Question

P, Q and R are in a partnership and as at 1st April, 2017 their respective capitals were: ₹ 40,000, ₹ 30,000 and ₹ 30,000. Q is entitled to a salary of ₹ 6,000 and R ₹ 4,000 p.a. payable before division of profits. Interest is allowed on capital @ 5% p.a. and is not charged on drawings. Of the divisible profits, P is entitled to 50% of the first ₹ 10,000, Q to 30% and R to 20%, rest of the profit are shared equally. Profits for the year ended 31st March, 2018, after debiting partners salaries but before charging interest on capital was ₹ 21,000 and the partners had drawn ₹ 10,000 each on account of salaries, interest and profit.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018 showing the distribution of profit and the Capital Accounts of the partners.

Answer 1

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2018, after debiting partners salaries but before charging interest on capital was ₹ 21,000 and the partners had drawn ₹ 10,000 each on account of salaries, interest and profit.

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Answer 2

Explanation:

Working Notes:

Working Notes:

1. Calculation of Interest on Capital

Interest on P's Capital = $40,000 \times \frac{5}{100}=2,000$

Interest on Q's Capital =$30,000 \times \frac{5}{100}=1,500$

Interest on R's Capital =$30,000 \times \frac{5}{100}=1,500$

2. Calculation of share of profit of each Partner

Profit available for distribution  = $\mathrm{Rs} .21,000-\mathrm{Rs} .5,000=\mathrm{Rs} .16,000$

i. Distribution of first $Rs.10,000 (50 \% 30 \% \text { and } 20 \% ) P's Profit Share =10,000 \times \frac{50}{100}=5,000$

Q's Profit Share = $10,000 \times \frac{30}{100}=3,000$

R'sProfit Share  = $10,000 \times \frac{20}{100}=2,000$

ii. Distribution of Reaming Profits in equal ratio i.e. $Rs.6,000 (Rs.16,000 - Rs.10,000) Profit Share of each =6,000 \times \frac{1}{3}=2,000$

Accordingly, Total Profit Share of $\mathrm{P}=\mathrm{Rs} .5,000+\mathrm{Rs} .2,000=\mathrm{Rs} .7,000$

Total Profit Share of $\mathrm{Q}=\mathrm{Rs} .3,000+\mathrm{Rs} .2,000=\mathrm{Rs} .5,000$

Total Profit Share of $\mathrm{R}=\mathrm{Rs} .2,000+\mathrm{Rs} .2,000=\mathrm{Rs} .4,000$