A and B are partners with capitals of 5,00,000 and 3,00,000 resp. The profit for the year
ended 31st March 2019 was 3,46,000 before providing rent payable to a partner 9,000. Prepare
Profit and Loss Appropriation Account and Partner’s Capital Account after taking the following into
consideration:
(i) Interest on capital to be allowed @ 5%p.a.
(ii) Interest on drawings @6%p.a. Drawings were A 60,000 and B 40,000.
(iii) B is allowed a commission of 2% on sales. Sales for the year were 30,00,000.
(iv) 10% of the divisible profits is to be kept in a reserve Account.
Answers
Explanation:
Important Accounting Formulas
Assets = Liabilities + Equity
CurrentAssetsCurrentLiabilities=CurrentRatio
Income – Expenses = Net Income
Beginning inventory value + Purchases of inventory – Ending inventory value = Cost of goods sold
Sales – Cost of goods sold = Gross profit
GrossProfitSales=GrossProfitMargin
FixedcostsSalespriceperunit−Variablecostperunit=BreakEvenPoint
Salespriceperunit×Break−evenpointinunits=BreakevenpointinRupees
Inventoryturnoverratio=CostofGoodsSoldInventory
AccountsReceivableTurnoverRatio=SalesoncreditAccountsReceivable
TotalAssetTurnover=SalesTotalAssets
DebttoEquityRatio=Debt–equityratio=TotalLiabilitiesShareholder′sEquity
Quickratio=CurrentAssets−InventoryCurrentLiabilities
CurrentRatio=CurrentAssetsCurrentLiabilities
ReturnonAssets=NetIncomeAverageTotalAssets
ReturnonEquity=NetIncomeAverageShareholder′sEquity
Beginning balance + net income – net losses – dividends = ending balance