Question

X and Y entered into partnership on 1st April, 2017 and contributed ₹ 2,00,000 and ₹ 1,50,000 respectively as their capitals. On 1st October, 2017, X provided ₹ 50,000 as loan to the firm. As per the provisions of the partnership Deed:
(i) 20% of Profits before charging interest on Drawings but after making appropriations to be transferred to General Reserve.
(ii) Interest on capital at 12% p.a. and Interest on Drawings @ 10% p.a.
(iii) X to ger monthly salary of ₹ 5,000 and Y to get salary of ₹ 22,500 per quarter.
(iv) X is entitled to a commission of 5% on sales. Sales for the year were ₹ 3,50,000.
(v) Profit and Loss to be shared in the ratio of their capital contribution up to ₹ 1,75,000 and above ₹ 1,75,000 equally.
The profit for the year ended 31st March, 2018 before providing for any interest was ₹ 4,61,000. The drawings of X and Y were ₹ 1,00,000 and ₹ 1,25,000 respectively. Pass the necessary Journal entries relating to appropriation our of profit and Loss Appropriation Account and the Partners Capital Accounts.

Answer 1

The necessary Journal entries relating to appropriation our of profit and Loss Appropriation Account and the Partners Capital Accounts are given below:

Explanation:

Calculation of Reserve:

Profit before charging Interest on Drawings but after making appropriations

$=\mathrm{Rs} .4,59,500-\mathrm{Rs} .42,000-\mathrm{Rs} .17,500-\mathrm{Rs} .60,000-\mathrm{Rs} .90,000$

$=\mathrm{Rs} .2,50,000$

Reserve

$=2,50,000 \times \frac{20}{100}=50,000$

Thus, the Reserve amount will be of Rs. 50,000.

Division of Profits:

The Profit division among the Partners X and Y are calculated below:

The profit of Partner X will be of Rs. 1,18,125 and the profit of Partner Y will be of Rs. 93,125.

Answer 2

Explanation:

here is the journal, since the question requires it.