Rick, Raja and Ratul are partners in a firm sharing profits and losses as 2: 2:1. The partnership deed provides the following : (i) Interest on capital @ 5% per annum. (ii) Commission to Rick at 2% of net profit after charging such commission. (iii) Salary to Raja and Ratul @ Rs. 400 and Rs. 300 per month respectively. Capital accounts as on 1.1.13 were : Rick Rs. 25,000; Raja Rs. 20,000 and Ratul Rs. 15,000. Net profit during the year ended on 31.12.13, after charging above items amounted to Rs. 20,400. During the year each partner drew Rs. 2,500. Prepare Capital Accounts of the Partners.
Answers
Following is the calculation for distribution of profits between Rick, Raja and Ratul.
Given in the question, profit sharing ratio of Rick, Raja and Ratul is 2:2:1
1) interest on capitals @5% p.a. :-
interest on Rick's capital = 25000 * 5/100 = 1,250
interest on Raja's capital = 20,000 * 5/100 = 1,000
interest on Ratul's capital = 15,000 * 5/100 = 750
2) salaries to partners :-
salary to Raja = 400 per month = 400 * 12 = 4,800 for the year.
salary to Ratul = 300 per month = 300 * 12 = 3,600 for the year.
3) commission to Rick after @2% on net profit after charging such commission:-
total net profit before charging salary and interest on capital but after charging commission = total net profit after charging everything + interest on capital + salaries to partners
= 20,400 + 3000 + 8400 = 31,800
commission to Rick = 31,800 * 2/100 = 636
4) distribution of net profit in 2:2:1 after charging everything which is 20,400 :-
Rick's share = 8,160
Raja's share = 8,160
Ratul's share = 4,080