Question

Mithun and Nithin are equal partners with capitals of these 180000 and 140000 respectively on 1.4 .2012 the partnership deed provided for interest on capital at 5% per annum interest on drawings being Mithun rupees 550 e and nithin rupees 360 and annual commission of rupees 8000 to Mithun. during the year within withdrew rupees 18000 and Nitin rupees 12000 for their private use
the prophet before adjustment of interest on capital , interest on drawings and Mithun commission was rupees 42100 for the year. prepare profit and loss appropriation account for the year ending 31. 3. 2013​

Answer 1

Given data:

• Mithun and Nithin are partners in a firm, sharing profits and losses equally, having capitals Rs 1,80,000 and Rs 1,40,000 respectively.
• Interest on capital is to be charged at 5% p.a.
• Interest on drawings for Mithun and Nithin are Rs 550 and Rs 360 respectively.
• Mithun is entitled to an annual commission of Rs 8,000.
• Mithun withdrew Rs 18,000 and Nithin withdrew Rs 12,000 during the year.
• The profit for the year was Rs 42,100.

Objective: To prepare a Profit & Loss Appropriation A/c.

Answer:

Calculation of interests on capitals:

Interest on capital = (Capital × Rate) ÷ 100

For Mithun:

• Interest on capital = (Rs 1,80,000 × 5) ÷ 100 = Rs 9,000

For Nithin:

• Interest on capital = (Rs 1,40,000 × 5) ÷ 100 = Rs 7,000

Interests on capitals are recorded on the debit side of the appropriation account.

Commissions are recorded on the debit side of the appropriation account.

The profit for the year is recorded on the credit side of the appropriation account.

Interests on drawings are recorded on the credit side of the appropriation account.

Calculation of profit/loss:

To determine profit/loss, observe the debit and credit sides of the account. If the balancing figure appears on the debit side, it is profit. Else, loss.

Credit = Rs 42,100 + Rs 910 = Rs 43,010

Debit = Rs 16,000 + Rs 8,000 = Rs 24,000

Balancing figure = Rs 43,010 - Rs 24,000 = Rs 19,010 [Dr.]

Calculation of profit distribution:

Since they are equal partners, they share their profits and losses equally, i.e., in the ratio 1:1.

For Mithun:

• Profit share = Rs 19,010 × 1/2 = Rs 9,505

For Nithin:

• Profit share = Rs 19,010 × 1/2 = Rs 9,505

The Profit & Loss Appropriation A/c has been attached below.