Question

1: Radha and Raman are partners in a firm sharing
profits and losses in the ratio of 5:2. Capital
contributed by them is Rs. 50,000 and Rs. 20,000
respectively. Radha was given salary of Rs. 10,000
and Raman Rs. 7,000 per annum. Radha advanced
loan of Rs. 20,000 to firm without any agreement to
rate of interest in deed while in deed rate of interest
on capital was mentioned as 6% p.a. Profits for the
year are Rs. 29,400. Prepare Profit and Loss
Appropriation Account for the year ending 31st
March 2015.​

Answer 1

Explanation:

Profit and Loss Appropriation account

For the year ending on 31.03.2015

Dr. Cr.

Particulars Rs. Particulars Rs.

To Interest on Capital:

Radha 3,000

Raman 1,200

To Partner’s Salary

Radha 10,000

Raman 7,000

To Profits transferred to capital A/cs of:

Radha 5,000

Raman 2,000

4,200

17,000

7,000

By Profit and Loss A/c

(Net Profits)29,400

Less: Interest

On Radha’s loan 1,200

28,200

28,200 28,200

When appropriation are more than available profits

In such case available profits are distributed in the ratio of appropriation.