Question

A, B and C are partners sharing profits and losses in the ratio of A 1/2, B 3/10, C 1/5 after providing for interest @ 5% on their respective capitals, viz., A ₹ 50,000; B ₹ 30,000 and C ₹ 20,000 and allowing B and C a salary of ₹ 5,000 each per annum. During the year ended 31st March, 2018, A has drawn ₹ 10,000 and B and C in addition to their salaries have drawn ₹ 2,500 and ₹ 1,000 respectively. The Profit and Loss Account for the year ended 31st March, 2018 showed a net profit of ₹ 45,000 before charging (a) interest on capital and (b) partners' salaries. On 1st April, 2017, the balances in the current Account of the partners were A (cr.) ₹ 4,500; B (Cr.) ₹ 1,500 and C (Cr.) ₹ 1,000. Interest is not charged on Drawings or Current Account balances. Show Partners' Capital and Current Accounts as at 31st March, 2018 after division of profits in accordance with the partnership agreement.

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	45,000
A			2,500
B			1,500
C			1,000	5,000
Salary to:
B			5,000
C			5,000	10,000
Profit transferred to:
A’s Current A/c	15,000
B’s Current A/c		9,000
C’s Current A/c		6,000		30,000
				45,000		45,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
				Balance b/d	50,000	30,000	20,000
Balance c/d	50,000	30,000	20,000
	50,000	30,000	20,000		50,000	30,000	20,000

Partners’ Current Accounts
Dr.							Cr.
Particulars	A	B	C	Particulars	A	B	C
Drawings A/c	10,000	7,500	6,000	Balance b/d	4,500	1,500	1,000
				Interest on Capital A/c	2,500	1,500	1,000
				Salaries A/c		5,000	5,000
Balance c/d	12,000	9,500	7,000	P/L Appropriation A/c	15,000	9,000	6,000
	22,000	17,000	13,000		22,000	17,000	13,000

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Profit available for Distribution = 45,000 − 15,000 = Rs 30,000