A and B are partners in a firm sharing profit and loss in the ratio 3:1 . Their capital at the end of the financial year 2019 - 20 were 50000 and 25000 . A's drawings were 5000 and B's drawings were 2500 which had been duly debited to partners capital account. Profit before charging interest on capital for the year was 10000 the same had also been credited to partners capital account in their profit ratio.
Calculate interest on capital of the partners @8% p.a. for the year 2019 - 20.
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Explanation:
A and B are partners sharing profits and losses In the ratio of 3 : 1. On 1st April, 2017; their capitals were: A Rs. 50,000 and B Rs. 30,000. During the year ended 31st March, 2018 they earned a net profit of Rs. 50,000. The terms of partnership are:
(a) Interest on capital is to be allowed @ 6% p.a.
(b) A will get a commission @ 2% on turnover.
(c) B will get a salary of Rs. 500 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A Rs. 8,000 and B Rs. 6,000. Turnover for the year was Rs. 3,00,000.
After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partners' Capital Accounts.
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