partners’ Salaries = 4,20,000` 1,45,000 =  ` 2,75,000

Commission to X	= Profit after Partners’ Salaries × Rate of commission / 100
	= 2,75,000 ×  10 /100= 27,500

Commission to Y = 10% of Net Profit after charging Commission and Partners’ Salaries

Profit after commission and partners’ salaries = 4,20,000-` 1,45,000-` 27,500 =  ` 2,47,500

Commission to Y	= Profit after commission and partners’ salaries × Rate of commission / 100+Rate
	= 2,45,500 ×  10 /100+10= 22,500

WN 2Calculation of Profit Share of each Partner

Profit available for distribution = 4,20,000-` 1,45,000 -` 50,000 =  `2,25,000

Profit sharing ratio = 1 : 1

 Profit share of each X and Y = 2,25,000× 1/2

 

Ram and Mohan, two partners, drew for their personal use `1,20,000 and  ` 80,000. Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest chargeable from each partner?

Answer:

In this question, date of drawings made by the partners is not given. Therefore, interest on drawings is calculated on average basis for a period of six months.

Interest on Ram’s Drawings = 1,20,000× 6/ 100×6/12=3,600

Interest on Mohan’s Drawings = 80,000× 6/ 100×6/12=2,400

 

Brij and Mohan are partners in a firm. They withdrew ` 48,000 and ` 36,000 respectively during the year evenly in the middle of every month. According to the partnership agreement, interest on drawings is to be charged @ 10% p.a.
Calculate interest on drawings of the partners using the appropriate formula.

Answer:

Since, the drawings are made evenly at the middle of every month, therefore interest on drawings is calculated for a period of six months.

Interest on Brij's Drawings= `. 48,000×10/100×6/12= `. 2,400

Interest on Mohan's Drawings= `. 36,000×10/100×6/12= `. 1,800

 

Dev withdrew  `10 000 on 15th day of every month Interest on drawings was to be charged @ 12% per annum. Calculate interest oh Dev's Drawings. (CBSC 2019)

 

Answer;

Interest on Dev’s Drawings=10,000×12=1,20,000×12/100×6/12=7,200

Note ; Interest on drawing will be calculated for 6 month as average ,because same amount withdrawn in the middle of every month during the year

 

One of the partners in a partnership firm has withdrawn `9,000 at the end of each quarter, throughout the year. Calculate interest on drawings at the rate of 6% per annum.

Answer:

Amount of Drawings =  ` 9,000 per quarter
Annual Drawings=  ` (9,000 × 4) =  ` 36,000
Rate of Interest on Drawings = 6% p.a.

Average Period	=	(Months remaining after the first drawings + Months remaining after the last drawings)/2
	=	(9 + 0)/2 = 4.5 months
Interest on Drawings	=	(Annual drawings × Rate of Drawings/100 × Average Period/12)
	=	(36,000 × 6/100 × 4.5/12) =  ` 810