Yand Z formed a partnership firm in 2019-20 to carry on a business. Y contributes a building
his capital. He purchased this building in May 2004 for 5.65,000. The fair market value
of the building on the date of contribution was * 35,00.000. However, the firm credited his
capital account by + 30.00.000. Compute the amount of capital gains. The cost inflation index
for relevant years is : 2004-05-113: 2019-20-289.
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Explanation:
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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