Question

A,B and C are in partnership. A and C share profits in the ratio of 2:1, B was allowed to receive a salary of Rs. 3,500 per month and commission of 10% of profit after charging his commission of 1/2 of the profit of the firm whichever is more subject to the maximum share of profit i,e., Rs. 60,000. Any excess which he receive will be paid back to A and C in the ratio of 1 : 1. The profit of the firm after charging B's salary is Rs. 88,000. Distribute the profits by making Profit and Loss Appropriation Account. Show your workings clearly.

Answer 1

PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ending... Cr.
$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \text{(Rs.)}& & \text{(Rs.)}\\ \text{To Profit:}& & \text{By Profit and Loss A/c}& 88,000\\ \text{A:}(88,000-50,000)\times 2/3& 25,333& & \\ \text{B:}50,000& 50,000& & \\ \text{C:}(88,000-50,000)\times 1/3& 12,667& & \\ \text{Total}& \text{88,000}& \text{Total}& 88,000\end{array}$

Calculation of B's Share
$\begin{array}{ccc}\text{Salary + Commission}& & \text{Share of Profit}\\ \text{Salary}=3,500\times 12& =42,000& 88,000\times 1/2=44,000\\ \text{+Commission}(88,000\times 10/110)& =8,000& \\ & =50,000& \end{array}$