Question

A, B and C are partners in a firm sharing profit and loss in the ratio 5:3:2 . A However personally guaranteed that C's share of profit after charging interest on capital@ 10% per annum would not be less than Rs. 22500 in any years. the capital of the partners were respectively Rs. 120000, Rs. 75000 and Rs. 60000. The profit for the year 2018 amounted to Rs. 119250 before charging interest on capital. Show profit and loss appropriation account.​

Answer 1

Given data:

• A, B and C are partners in a firm, sharing profits and losses in the ratio 5:3:2.
• C is guaranteed a minimum of Rs 22,500 by A.
• The capitals of each partner are Rs 1,20,000, Rs 75,000 and Rs 60,000.
• The profit for the year was Rs 1,19,250.

Objective: To prepare a Profit & Loss Appropriation A/c.

Answer:

Calculation of interest on capitals:

Interest on capital = (Capital × Rate) ÷ 100

For A:

• Interest on capital = (Rs 1,20,000 × 10) ÷ 100 = Rs 12,000

For B:

• Interest on capital = (Rs 75,000 × 10) ÷ 100 = Rs 7,500

For C:

• Interest on capital = (Rs 60,000 × 10) ÷ 100 = Rs 6,000

Calculation of profit/loss:

To determine profit/loss, observe both sides of the account. If the balancing figure appears on the debit side, it is profit. Else, loss.

Credit = Rs 1,19,250

Debit = Rs 25,500

Balancing figure = Rs 93,750 [Dr.]

Calculation of profit distribution:

For A:

• Profit share = Rs 93,750 × 5/10 = Rs 46,875

For B:

• Profit share = Rs 93,750 × 3/10 = Rs 28,125

For C:

• Profit share = Rs 93,750 × 2/10 = Rs 18,750

Deficiency of C = Guaranteed profit - Actual profit acquired

Deficiency of C = Rs 22,500 - Rs 18,750

Deficiency of C = Rs 3,750

Since the deficiency is to be met by A, the deficiency arising in C's share will be deducted from A's share.

Corrected profit distribution:

For A:

• Profit share = Rs 46,875 - Rs 3,750 = Rs 43,125

For B:

• Profit share = Rs 28,125

For C:

• Profit share = Rs 18,750 + Rs 3,750 = Rs 22,500

The Profit & Loss Appropriation A/c has been attached below.

Answer 2

Answer:

Given data

• A, B and C are partners in a firm sharing profit and loss in the ratio 5:3:2 .
• profit after charging interest on capital@ 10% per annum would not be less than
• Rs. 22500 in any years. the capital of the partners were respectively Rs. 120000,
• Rs. 75000 and Rs. 60000. The profit for the year 2018 amounted to Rs. 119250.

Object-: To prepare on profit and loss appropriation A/C.

Answer.

Calculation on interest on capital.

$\boxed{Interest \: on \: capital= \: \frac{capital \: \times rate}{100} }$

$\boxed{For A:- interest \: on \: capital \: \frac{120000 \times 10}{100} = 12000}$

$\boxed{For B \: interest \: on \: capital = \frac{75000 \times 10}{100} = 7500}$

$\boxed{For \: C \: interest \: on \: capital = ( \frac{60000 \times 10}{100} = 6000}$

(Calculation of profit or loss)

Credit-1,19,250

Debit- 25,500

Balancing figure=Rs. 93,750

$\boxed{For A \: profit \: share = 93750 \times \frac{3}{10} = 46875}$

For A= 46,875

$\boxed{For B \: profit \: share = 93750 \times \frac{3}{10} = \: rs \: 23125}$

$\boxed{For \: C \: profit \: share = 93750 \times \frac{2}{10} = 18750}$

Deficiency of C = Guaranteed profit - Actual profit acquired.

For A

• profit share = Rs. 46,875-3,750=43,125

For B

• profit share is Rs. 28,125

For C

• profit share 18750+3750=22,500

The profit and loss Appropriation A/C has been attached below