Question

4. Arun & Varun are the partners sharing profits & losses in the ratio of 2:1 Their
opening capital being 80,000 & 50,000 respectively. They carned a profit of
320,000 before allowing the following:
a) Interest on capital @ 8% p.a..
b) Interest on drawings: Arun 2,000
Varun 2,500
c) Salary to Arun 3,000 p.a.
d) Commission to Varun 2,000 p.a.
Prepare P & L Appropriate A/C​

Answer 1

Answer:

4. Arun & Varun are the partners sharing profits & losses in the ratio of 2:1 Their

opening capital being 80,000 & 50,000 respectively. They carned a profit of

320,000 before allowing the following:

a) Interest on capital @ 8% p.a..

b) Interest on drawings: Arun 2,000

Varun 2,500

c) Salary to Arun 3,000 p.a.

d) Commission to Varun 2,000 p.a.

Prepare P & L Appropriate A/C

Answer 2

Answer:

Net profit transferred to partner's capital a/c is Rs.21100- Rs.14067 to Arun and Rs, 7033 to Varun, according to their profit-sharing ratio of 2:1.

Explanation:

Given:

Profit-sharing ratio= 2:1

Opening capital:

Arun= Rs.80000

Varun= Rs.50000

Profit for the year= Rs.320000

Rate of interest on capital= 8%

Interest on drawings:

Arun= Rs.2000

Varun= Rs.2500

Salary to Arun= Rs.3000 p.a.

Commission to Varun= Rs.2000 p.a.

Explanation:

Refer to the file attached for Profit & Loss Appropriation A/c.

Working Notes:

Calculation of interest on capital:

Arun= 8%×80000

= Rs.6400

Varun= 8%×50000

= Rs.4000

Salary to Arun= Rs.3000 and Commission to Varun= Rs.2000

Interests on drawings for Arun and Varun, respectively, are Rs.2000 and Rs.2500

∴ Net Profit to be distributed between Arun and Varun=

Profit+ Interest on drawings- Interest on capitals- Commission & Salary

= 32000+4500-10400-5000

= Rs.21100

∴ Arun's share of profits= $\frac{2}{3}$×$21100$

= Rs.14067 (approx)

Similarly, Varun's share of profits= $\frac{1}{3}$×$21100$

= Rs.7033 (approx)