A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1st April, 2021, their capitals were: A  ` 50,000 and B  ` 30,000. During the year ended 31st March, 2022 they earned a net profit of  ` 50,000. The terms of partnership are:
(a) Interest on capital is to allowed @ 6% p.a.
(b) A will get a commission @ 2% on turnover.
(c) B will get a salary of  ` 500 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A  ` 8,000 and B  ` 6,000. Turnover for the year was  ` 3,00,000.
After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partners' Capital Accounts.

Profit and Loss Appropriation Account for the year ended 31st March, 2022
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on  Capital:			Profit and Loss A/c (Net Profit)	50,000
A’s Capital A/c	3,000
B’s Capital A/c	1,800	4,800
B’s Salary (500 × 12)		6,000
Partner’s  Commission
A’s Capital A/c	6,000
B’s Capital A/c	1,581	7,581
Profit transferred to:
A’s Capital A/c	23,714
B’s Capital A/c	7,905	31,619
		50,000		50,000

 

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A ( `)	B ( `)	Particulars	A ( `)	B ( `)
Drawings A/c	8,000	6,000	Balance b/d	50,000	30,000
			Interest on Capital A/c	3,000	1,800
			Commission A/c	6,000	1,581
			Salary A/c		6,000
Balance c/d	74,714	41,286	P/L Appropriation A/c	23,714	7,905
	82,714	47,286		82,714	47,286

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on A’s capital=50,000×6/100=3000

Interest on B’s capital=30,000×6/100=1,800

WN 2 Calculation of Commission to Partners

A’s commission = 2% on turnover

=3,00,000×2/100=6,000

Commission to B = 5% on Profits after all Expense including such Commission

Profits after all expense = 50,000 -` 4,800 -` 6,000 -` 6,000 = ` 33,200

B’s commission= Profit after all expenses×Rate of commission/100+Rate

33.200×5/105=1,581 (approx.)

WN 3 Calculation of Profit Share of each Partner

Profit available for Distribution = 50,000 -` 4,800- ` 6,000 -`7,581 = ` 31,619

Profit sharing ratio = 3 : 1

A’s profit share= 31,619×3/4=23,716

B’s profit share= 31,619×1/4=7,905

 

A, B and C were partners in a firm having capitals of  ` 50,000 ;  ` 50,000 and  ` 1,00,000 respectively. Their Current Account balances were A:  ` 10,000; B:  ` 5,000 and C:  ` 2,000 (Dr.). According to the Partnership Deed the partners were entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of  ` 12,000 p.a. The profits were to be  divided as:
(a) The first  ` 20,000 in proportion to their capitals.
(b) Next  ` 30,000 in the ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm earned net profit of  ` 1,72,000 before charging any of the above items.
Prepare Profit and Loss Appropriation Account and pass necessary Journal entry for the appropriation of profits.

Profit and Loss Appropriation Account
Dr.							Cr.
Particulars			( `)	Particulars			( `)
Interest on  Capital:				Profit and Loss A/c (Net Profit)			1,72,000
A’s Current A/c		5,000
B’s Current A/c		5,000
C’s Current A/c		10,000	20,000
Salary to C			12,000
Profit transferred to:
A’s Current A/c		50,000
B’s Current A/c		44,000
C’s Current A/c		46,000	1,40,000
			1,72,000				1,72,000
Journal Entries
Date	Particulars					L.F.	Debit  ( `)	Credit  ( `)
	Interest on Capital A/c				Dr.		20,000
	To A’s Current A/c							5,000
	To B’s Current A/c							5,000
	To C’s Current A/c							10,000
	(Interest on partners’ capital allowed to partners)
	Salary A/c				Dr.		12,000
	To C’s Current A/c							12,000
	(Salary allowed to C)
	Profit and Loss Appropriation A/c				Dr.		1,40,000
	To A’s Current A/c							50,000
	To B’s Current A/c							44,000
	To C’s Current A/c							46,000
	(Profit available for distribution transferred to partners’ current accounts)

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on A’s capital=50,000×10/100=5,000

Interest on B’s capital=50,000×10/100=5,000

Interest on C’s capital=1,00,000×10/100=10,000

 

WN 2 Calculation of Profit Share of each Partner

Profits available for Distribution = 1,72,000 -` 20,000- ` 12,000 = ` 1,40,000

1. Distribution of first ` 20,000 in the Capital Ratio i.e. 1:1:2

A’s profit share=20,000×1/4=5,000

B’s profit share=20,000×1/4=5,000

C’s profit share=20,000×2/4=10,000

2. Distribution of Next ` 30,000 in the ratio of 5:3:2

A’s profit share=30,000×5/10=15,000

B’s profit share=30,000×3/10=9,000

C’s profit share=30,000×2/10=6,000

3. Remaining Profit available for distribution = ` 1,40,000 -` 20,000 -` 30,000 = ` 90,000

This profit of ` 90,000 is to be shared equally by the partners.

Profir Share of  A,B,C each =90,000 ×1/3=30,000

Therefore,

Total Profit Share of A = 5,000 + 15,000 + 30,000 = ` 50,000

Total Profit Share of B = 5,000 + 9,000 + 30,000 = ` 44,000

Total Profit Share of C = 10,000 + 6,000 + 30,000 = ` 46,000

 

Amit, Binita and Charu are three partners. On 1st April, 2021, their Capitals stood as: Amit  ` 1,00,000, Binita  ` 2,00,000 and Charu  ` 3,00,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amit would get a salary of  ` 10,000 per month,
(c) Binita would receive commission @ 5% of net profit after deduction of commission, and
(d) 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2022 was  ` 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

Profit and Loss Appropriation Account for the year ended March 31, 2022
Dr.					Cr.
Particulars			( `)	Particulars	( `)
Interest on Capital:				Profit and Loss A/c (Net Profit)	5,00,000
Amit’s Capital A/c	5,000
Binita’s Capital A/c	10,000
Charu’s Capital A/c	15,000		30,000
Salary to Amit (10,000 × 12)			1,20,000
Commission to Binita			23,810
General Reserve			50,000
Profit transferred to:
Amit’s Capital A/c		92,063
Binita’s Capital A/c		92,063
Charu’s Capital A/c		92,064	2,76,190
			33,360		33,360

 

Partners’ Capital Accounts
Dr.					Cr.
Particulars	Amit	Binita	Charu	Particulars		Amit	Binita	Charu
				Balance b/d		1,00,000	2,00,000	3,00,000
				Interest on Capital A/c		5,000	10,000	15,000
				Salary A/c		1,20,000	–	–
				Commission		–	23,810	–
Balance c/d	3,17,063	3,25,873	4,07,064	P/L Appropriation A/c		92,063	92,063	92,064
	3,17,063	3,25,873	4,07,064			3,17,063	3,25,873	4,07,064

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on Amit=1,00,000×5÷100=5,000

Interest on Binita=2,00,000×5÷100=10,000

Interest on Charu=3,00,000×5÷100=15,000

 

WN 2 Calculation of Commission to Binita

Commission to Binita = 5% on Net Profits after Commission
Commission to Binita=Net Profit ×Rate100+Rate=5,00,000×5÷105=` 23,810

 

WN 3 Calculation of Amount to be transferred to General Reserve

Amount for General Reserve = 10% of Profit

=5,00,000×10÷100=` 50,000

WN 4 Calculation of Profit Share of each Partner

Profit available for Distribution = 5,00,000 - 30,000 - 1,20,000 - 23,810 - 50,000

= ` 2,76,190
Profit share of Amit, Binita and Charu each = 2,76,190×1÷ 3= ` 92,063

 

1st April, 2018 were ` 9,00,000, `5,00,000 and ` 4,00,000 respectively. On 1st November, 2018, Yadu gave a loan of `80,000 to the firm, as per the partnership agreement.

(i) The partners were entitled to an interest on capital @ 6% p.a.

(ii)Interest on partners' drawings was to be charged@ 8% p.a.

The firm earned profit of `2,53,000 (after interest on Yadu's Loan) during the year 2018-19. Partners

drawings for the year amounted to:

Yadu- `80,000, Vidu- `70,000 and Radhu- `50,000.

Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2019.

 

	Profit and Loss Appropriation Account
Dr.							Cr.
Particulars			`	Particulars			`
Interest on Capital:				Profit and Loss A/c (Net Profit)			2,53,000
Yadu’s Capital A/c Vidu’s Capital A/c		54,000 30,000		Interest on Capital:
Radhu’s Capital A/c		24,000	1,08,000	Yadu’s Capital A/c Vidu’s Capital A/c		3.200 2,800
				Radhu’s Capital A/c		2,000	8,000
Profit transferred to:
Yadu’s Capital A/c Vidu’s Capital A/c		61,200 45,900
Radhu’s Capital A/c		48,900	1,53,000
			2,61,000				2,61,000

Working notes:

WN1 Calculation of Interest on Capital

Yadu =9,00,000×6/100=54,000

Vidu=5,00,000×6/100=30,000

Radhu =4,00,000×6/100=24,000

 

WN2 Calculation of Interest on Drawings

Yadu =80,000×8/100×6/12=3,200

Vidu=70,000×8/100×6/12=2,800

Radhu =50,000×8/100×6/12=2,000

 

WN3 Distribution of profit (4:3:3)

Yadu =1,53,000×4/10=61,200

Vidu =1,53,000×3/10=45,900

Radhu =1,53,000×3/10=45,900

 

Sajal and Kajal are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2021 their Capitals were: Sajal –  ` 50,000 and Kajal –  ` 40,000.
Prepare Profit and Loss Appropriation Account and the Partners' Capital Accounts at the end of the year after considering the following items:
(a) Interest on Capital is to be allowed @ 5% p.a.
(b) Interest on the loan advanced by Kajal for the whole year, the amount of loan being  ` 30,000.
(c) Interest on partners' drawings @ 6% p.a. Drawings: Sajal  ` 10,000 and Kajal  ` 8,000.
(d) 10% of the divisible profit is to be transferred to Reserve.
Net profit for the year ended 31st March, 2022 is  ` 68,460.
Note: Net profit means net profit after debit of interest on loan by the partner.

Profit and Loss Account for the year ended 31st March, 2022
Dr.			Cr.
Particulars	( `)	Particulars	( `)
Interest on Kajal’s loan@ 6% p.a.	1,800	Profit	70,260
Profit transferred to P/L Appropriation A/c	68,460
	70,260		70,260

 

Profit and Loss Appropriation Account for the year ended 31st  March,  2022
Dr.					Cr.
Particulars		( `)	Particulars		( `)
Interest on Capital A/c:			Profit and Loss A/c		68,460
Sajal’s Capital A/c	2,500
Kajal’s Capital A/c	2,000	4,500	Interest on Drawings A/c:
			Sajal’s Capital A/c	300
Reserve		6,450	Kajal’s Capital A/c	240	540
Profit transferred to:
Sajal’s Capital A/c	38,700
Kajal’s Capital A/c	19,350	58,050
		69,000			69,000

 

Partners’ Capital Accounts
Dr.			Cr.
Particulars	Sajal ( `)	Kajal ( `)		Particulars	Sajal ( `)	Kajal ( `)
Drawings A/c	10,000	8,000		Balance b/d	50,000	40,000
Interest on Drawings A/c	300	240		Interest on Capital A/c	2,500	2,000
				P&L Appropriation A/c	38,700	19,350
Balance c/d	80,900	53,110
	91,200	61,350			91,200	61,350

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on Sajal’s capital=50,000×5/100=2,500

Interest on Kajal’s capital=20,000×5/100=2,000

 

WN 2 Calculation of Interest on Drawings

Interest on Sajal’s Drawing=10,000×6/100×6/12=300

Interest on Kajal’s Drawing=8,000×6/100×6/12=240

 

WN 3 Calculation of Amount to be transferred to Reserve

Amount for Reserve = 10% of Divisible Profit

Divisible Profit = Profit + Interest on Drawings - ` Interest on Capital

= 68,460 + 540 - 4,500 = ` 64,500

Amount of reserve =64,500×10/100=6,450

 

WN 4 Calculation of Profit Share of each Partner

Profit available for Distribution = 68,460 + 540 – (` 4,500+ ` 6,450) = ` 58,050

Profit sharing ratio = 2 : 1

Sajal’s profit share = 58,050×2/3=38700

kajal’s profit share = 58,050×1/3=19350