Question

A, B ,C and D are partners sharing profits and losses in the ratio of 4:3:2:1. Their capitals as at 1st April, 2017 were ₹ 3,00,000; ₹ 2,50,000; ₹ 1,50,000 and ₹ 1,00,000 respectively. D’s share of profit excluding interest on capital has been guaranteed by the firm to be not less than ₹ 2,50,000. C’s share of profit including interest on capital and salary guaranteed by A is not less than ₹ 2,60,000.The profits for the year ended 31st March, 2018 were ₹ 9,00,000 before interest on capital @ 10% and salary to C @ ₹ 10,000 p.m. Prepare Profit and Loss Appropriation Account.

Answer 1

Profit and loss application account

particulars. amt. particulars. amt

interest on. profit & loss a/c

capital. 900000

A 30000

B. 25000

C. 15000

D. 10000

C' Salary. 120000

divisible profit

A 175000

B 150000

C 125000

D 250000. 700000 700000

Explanation:

divisible profit = 900000-200000=700000

divided in ratio 4:3:2:1

A = 700000*4/10=280000

B = 700000*3/10=210000

C = 700000*2/10=140000

D 700000*1/10= 70000

D guaranteed only share of profit if rs.250000by firm but D's share in divisible profit is 70000 so deficiency is (250000-70000)180000 will borne by A,B and C in ratio 4:3:2

A share in deficiency = 180000*4/9 = 80000

B share in deficiency = 180000*3/9= 60000

C share in deficiency = 180000*2/9= 40000

Cshare of profit after deficiency =

140000-40000= 100000

C is Guaranteed of profit + interest on capital+ salary is 260000

C share = 100000(profit) +( salary) 120000+(ins. in capital) 15000= 235000

C share of deficiency = 260000-235000= 25000 will borne by A

Finally Partners share of profit after adjustment for deficiency:-

A share of profit

280000-80000-25000=175000

B share of profit

210000-60000= 150000

C share of profit

140000-40000+25000= 125000

D share if profit

70000+ 80000+60000+40000= 250000