A, B and C were partners in a firm having capitals of 60,000; 60,000 and 80,000 respectively Their Current Account balances were A: 10.000; B: 5,000 and C: 72,000 (Dr). According to th partnership deed, the partners were entitled to interest on capital @ 5% p.a. C being the working partner was also entitled to a salary of 6,000 p.a. The profits were to be divided as follows:
(a) The first 20,000 in proportion to their capitals.
(b) Next 30,000 in the ratio of 5:3:2.
(c) Remaining profits to be shared equally.
The firm made a profit of 1,56,000 before charging any of the above items.
Prepare the Profit and Loss Appropriation Account and pass necessary journal entry fol apportionment of profit.
Answers
PROFIT AND LOSS APPROPRIATION A/C
(for the year ended 31st March, 2018)
Dr. Cr.
Particulars Amount Particulars Amount
To Salary to C 12000 By Net Profit a/c 172000
To Interest on Capital a/c
- A
- B
- C
5000
5000
10000
To Profit transferred to:
- A's Current a/c
- B's Current a/c
- C's Current a/c
50000
44000
46000
172000 172000
JOURNAL
1. Interest on Capital a/c..... Dr. 20000
To A's Current a/c 5000
To B's Current a/c 5000
To C's Current a/c 10000
(Being interest on capital transferred to the partner's current accounts)
2. Salary a/c.... Dr. 12000
To C's Current a/c 12000
(Being salary provided to C)
3. Profit and Loss Appropriation a/c.... Dr. 140000
To A's Current a/c 50000
To B's Current a/c 44000
To C's Current a/c 46000
(Being profit distributed among the partners)
Working Note:
Distribution of Profit:
Profit available for distribution= 172000-12000-20000
= 140000
A's share= [20000*1/4] + [30000*5/10] + [90000*1/3]
= 5000+15000+30000
= 50000
B's share= [20000*1/4] + [30000*3/10] + [90000*1/3]
= 5000+9000+30000
= 44000
C's share= [20000*2/4] + [30000*2/10] + [90000*1/3]
= 10000+6000+30000
= 46000