Question 46:
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.
Answer:
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
Question 47:
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.
Answer:
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 










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
Question 48:
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.
Answer:
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
Question 49: Yadu, Vidu and Radhu were partners in a
firm sharing profits in the ratio of 4:3:3. Their fixed capitals
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 201819. 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.
Answer:

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
Question 50:
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.
Answer:
Profit and Loss Account 

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 

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