9. Navin & Pravin the two partners of a business firm, agreed to appropriate the profits of their firm on the
following terms:
1. Interest on capital to be allowed @ 5% pa.
2. Navin will be entitled to a salary of Rs 500 per month
3. Interest on loan to be given by the firm to the partners to be charged @ 10% p.a.
4. Interest on drawings to be charged from the partners @ 5% p.a.
vi.
5. Pravin will get commission @ 1% on the sales made during the year
6. Rahim is entitled to a rent of Rs 25000 per annum for allowing the firm to carry on the business in
his premises
The net profit of the firm for the year ended 31st March 2013 was Rs 180000 before taking the
above terms into account:
Capital balances on 1 April 2012
Navin - 150000
Pravin - 140000
Loan advanced on 1st October 2012
100000
Drawings made during the year
Navin - 40000
Pravin - 30000
During the year 2012 - 13, sales of the firm amounted to Rs 700000
From the above information prepare :
Profit and Loss appropriation account.
Answers
Answer:
Interest, in finance and economics, is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate.[1] It is distinct from a fee which the borrower may pay the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs.[2][3]
For example, a customer would usually pay interest to borrow from a bank, so they pay the bank an amount which is more than the amount they borrowed; or a customer may earn interest on their savings, and so they may withdraw more than they originally deposited. In the case of savings, the customer is the lender, and the bank plays the role of the borrower.
Explanation: