QUESTION 14
Ashish and Aakash are partners sharing profit in the ratio of 3 :2. Their Capital
Accounts showed a credit balance of Rs. 5,00,000 and Rs. 6,00,000 respectively as
on 1st APRIL, 2019 Net profit for the year ended 31 st March 2020 was Rs. 5,00,000.
(i) Interest on capital is to be allowed @ 10% p.a.
(ii) Ashish & Akash is entitled to a salary of Rs. 6,000 & Rs 4,000 p.a.
(iii) Ashish withdrew Rs.20,000 in the beginning of each quarter & Akash
withdrew Rs.20,000 in the end of each quarter.
(iv) Charge Interest on Drawings @5% p.a.
(v) 10% of the Net profits( i.e Rs 5,00,000) must be transferred to General
Reserve.
Pass the journal entries and prepare Profit and Loss Appropriation Account &
capital A/c if capitals are fluctuating
Answers
Answer:
Ashish’s capital at the end of the year = Rs. 5,00,000
Drawings by Ashish = 1,50,000
Total capital for Ashish = 6,50,000 (5,00,000 + 1,50,000)
Aakash’s capital at the end of the year = Rs. 6,00,000
Drawings = 1,00,000
Total capital for Aakash = Rs. 7,00,000
Calculation of Interest:
Interest will be calculated for each one of them at the rate of 10% per annum.
Ashish’s interest
= 6,50,000 \times \frac {10}{100} = Rs. 65,000=6,50,000×
100
10
=Rs.65,000
Aakash’s interest
= 7,00,000 \times \frac {10}{100} = Rs. 70,000=7,00,000×
100
10
=Rs.70,000
Total interest = 1,35,000 (65,000 + 70,000)
Net profit of the company is 5,00,000.
Interest on capital will be deducted by this amount to calculate the profit that will be transferred to each one’s account.
5,00,000 – 1,35,000 = Rs. 3,65,000
which will be divided with the ratio of 3:2 between the two.
Calculation of Profit:
Ashish’s Profit
= 3,65,000 \times \frac {3}{5} = Rs. 2,19,000=3,65,000×
5
3
=Rs.2,19,000
Aakash’ Profit
= 3,65,000\times \frac {2}{5} = Rs. 1,46,000=3,65,000×
5
2
=Rs.1,46,000
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