(Profit and Loss Appropriation A/c, Partners Fixed and Fluctuating Capital
A/c) On 1st April, 2016 A and B entered into a partnership contributing * 24,000 and
10,000 respectively. According to the deed the interest on capital is to be allowed and
on drawings to be charged @ 15% p.a. A and B shall receive a monthly salary of 2,000
each. A is entitled to 3/5th and B is entitled to 2/5 of profits. During the year the
following transactions took place.
On 1st October, 2016 A withdrew (on permanent basis) 8,000 from his capital
and B introduced 4,000 as additional capital.
(ii) The drawings of A and B were * 12,000 each drawn at different intervals of time
and the interest corresponding to these drawings were 675 and 450
respectively.
(iii) The profit for the year before any adjustment is made was 60,000.
Prepare the profit and loss appropriation account and the necessary accounts assumin
that (i) the capitals are fluctuating (ii) the capitals are fixed.
Answers
Answer:
ACCOUNTANCY
(When Capitals are Fixed and Fluctuating). A and B are partners with capitals of Rs.60,000 and Rs.20,000 respectively on 1st April, 2017. Net profit (before taking into account the provisions of the Deed) for the year ended 31st March, 2018 was Rs.24,000. The Partnership Deed provides for the following:
(a) B is entitled to a salary of Rs.6,000 p.a.
(b) Interest on capitals is to be allowed @ 6% p.a.
(c) Interest on drawings is to be charged @ 5% p.a.
The drawings of the partners A and B were Rs.6,000 and Rs.4,000 respectively and interest on drawings for A being Rs.200 and for BRs.100.
Pass the Journal entries for the above and show how profit will be divided between A and B and also show the Capital Accounts of the partners along with their Drawings Accounts:
(i) if they are fixed, and (ii) if they are fluctuating.