Question

A and B are partners. A's Capital is ₹ 1,00,000 and B's Capital is ₹ 60,000. Interest on capital is payable @ 6% p.a. B is entitled to a salary of ₹ 3,000 per month. Profit for the current year before interest and salary to B is ₹ 80,000.
Prepare Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Interest on Capital:				Profit and Loss A/c (Net Profit)	80,000
A		6,000
B		3,600	9,600
Salary to B (Rs 3,000 × 12)			36,000
Profit transferred to:
A’s Capital A/c	17,200
B’s Capital A/c	17,200		34,400
			80,000		80,000

Working Notes:

WN1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Divisible Profit = 80,000 – 9,600 – 36,000 = 34,400