Sohail and Maham are partners in a firm sharing profit in the ratio of 5:3. The partnership agreement provided that Sohail was to be paid salary of Rs. 7000 and Maham was to get a commission of Rs. 12,000 per year. Interest on capital was to be allowed @ 4% p.a. Interest on Sohail’s drawings was Rs. 1,800 and Maham’s drawings was Rs. 1,200. Capital of Sohail was Rs. 140,000 and Maham Rs. 100,000. The firm earned a profit Rs. 75,000 for the year ended December 31st, 2019. Prepare Profit and Loss Appropriation Account of the firm.
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Explanation:
working Notes:-
Calculation of Intrest on Capital
- Sohail capital = 1,40,000
- Maham capital = 1,00,000
- Rate = 4% p.a.
Equation = Capital × Rate/100
- Sohali intrest = 1,40,000 × 10% = 14,000
- Maham intrest = 1,00,000 × 10% = 10,000
Salary
- Sohali = 7,000
Commission
- Maham = 12,000
Intrest on drawings
- Sohali = 1,800
- Maham = 1,200
Share of profit = 75,000 + 1,800 + 1,200 - 24,000 - 7,000 - 12,000 = 35000
- Sohali share (5/8) = 21,875
- Maham share (3/8) = 13,125
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