Question

Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of Rs 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending December 31, 2016 and December 31, 2017 were Rs 40,000 and Rs 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.

Answer 1

Given : Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1.

Suresh is guaranteed a minimum amount of Rs 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending December 31, 2016 and December 31, 2017 were Rs 40,000 and Rs 60,000, respectively.

Solution :  

Profit and Loss Appropriation account is in the attachment below.

Extra information :  

Profit and Loss Appropriation account :  

Profit and Loss Appropriation account is prepared to show how the net profit among partners has been distributed. It is credited with interest on drawings and debited with interest on capital , salary or commission payable to partners. After these adjustments have been made the Profit and Loss appropriation account shows the amount of net profit on net loss which shall be distributed among the partner in the agreed profit sharing ratio.  

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