Question

A, B and C are in partnership with respective fixed capitals of ₹40000, ₹30000 and ₹20000. B and C are entitled to annual salaries of ₹2,000 and ₹1,500 respectively payable before division of profits. Interest on capital is allowed @ 5% p.a., but interest is not charged on drawings. Of the first ₹12,000 divisible as profits in any year, A is entitled to 50%, B to 30% and C to 20%. Annual profits in excess of 12,000 are divisible equally.
The profits for the year ended · 31st: March, 2010 were ₹20,100 after debiting partners' salaries, but before charging interest on capital.
The partners' drawings during the year 2009-10 were: A ₹8,000, B ₹7,500 and C ₹4,000.
The balance in Partners' Current Accounts on 1st April, 2009 were A ₹ 3,000 (credit),
B ₹ 500 (credit) and C ₹ 1,000 ( debit).
Prepare Profit and Loss Appropriation Account and Partners' Current Accounts.

Answer 1

Answer:

ANSWER

Calculation of Interest on capital

A = 30000*5% = 1500

B= 20000*5% = 1000

C= 10000*5% = 500

Salary to B = 500*12=6000

Calculation of C's commission = 30000-3000 = 27000*5/100= 1350

Profits to be distributed= 30000-3000-6000-1350 = 19,650

The adjustment entry to be passed is as follows:-

A's Capital A/c Dr. 3675

To B's capital A/c 2895

To C's capital A/c 780

(Being adjustment entry passed)

Answer 2

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