7. X and Y are partners in a firm sharing profits and losses in the ratio of 7:3. According to the partnership deed, X was to
be paid salary of 3,000 per month and Y was to get a bonus of 24,000 per annum. Interest on capital was to be allowed
@ 10% per annum and interest on drawings was to be charged @ 8% per annum. Interest on X's drawings was 1,800 and
on Y's drawings was 1,200. Their fixed capitals were * 2,40,000 and 90,000 respectively. The firm earned a profit of
1,50,000 for the year ended 31.3.2012. Prepare Profit and Loss Appropriation Account. (Ans. Divisible profit 60,000)
2
Answers
ANSWER
Calculation of profit before Z's salary and Interest on loan
Year 2014-15 2015-16 2016-17 2017-18
profit/loss 590000 626000 (40000) 780000
Add:-Salary 90000 90000 90000 90000
Add:-Interest on Z's loan 18000 18000 18000 18000
Profit before Z's salary
and Interest on loan 698000 734000 68000 888000
Total profit for 4 years = 2388000
Calculation of interest on capital = 200000*6% = 12000
Interest on capital for 4 years= 12000*4=48000
Profit after Z's interest on capital = 2388000-48000
= 2340000
Z's share of profit= 2340000/6=390000
Z's share as partner= 390000+48000=438000
Less Z's share as manager= salary+interest on loan=360000+72000
= (432000)
Z to get from X and Y = 6000
The following journal entries need to be passed:-
X's capital A/c Dr.(6000*3/5) 3600
Y's capital A/c Dr.(6000*2/5) 2400
To Z 's capital A/c 6000
(Being Z paid by X and Y in 3:2 ratio)
Z's loan A/c Dr. 200000
To Z's capital A/c 200000
(Being Z's loan transferred to Z' capital A/c)