The partnership agreement between Maneesh and Girish provides that: (i) Profits will be shared equally; (ii) Maneesh will be allowed a salary of Rs 400 p.m; (iii) Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary; (iv) 7% interest will be allowed on partner’s fixed capital; (v) 5% interest will be charged on partner’s annual drawings; (vi) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs 80,000, respectively. Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015 amounted to Rs 40,000; Prepare firm’s Profit and Loss Appropriation Account.
Answers
Given : The partnership agreement between Maneesh and Girish provides that: (i) Profits will be shared equally;
(ii) Maneesh will be allowed a salary of Rs 400 p.m; (iii) Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary; (iv) 7% interest will be allowed on partner’s fixed capital; (v) 5% interest will be charged on partner’s annual drawings; (vi) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs 80,000, respectively. Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015 amounted to Rs 40,000;
Solution :
Profit and Loss Appropriation account is in the attachment below.
** It has been assumed drawings have been made in the middle of the year. Normally, in the absence of date , drawings are assumed to have been made in the middle of the year.
Extra information :
Profit and Loss Appropriation account :
Profit and Loss Appropriation account is prepared to show how the net profit among partners has been distributed. It is credited with interest on drawings and debited with interest on capital , salary or commission payable to partners. After these adjustments have been made the Profit and Loss appropriation account shows the amount of net profit on net loss which shall be distributed among the partner in the agreed profit sharing ratio.
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Here are some more questions from this chapter :
Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of Rs 5,00,000 and Rs 3,00,000 respectively on October 01, 2016. Aakriti Advanced. Rs 20,000 by way of loan to the firm without any agreement as to interest. Profit and Loss account for the year ended March 2017 showed profit of Rs 43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them giving reason for your solution.
https://brainly.in/question/17097639
How will you deal with a change in the profit sharing ratio among existing partners? Take imaginary figures to illustrate your answer?
https://brainly.in/question/17097638
Explanation:
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