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 Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of  ₹ 60,000 which has not been withdrawn.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, 2026 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 for the year ended 31st March 2026
Dr.			Cr.
Particulars	( ₹)	Particulars	( ₹)
Manager’s Commission (3,00,000×5%)	15,000	Profit and Loss A/c (Net Profit after Y’s salary)	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 for the year ended 31st March 2026
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

 

Atul and Mithun are partners sharing profits in the ratio of 3: 2

Balances as on 1st April 2025 were as follows:

Loan Accounts: Atul - ₹3,00,000 (Cr.) and Mithun - ₹2,00,000 (Dr.)

Capital Accounts (fixed): Atul- ₹5,00,000 and Mithun- ₹6,00,000

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, 2026.

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

 

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, 2026.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2026

Answer:

Profit and Loss Appropriation Account for the year ended March 31, 2026
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.

 

Bhanu and Partab are partners sharing profits equally. Their fixed capitals as on 1st April, 2025 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, 2026 before giving effect to the above was  ₹ 1,20,000.
Prepare Profit and Loss Appropriation Account.

Answer:

Profit and Loss Appropriation Account for the year ended March 31, 2026
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

 

Fixed Capital

Amit and Sumit entered into partnership on 1st April, 2025 contributing ₹1,50,000 and  ₹ 2,50,000 respectively towards capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of ₹1,00,000 for the year ended 31st March,2026.
Pass the Journal entry for interest on capital.

Answer:

Journal
Date	Particulars		L.F.	Debit  ( ₹)	Credit ( ₹)
2026
March 31	Profit & Loss Appropriation A/c	Dr.		40,000
	To Amit’s Current A/c				15,000
	To Sumit’s Current A/c				25,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Working Notes:

 

WN1: Calculation of Interest on Capital:
Amit's Interest on Capital=1,50,000×10/100=₹ 15,000

Sumit's Interest on Capital=2,50,000×10/100=₹ 25,000