A and B are partners sharing profits and losses in the ratio of 2 : 1. A is a non-working partner and has contributed Rs. 12,00,000 as his capital. B is a working partner. The partnership deed provides for interest on capital @ 10% p.a. and salary of Rs.7,500 per month to the working partner. The net profit for the year ended 31st March, 2016 before providing for interest on capital and salary amounted to Rs.70,000. You are required to show the distribution of profit.
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Profit and loss Appropriation account
particular. amt. particular. amt.
Interest on. profit &loss. 70000
capital. 40000.
salary. 30000
Explanation:
Interest on A capital = 1200000*10%=120000
B salary. = 7500*12= 90000
Total Appropriation is 120000+90000=210000
but profit is only 70000
In such case available profit is distributed among partners in 120000:90000 ratio ( 4:3)
A will interest oncapital 70000*4/7=40000
B will get salary. 70000*3/7= 30000
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