Question

A and B are partners sharing profits and losses in the ratio of their effective capital. They had Rs. 1,00,000 and Rs.
60,000 respectively in their Capital Accounts as on 1st January, 2016.
A introduced a further capital of Rs. 10,000 on 1st April, 2016 and another Rs. 5,000 on 1st July, 2016. On 30th September, 2016 A withdrew Rs. 40,000.
On 1st July, 2016, B introduced further capital of Rs. 30,000.
The partners drew the following amounts in anticipation of profit.
A drew Rs. 1,000 per month at the end of each month beginning from January, 2016. B drew Rs. 1,000 on 30th June, and Rs. 5,000 on 30th September, 2016.
% p.a. interest on capital is allowable and 10% p.a. interest on drawings is chargeable. Date of closing 31.12.2016. Calculate: (a) Profit-sharing ratio; (b) Interest on capital; and (c) Interest on drawings

Answer 1

Answer:

ANSWER

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars Amount Particulars Amount

To Int on capital

A=50000*6%

= 3000

B=30,000*6%

= 1800 4800 By net profit 50000

To Commission

A=300000*2% 6000

To Salary

B=500*12 6000

To Commission

B(notes) 1581

To profits t/f to

A's Capital A/c= 23714

B's Capital A/c=7905 31619

Total 50000 Total 50000

PARTNERS CAPITAL ACCOUNT

Particulars A B Particulars A B

To drawings 8000 6000 By bal b/d 50000 30000

By Int on

capital 3000 1800

By commission 6000 1581

To bal c/d 74714 35286 By P/L app A/c 23714 7905

Total 82714 41286 Total 82714 41286

Notes:- Commission to B= 5% of profits after all expenses including such commission

= 50,000-4800-6000-6000

= 33,200*5/105 = 1581.

Answer 2

Answer:a)4:3

Explanation:(a) Calculation of Effective Capital

A B

` 1,00,000 invested for 3 months i.e., ` 60,000 invested for 6 months i.e.,

` 3,00,000 invested for 1 month 3,00,000 ` 3,60,000 invested for 1 month 3,60,000

` 1,10,000 invested for 3 months i.e., ` 90,000 invested for 6 months, i.e.,

` 3,30,000 invested for 1 month. 3,30,000 ` 5,40,000 invested for 1 month 5,40,000

9,00,000

` 1,15,000 invested for 3 months i.e.,

` 3,45,000 invested for 1 month. 3,45,000

` 75,000 invested for 3 months, i.e.,

` 2,25,000 invested for 1 month. 2,25,000

12,00,000

(b) Calculation of Interest on Capital

A = ` 12,00,000 x 12/100 x 1/12 = ` 12,000 B = ` 9,00,000 x 12/100 x 1/12 = ` 9,000

(c) Calculation of Interest on Drawings

A = ` 12,000 x 10/100 x 5.5/12 = ` 550 B = ` 1,000 x 10/100 x 6/12 = ` 50

` 5,000 x 10/100 x 3/12 = ` 125

Effective capital is in the ratio 12 : 9 therefore profit sharing ratio is 12 : 9 i.e. 4 : 3.