Atul and Bhaskar are partners sharing profits in the ratio of 2:3. Their capitals are * 4,00,000
and 2,00,000 respectively. Interest is to be allowed on capitals @ 6% p.a. Profit before allowing
interest on capitals is 30,000.
Prepare Profit and Loss Appropriation Account to distribute profit or loss, if interest on capitals
is a charge.
Answers
Answer:1. PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars Amount
To interest on capital
A=30,000*4/6=20000
B=30,000*2/6=10,000 30,000 By net profit 30,000
Total 30,000 Total 30,000
When partnership deed is silent regarding interest as a charge or appropriation.
As the total amount of interest is more than the available profit,the interest should be allowed in the ratio of capital i.e 4:2
Interest on capital
A=4,00,000*6%=24,000
B=2,00,000*6%=12000
PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars Amount
To Interest on capital
A= 4,00,000*6%=24000
B=2,00,000*6%=12000 36,000 By net profit
By loss transferred A/c
A=2400
B=3600 30,000
Total 36,000 Total 36,000
Explanation: