Question

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.​

Answer 1

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: