Question

M, N and O were partners in a firm having capitals of 72,000; 72,000 and 96,000 respectively. Their Current Account balances were M: 12,000; N: 6,000 and O: 2,400 (Dr). According to the partnership deed, the partners were entitled to interest on capital @5% p.a. O being the working partner was also entitled to a salary of 7,200 p.a. The profits were to be divided as follows: (a) The first 24,000 in proportion to their capitals. (b) Next 36,000 in the ratio of 5:3:2. (c) Remaining profitsto be shared equally. The firm made a profit of 1,87,200 before charging any of the above items. Prepare the Profit and Loss Appropriation Account and pass necessary journal entry for apportionment of profit.​

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