Question

Amal, Bimal and kamal are three partners. On 1st April, 2017, their Capitals stood as: Amal ₹ 40,000, Bimal ₹ 30,000 and Kamal ₹ 25,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.
(b) Amal would get a salary of ₹ 250 per month.
(c) Bimal would receive commission @ 4% on net profit after deducting commission, interest on capital and salary, and
(d) After deducting all of these 10% of the profit should be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2018 was ₹ 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the Partners.

Answer 1

Profit and loss Appropriation  and capital accounts of Partners are calculated below:

Explanation:

(1) Calculation of Interest on Capital

Amal’s Capital = Rs. 40,000

Bimal’s capital= Rs. 30,000

Kamal’s Capital = Rs. 25,000

Rate of interest as per their partnership deed = 5%

Interest on their capitals would be as follows:

Amal’s Interest

$= 40,000 \times \frac {5}{100} = Rs. 2,000$

Bimal’s Interest

$= 30,000 \times \frac {5}{100} = Rs. 1,500$

Kamal’s Interest

$= 25,000\times \frac {5}{100} = Rs. 1,250$

Total interest will be (Rs. 2000 + Rs. 1500 + Rs. 1250)  = Rs. 4,750

(2) Calculation of Commission to Bimal

Bimal’s commission is 4% on profit after deducting interest and Amal’s salary

Amal’s salary

$= 250 \times 12= Rs. 3000$

Profit = 33,360 – 4,750 - 3,000 = Rs. 25,610

Bimal’s commission

$= 25,610 \times \frac{4}{(100+4)} = Rs. 985$

(3) Calculation of Amount to be transferred to General Reserve

Amount that will be transferred to General Reserve will be 10% of the profit:

$=(33,360-4,750 -3,000 -985) \times \frac {10}{100} = Rs. 2,462$

(4) Calculation of share of profits to each partner

Now, share of profits will be:  

$(33,360 -4,750 -3,000 -985 -2,462) = Rs. 22,163$

This amount will be equally divided into three

$= \frac {22,163}{3}= Rs. 7,387.67$