Question

Bhanu and Partab are partners sharings profits eqully. Their fixed capitals as on 1st April, 2017 are ₹ 8,00,000 and ₹ 10,00,000 respectively. Their drawings the year were ₹ 50,000 and ₹ 1,00,000 respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a. and interest on drawings is to be charged @ 15% p.a. Profit for the year ended 31st March, 2018 was ₹ 1,20,000. Prepare Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation is calculated below

Explanation:

Bhanu’s drawings per year = Rs. 50,000

Partab’s drawings per year = Rs. 1,00,000

Calculation of Interest

Interest will be calculated at 15% per annum.

Bhanu’s interest ion drawings

$= 50,000 \times \frac {15}{100} \times \frac {6}{12} = Rs. 3,750$

Partab’s interest ion drawings

$= 1,00,000 \times \frac {15}{100} \times \frac {6}{12} = Rs. 7,500$

Calculation of Interest based on their capital

Interest on capital will be calculated at the rate of 10% per annum.

Fixed capitals for each one of them is given as 8,00,000 and 10,00,000.

Bhanu’s $= 8,00,000 \times \frac {10}{100} = Rs. 80,000$

Partab’s $= 10,00,000 \times \frac {10}{100} = Rs. 1,00,000$

Total interest will be (Rs. 80000 + Rs. 100000) i.e., Rs. 1,80,000