19. Arun and Arora are partner in a firm sharing profits in the ratio of 5:3. Their fixed capitals on
1.4.2019 were Arun 60,000 and Arora 80,000. They agreed to allow interest on capital @ 12%
p.a. and to charge interest on drawings @ 15% p.a. The profit of the firm for the year ended
31.3.2020 before all above adjustments were 12,600. The drawings made by Arun were 2,000
and by Arora * 4,000 during the year.
Prepare Profit and Loss Appropriation Account of Arun and Arora. Show the calculations clearly.
The interest on capital will be allowed even if the firm incurs loss.
(PLSS ALSO EXPLAIN WHY THE IOD WILL BE CHARGE FOR 6MONTHS ONLY)
Answers
Answer:
hope it helps you...
Explanation:
In the Books of the Firm
P&L Appropriation A/c
Particulars Amount(Rs.) Particulars Amount(Rs.)
To Interest on Capital- By Net Profit 12600
Arun 7200 By Int. on Drawings-
Arora 9600 Arun 150
Arora 300
By Loss Transferred
to Partner Current A/c-
Arun 2344
Arora 3750
16800 16800
*Working Notes:
1) Calculation of Interest on Capital:
Arun = = Rs.7200
Arora = = Rs.9600
2) Calculation of Interest on Drawings:
Arun = = Rs.150
Arora = = Rs.300
3) Loan transferred to Partner Current A/c
Arun = = Rs.2344
Arora = = Rs.1406