Question

Pawan and Parul are partners in a firm. Pawan is entitled to a salary of 30,000 per month and commission of 10% of net profit before charging any commission. Parul is entitled to a salary of 50,000 p.a. and commission of 8% of the net profit after charging the commission. Profit after Partner's salary but before commission to partners for the year ended 31st March, 2021 was*5,50,000. Show the distribution of profits.

Answer 1

PROFIT AND LOSS APPROPRIATION A/C

(for the year ended 31st March, 2018)

Dr. Cr.

Particulars Amount Particulars Amount

To Partner's Salary a/c

- X (10000*12)

- Y

120000

25000 By Net Profit a/c 420000

To Partner's Commission a/c

- X

- Y

27500

22500

To Profit transferred to:

- X's Capital a/c

- Y's Capital a/c

112500

112500

420000 420000

Working Note:

Calculation of partner's commission:

Commission to X= Profit after partner's salary but before charging such commission

Profit after salary= 420000-145000

= 275000

X's commission= 275000* 10/100

= 27500

Commission to Y= Profit after partner's salary and commission

Profit after salary and commission= 420000-145000-27500

= 247500

Y's commission= 247500 * 10/110

= 22500

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Answer 2

Concept:

Profit it is the benefit which we get when we lent money or borrow money.

Given:

Pawan's salary per month = 30,000

Pawan's commission of net profit = 10%

Parul's salary per Annum = 50,000

Parul's commission of net profit = 8%

Total profit after deducting salary = 5,50,000

Find:

We are instructed to show the distribution of profits.

Solution:

According to the problem:

Total salary of Pawan for a year $=30000\ *\ 12=3,60,000$

Parul's salary per Annum = 50,000

So,

Total salary of both partners = 3,60,000 + 50,000

                                                = 4,10,000

So,

Total profit without giving salary to partners = 4,10,000 + 5,50,000

                                                                          = 9,60,000

Now,

Commission of Pawan = (Profit - Salary) * Commission Percentage

                                      = (9,60,000) * Commission Percentage

Commission of Pawan  = 9,60,000 * 10%

                                      = 96,000

Commission of Parul = 9,60,000 * 8%

                                   = 76,800

Commission of both = 96,000 + 76,800 = 1,72,800

So,

Profit for both partners = 9,60,000 -  4,10,000 -  1,72,800

                                       = 3,77,000

Profit for each partner will be equal,

So, Profit for Pawan = $\frac{3,77,000}{2}$ = 1,88,600

         Profit for Parul = $\frac{3,77,000}{2}$ = 1,88,600

Hence the solutions of the distribution of profits is 1,88,000 for each partner.

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