X and Y commenced a partnership business on 1.1.2013 with capitals of 32,40,000 and
Rs 1,80,000 respectively. There was no Partnership Deed. On 1.7.2013, X made a loan to
the partnership of Rs 1,00,000 without any agreement as to interest. The Profit and Loss Account
for the year ended 31.12.2013 disclosed a net profit of Rs 1,40,000. You are required to prepare
the Profit and Loss Appropriation Account for the year ended 31.12.2013. Also state reasons.
Answers
Answer:
Partners Capital A/c
Dr X Y X Y
To drawings 100000 125000 By Balance b/d 200000 150000
To interest on
drawings 10000 12500 By Interest on capital 24000 18000
By Salary 60000 90000
By Commission 17500 Nil
By profits 124350 99,350
To balance c/d 315850 219850
Profit distribution up to 1,75,000 in the ratio of 4:3 i.e capital ratio and above equally distributed.
Profit And Loss Appropriation Account
Notes :
To interest on Capital
X= 2,00,000*12%
= 24,000
Y= 1,50,000*12%
= 18,000 42000 By net profit 4,61,000
X's salary = 5,000*12
= 60,000
Y's salary = 22,500*4
= 90,000 150000 By interest on drawings
X=1,00,000*10%
= 10,000
Y = 1,25,000*10%
= 12,500
X's Commission
(3,50,000*5%) 17,500
To General reserve
(Notes) 50,300
Share of profits
Up to 1,75,000
X = 1,00,000
Y=75,000
Remaining 48,700
X= 24,350
Y=24,350
Total 4,85,500 Total 4,83,500
Notes :
General Reserve transfer = 20% of Profits before charging Interest on Drawings but after making appropriations
Profit for the year Rs. 461000
Less : Interest on capital (42000)
Less : X's commission (17500)
Less : Salary of X & Y (150000)
Profit available for transfer of general reserve 251500
Profit transfer to general reserve = 20% of Rs. 251500 = Rs. 50300.
Explanation:
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