Question

Reema and Seema are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly salary of Rs 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were Rs 5,00,000 each and drawings during the year were Rs 60,000 each. The firm incurred a loss of Rs 1,00,000 during the year ended 31st March, 2018. Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.

Answer 1

Profit and Loss Appropriation account of the firm is calculated below.

Explanation:

Total loss of the firm that is given = Rs. 1,00,000

Capital of each Reema and Seema = Rs. 5,00,000

Drawings for each during the year = Rs. 60,000

Interest on the drawings of each of the partner

 Reema’s interest

$= 60,000 \times \frac {6}{12} \times \frac {10}{100} =Rs. 3000$

Seema’s interest

$= 60,000 \times \frac {6}{12} \times \frac {10}{100} =Rs. 3000$

Total interest on drawings is Rs. 6,000 (3,000 + 3,000)

Total loss is 1,00,000.  

Net loss transferred to each account will be equally divided among Reema and Seema:

$1,00,000- 6,000 = \frac {94,000}{2}= Rs. 47,000$