Question

• Alok and Ashok are equal partners in a firm, their capital are 20,000 and 16,000 resp
ctively. Ashok is entitled to get salary of 600 per month. Interest on capital is 6% po
annum. The profit of the firm before the above adjustment was 12,000. Prepare Prof
and Loss adjustment account.

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Answer 1

Answer:

Interest on Capital PAYABLE

Alok : 20,000 x 6% = 1200

Ashok : 16,000 x 6% = 960

Salary to Ashok = 600 x 12 month = 7200

Profit and Loss Appropriation A/C

Credit Side : By Net Profit 12,000

Debit Side : To Interest on Capital

Alok : 1200

Ashok : 960

To Salary ( Ashok) : 7,200

[ Profit available for distribution = 12,000 - 1200 - 960 - 7200 = 2,640 ]

Since no Profit sharing ratio is given in question and hence it is to be distributed equally as follow :

Profit & Loss Appropriation A/C : Debit Side

To profit transferred to :

Alok's Capital A/C 1320

Ashok's Capital A/C 1320