Question

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.​

Answer 1

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