Question

ashwini Bharani and Kritika are partners in a firm. they share profits and losses in ratio 2:2:1.their capital on 1.04.2012 rupees 100000,80000and 60000 respectively the partnership deed provides
interest on capital at 8/p.a
allowed salary 500 p.m to ashwini
there drawing during the year 10000 8000 and 6000 respectively
interest on drawing 1000 8000 and 600 respectively​

Answer 1

Correct question:

Ashwini, Bharani and Kritika are partners in a firm. They share profits and losses in the ratio 2:2:1. Their capitals as on 1 - 04 - 2012 are Rs 1,00,000, Rs 80,000 and Rs 60,000 respectively. The partnership deed provides interest on capital at 8% p.a. Ashwini is entitled to a salary of Rs 500 per annum. Interest on drawings is Rs 1,000, Rs 800 and Rs 600 respectively. The profit for the year is Rs 39,000. Prepare a Profit & Loss Appropriation Account for the year ended 31st March, 2013.

Answer:

Calculation of interests on capitals:

Interest on capital = (Capital × Rate) ÷ 100

For Ashwini:

• Interest on capital = (Rs 1,00,000 × 8) ÷ 100 = Rs 8,000

For Bharani:

• Interest on capital = (Rs 80,000 × 8) ÷ 100 = Rs 6,400

For Kritika:

• Interest on capital = (Rs 60,000 × 8) ÷ 100 = Rs 4,800

Interests on capitals will be recorded on the debit side of the appropriation account.

Salaries will be recorded on the debit side of the appropriation account.

Interests on drawings will be recorded on the credit side of the appropriation account.

Calculation of profit/loss:

To determine profit/loss, observe the debit and credit sides of the account. If the balancing figure appears on the debit side, it is profit. Else, loss.

Credit = Rs 41,400

Debit = Rs 18,000 + Rs 500 = Rs 18,500

Balancing figure = Rs 41,400 - Rs 18,500 = Rs 22,900 [Dr.]

Calculation of profit distribution:

Since they share their profits and losses in the ratio 2:2:1, it must be distributed accordingly.

For Ashwini:

• Profit share = Rs 22,900 × 2/5 = Rs 9,160

For Bharani:

• Profit share = Rs 22,900 × 2/5 = Rs 9,160

For Kritika:

• Profit share = Rs 22,900 × 1/5 = Rs 4,580

The Profit & Loss Appropriation A/c has been attached below.