wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

A, B and C are partners in a firm. Their profit-sharing ratio is 2 : 2 : 1. C is guaranteed a minimum amount of ₹ 10,000 as share of profit every year. Any deficiency arising on that amount shall be met by B. The profits for the two years ended 31st March, 2017 and 2018 were ₹ 40,000 and ₹ 60,000 respectively. Prepare Profit and Loss Appropriation Account for the two years.

Open in App
Solution

Profit and Loss Appropriation Account

for the year ended 31st March, 2017

Dr. Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to: (WN 1)

Profit and Loss A/c (Net Profit)

40,000

A’s Capital A/c

16,000

B’s Capital A/c

14,000

C’s Capital A/c

10,000

40,000

40,000

40,000

Profit and Loss Appropriation Account

for the year ended 31st March, 2018

Dr. Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to:

Profit and Loss A/c (Net Profit)

60,000

A’s Capital A/c

24,000

B’s Capital A/c

24,000

C’s Capital A/c

12,000

60,000

60,000

60,000


Working Notes:

WN 1 Distribution of Profit for the year 2016-17

Profit for 2015 = Rs 40,000

Profit sharing ratio = 2 : 2 : 1

C is given a guarantee of minimum profit of Rs 10,000

Deficiency in C’s Profit Share = 10,000 − 8,000 = Rs 2,000

This deficiency is to be borne by B.

Therefore,

Final Profit Share of A = 16,000

Final Profit Share of B = 16,000 2,000 = Rs 14,000

Final Profit Share of C = 8,000 + 2,000 = Rs 10,000


WN 2 Distribution of Profit for the year 2017-18

Profit for 2016 = Rs 60,000

Profit sharing ratio = 2 : 2 : 1

C is given a guarantee of minimum profit of Rs 10,000


flag
Suggest Corrections
thumbs-up
3
similar_icon
Similar questions
View More
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Accounting Treatment - I
ACCOUNTANCY
Watch in App
Join BYJU'S Learning Program
CrossIcon