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 the year profit prior to interest on capital but after charging B's salary amounted to Rs. 12,500. A provision of 5% of the profits is to be made in respect of Manager's Commission. Prepare an account showing the allocation of profits and the Partners' Capital Accounts.

Answer 1

Profit And Loss Account

Particulars	Amount	Particulars	Amount
To Manager;s commission (15000*5/100)	750	By profit before B's Salary (12500+2500)	15000
To Net profit T/f to P/L Appropriation Account	14250
Total	15000	Total	15000

Profit And Loss Appropriation Account

Particulars	Amount	Particulars	Amount
To Interest on capital A = 50000*6% = 3000 B=30000*6% = 1800	4800	By net profit	14250
B's Salary	2500
To profit T/f to A's Capital A/c = 4170 B's Capital A/c = 2780	6950
Total	14250	Total	14250

Partners capital account

Particulars	A	B	Particulars	A	B
			By bal b/d	50000	30000
			By Int on capital	3000	1800
			salary		2500
To bal c/d	57170	37080	By P/L Appr A/c	4170	2780
Total	57170	37080	Total	57170	37080