A, B & C are partners in a firm sharing profits and losses in the ratio of 3:2:1. According to the partnership deed C should be guaranteed Rs.7,500 every year as profit share. Profit for the year 31st March 2018 is Rs.30,000. Show the Profit& Loss Appropriation A/c.
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Answer:
ANSWER
C's share of profit is (1,57,500*1/7) 22,500. So,the deficiency of (37,500-22,500) i.e 15,000 is to be borne by A and B in the ratio of 4:2.
Journal Entries are:-
Profit and Loss A/c Dr. 1,57,500
To Profit and Loss appropriation A/c 1,57,500
(Being profit transferred to P&L appropriation account)
Profit and Loss Appropriation A/c Dr. 1,57,500
To A's capital A/c 90,000
To B's capital A/c 45,000
To C's capital A/c 22,500
(Being actual distribution of profit)
A's capital A/c Dr. 10,000
B's capital A/c Dr. 5000
To C's capital A/c 15,000
(Being deficiency of C,contributed by A and B)
PROFIT AND LOSS APPROPRIATION ACCOUNT Particulars Amount ParticularsAmount To A's capital A/c 90,000
Less:C's deficiency (10,000)
To B's capital A/c 45,000
Less: C's deficiency (5000)
To C's capital A/c 22,500
Add: share from
A&B 15,000
1,57,500 By Net profit 1,57,500 Total 1,57,500 Total 1,57,500
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