A and B are partners with Capitals of Rs. 50,000 and Rs. 30,000. The profit for the year ended 31st March, 2017 amounted to Rs. 49,200 before considering the following:
(i)Interest on Capital is to be allowed @ 5% p.a.
(ii) A is allowed 2% commission on sales, sales was Rs. 200,000.
(iii) B is allowed commission @ 10% on divisible profits (before charging his commission and reserve).
(iv) It is devided to transfer 10% of divisible profit to Reserve Account.
(v) A had advanced a loan of Rs. 20,000 to firm on 1.4.2016. Prepare profit and loss Account (if necessary) and profit and loss Appropriation Account for the year ending 31st March, 2017.
Answers
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.