Question

A and B are Partners sharing profits in the ratio of 3:2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 2016, the profits of the year prior to calculation of interest on capital but after charging B's salary amounted to Rs. 12,500. Calculate the amount of profits to be distributed to A and B after the above effect.

• A. A's Profit Rs. 4,389; B's Profit Rs. 2,926
• B. A's Profit Rs. 4,620; B's Profit Rs. 3,080
• C. A's Profit Rs. 4,000; B's Profit Rs. 3,000
• D. A's Profit Rs. 4,300; B's Profit Rs. 2,900

Answer 1

The correct option is B A's Profit Rs. 4,620; B's Profit Rs. 3,080

A and B share profits in ratio 3:2

Profit & Loss Appropriation A/c

Particulars (Dr.)	Amount	Particulars (Cr.)	Amount
To interest on capital A's capital 3,000 B's capital 1,800 To salary a/c (B) To profit on appropriation A's capital 4,620 B's capital 3,080	4,800 2,500 7,700	By P&l a/c 12,500 + B's salary 2,500	15,000

Hence, A's share of proit is $Rs4,620$ whereas B's share is $Rs3,080$