Question

A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1st April, 2017, their capitals were: A ₹ 50,000 and B ₹ 30,000. During the year ended 31st March, 2018 they earned a net profit of ₹ 50,000. The terms of partnership are:
(a) Interest on capital is to allowed @ 6% p.a.
(b) A will get a commission @ 2% on turnover.
(c) B will get a salary of ₹ 500 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A ₹ 8,000 and B ₹ 6,000. Turnover for the year was ₹ 3,00,000. After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partners' Capital Accounts.

Answer 1

Profit and Loss Appropriation Account for the year ended 31st March, 2018
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Interest on Capital:			Profit and Loss A/c (Net Profit)	50,000
A	3,000
B	1,800	4,800
B’s Salary (500 × 12)		6,000
Partner’s Commission
A	6,000
B	1,581	7,581
Profit transferred to:
A’s Capital A/c	23,714
B’s Capital A/c	7,905	31,619
		50,000		50,000

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A	B	Particulars	A	B
Drawings A/c	8,000	6,000	Balance b/d	50,000	30,000
			Interest on Capital A/c	3,000	1,800
			Commission A/c	6,000	1,581
			Salary A/c		6,000
Balance c/d	74,714	41,286	P/L Appropriation A/c	23,714	7,905
	82,714	47,286		82,714	47,286

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Commission to Partners

Commission to B = 5% on Profits after all Expense including such Commission

Profits after all expense = 50,000 − 4,800 − 6,000 − 6,000 = Rs 33,200

WN 3 Calculation of Profit Share of each Partner

Profit available for Distribution = 50,000 − 4,800 − 6,000 −7,581 = Rs 31,619

Profit sharing ratio = 3 : 1