Question

X, Y and Z were partners in a firm. Their capitals were Rs.1,00,000; Rs.2,00,000 and Rs.2,50,000. Their
agreement provided the following:
(i) The profit sharing ratio will be 1:2:2
(ii) X is being guaranteed a share of Profit Rs.50,000
(iii) Y will be allowed a salary of Rs.12,000 p.a.
(iv) Interest on capital will be allowed @ 12% p.a.
The interest on drawings were Rs.500, Rs.600, and Rs. 800 for X,Y and Z. The firm earned a profit of
Rs.2, 88,900 during the year.
Prepare profit & loss appropriation account and show the workings

Answer 1

Reconstitution of a Partnership Firm - Admission of a Partner

Accounting Treatment of Accumulated Profits and Losses and Reserves

X, Y and Z are partners in ...

ACCOUNTANCY

X,Y and Z are partners in a firm sharing profits in 2:2:1 ratio. The fixed capitals of the partners were: X Rs.5,00,000;Y Rs.5,00,000 and Rs.2,50,000 respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. Z is to be allowed a salary of Rs.2,000 per month. The profit of the firm for the year ended 31st March, 2018 after debiting Z's salary was Rs.4,00,000

ANSWER

Profit and Loss Appropriation a/c

(for the year ended 31st March,2018)

Dr. Cr.

Particulars Amount Particulars Amount

To Interest on Capital:

- X

- Y

- Z

50000

50000

25000 By Profit and Loss a/c

(after charging Z's salary) 400000

To Profit transferred to:

- X's Capital a/c

- Y's Capital a/c

- Z's Capital a/c

110000

110000

55000

400000 400000