X and Y are partners in a business and they have invested Rs. 80,000 and Rs.60,000
respectively as capital on 1-1-95. Each partner has been withdrawing Rs. 400 at the
end of each month [from January to December) for private expenses. According to the
partnership deed, interest is allowed on capital at 8% p.a. and charged on drawings at
6% p.a. Calculate the amount of interest to which each partner is entitled under the average due date system
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Answer:
PROFIT AND LOSS APPROPRIATION ACCOUNT
Particulars Amount Particulars Amount
To Interest on capital
X= 50,000
To Salary
Y= 30,000 80,000 By net profit 80,000
Total 80,000 Total 80,000
Interest on X's capital = 20,00,000*8%=1,60,000
Salary to Y = 8000*12 = 96,000
Total = 2,56,000
Net profits available is less than the appropriations to be made. So,the appropriations are to be made in the ratio of interest and salary i.e 5:3.
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