Question

Kabir, Zoravar and Parul are partners sharing profits in the ratio of 5:3:2. Their capitals as on 1st April, 2019were: Kabir - 5,20,000, Zoravar- 3,20,000 and Parul- 2,00,000.The Partnership Deed provided as follows:(1) Kabir and Zoravar each will get salary of 24,000 p.a.(ii) Parul will get commission of 2% of Sales.(iii) Interest on capital is to be allowed @ 5% p.a.(iv) Interest on Drawings is to be charged @ 5% p.a.(v) 10% of Divisible Profit is to be transferred to General Reserve.Sales for the year ended 31st March, 2020 were 50,00,000. Drawings by each of the partners during theyear was 60,000. Net Profit for the year was 1,55,500.Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2020.​

Answer 1

Explanation:

(i) Since the interest on drawings is not stated whether it is per annum (p.a), we will consider it as for 6 months. So, interest on drawings will be 60,000 x 5/100 x 6/12 for the whole year

(ii) As given in the note, since it is a loss and not a profit, we cannot and so will not calculate or take into account the 5th point- 10% of divisible profit....