Question

1930;
3,01830,
C 1,6191
W R, S and I are partners in a firm. On 1st April, 2017, their capital was 3 20,000;
10,000 and 5,000. Interest is provided @ 4% on Partners' Capital. H is to
receive 500 p.a. as salary. After deducting interest and salary first * 1,000 of
the profit is to be distributed in the ratio of 9:7:4, further 3 1,000 in the ratio of
9: 6:5 and remaining amount to be distributed equally. On 31st March, 2018,
the year's profit was 4,500 before deducting interest and salaries.
Prepare Profit & Loss Appropriation Account and Capital Accounts of the
partners for year 2017-18.
[Ans : Net Profit 2,600; Bal. of Capital a/c : R 21,900; S * 11,250;
H 6,350)​

Answer 1

Calculation of Interest on capital

A = 30000*5% = 1500

B= 20000*5% = 1000

C= 10000*5% = 500

Salary to B = 500*12=6000

Calculation of C's commission = 30000-3000 = 27000*5/100= 1350

Profits to be distributed= 30000-3000-6000-1350 = 19,650

The adjustment entry to be passed is as follows:-

A's Capital A/c Dr. 3675

To B's capital A/c 2895

To C's capital A/c 780

(Being adjustment entry passed)

Table Showing Adjustment To be Made

A B C

Interest on capital 1500 1000 500

Salary 6000

Commission 1350

Profits to be distributed( 19650) 9825 5895 3930

Total 11325 12895 5780

Less: profits wrongly allocated (15000) (10000) (5000)

Adjustments (3675) 2895 780

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