A,B and C were partners in a firm having capitals of Rs 60,000 Rs 60,000 and Rs 80,000 respectively. There current account balance were A-10,000 , B-5000 and C-2000 (Dr.).According to the partnership deed the partners were entitled to an intt. on capital @ 5% p.a. C being the working partner was also entitled to a salary of Rs 6,000 p.a. The profits were to be divided as follows:
(i)The first Rs 20,000 in proportion to their capitals.
(ii)next Rs 30,000 in the ratio of 5:3:2.
(iii)remaining profits to be shared equally.
During the year the firm made a profit of Rs 1,56,000 before charging any of the above items. prepare the profit and loss appropriation on A/C.
Answers
Answer:
ANSWER
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
Explanation:
The total amount of profit is 1,40,000 which is divided among the partners as per the three cases mentioned in the question....(i) the first 20,000 of 1,40,000 (remaining 1,40,000-20,000=1,20,000) (ii) next 30,000 from 1,20,000 in the ratio of 5:3:2 (remaining 1,20,000-30,000=90,000) (iii) So the remaining profit i.e. 90,000 is divided equally among the partners in ratio 1:1:1
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