ILLUSTRATION 9. (When Interest is a Charge and Profits are not Sufficient). X, Y
and Z are partners in 3:2:1 ratio. Interest on capital is allowed as charge @ 10% on capital of
50.000 (X); * 40,000 (Y) and 20,000 (Z). Profits for the year ended 31-3-2019 before interest
were * 2,000. Show distribution profits.
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Answer:
ACCOUNTANCY
A and B are Partners sharing profits in the ratio of 3:2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 2016, the profits of the year prior to calculation of interest on capital but after charging B's salary amounted to Rs. 12,500. Calculate the amount of profits to be distributed to A and B after the above effect.
December 27, 2019avatar
Anoushka Gosalia
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ANSWER
A and B share profits in ratio 3:2
Profit & Loss Appropriation A/c
Particulars (Dr.) Amount Particulars (Cr.) Amount
To interest on capital
A's capital 3,000
B's capital 1,800
To salary a/c (B)
To profit on appropriation
A's capital 4,620
B's capital 3,080
4,800
2,500
7,700 By P&l a/c 12,500
+ B's salary 2,500 15,000
Hence, A's share of proit is Rs4,620 whereas B's share is Rs3,080