Q22. K and P were partner in a firm sharing profits in 4:3 ratio. Their capital on 1.4.2016
were Rs 80,000 and Rs 60,000. The partnership deed provided as follows:
1) Interest on capital and drawing will be allowed and charged @ 12% p.a and 10 %
p.a.respectively
2) K and P will be entitled to get monthly salary of Rs 2000 and Rs 3000 respectively.
The profits for the year ended 31.3.2017 were Rs 1,00,300. The drawing of K AND P
were Rs 40,000 and Rs 50,000 respectively. Interest on k's drawing was Rs 2000 and
P's drawings Rs 2500.
Prepare pr
ofit and loss appropriation account assuming capital of partner were
Fluctuating
Answers
Explanation:
Here we simply have to charge 12% interest on the capital amounts brought by the partners and no extra calculation is required for the interest on drawing since the interest amount is already mentioned in the question.
The profit of Rs 82,600 will be transferred to K and P's capital accounts in their profit sharing ratio of 4:3, i.e., K will receive 4/7 of Rs 82,600 = Rs 47,314, and P will receive 3/7 of Rs 82,600 = Rs 35,286.
Calculation of K and P's Capital Accounts as on 31.3.2017
K's Capital Account:
Opening Balance on 1.4.2016 = Rs 80,000
Add: Share of Profit (4/7 of Rs 1,00,300) = Rs 57,314
Add: Interest on Capital (12% p.a for 12 months) = Rs 9,600
Less: Drawings = Rs 40,000 + Rs 2,000 (Interest) = Rs 42,000
Closing Balance on 31.3.2017 = Rs 1,04,914
P's Capital Account:
Opening Balance on 1.4.2016 = Rs 60,000
Add: Share of Profit (3/7 of Rs 1,00,300) = Rs 43,986
Add: Interest on Capital (12% p.a for 12 months) = Rs 7,200
Less: Drawings = Rs 50,000 + Rs 2,500 (Interest) = Rs 52,500
Closing Balance on 31.3.2017 = Rs 58,686
Calculation of Profit and Loss Appropriation Account for the year ended 31.3.2017
Particulars Amount (Rs)
Profit as per Profit and Loss Account 1,00,300
Add: Interest on K's Capital @ 12% p.a for 12 months 9,600
Add: Interest on P's Capital @ 12% p.a for 12 months 7,200
Add: K's Salary (Rs 2,000 per month for 12 months) 24,000
Add: P's Salary (Rs 3,000 per month for 12 months) 36,000
Less: K's Drawings (Rs 40,000 + Rs 2,000 Interest) 42,000
Less: P's Drawings (Rs 50,000 + Rs 2,500 Interest) 52,500
Profit to be transferred to Balance Sheet 82,600
Note: The profit of Rs 82,600 will be transferred to K and P's capital accounts in their profit sharing ratio of 4:3, i.e., K will receive 4/7 of Rs 82,600 = Rs 47,314, and P will receive 3/7 of Rs 82,600 = Rs 35,286.
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