Question

2. Shiva and Basava are partners sharing profits in the ratio of 2:1 with capitals of
25,000 and 15,000 respectively. Interest on capital is agreed 26% p.a. Basava
is to be allowed an annual salary of 1,500. During the year 2015-16, they
earned the profits of 10,000. A provision of 2000 is to be made in respect
of commission to the manager Interest on drawings being; Shiva-31,500 and
Basava 31000.
Prepare Profit and Loss Appropriation Account.​

Answer 1

Explanation:

Calculation of interest on capital

Interest on capital is to be calculated on the capitals at the beginning for the relevant period. ...

Tutorial note: If capital at the beginning is not given, then it can be calculated as below:

Mannan and Ramesh share profits and losses in the ratio of 3:1. ...

Interest on capital = Amount of capital x Rate of interest.

Answer 2

Commission to manager of firm , including any provision thereof shall be shown under P & L of firm itself & not in Appropriation a/c.