Question

Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account as on March 31, 2016
Dr.												Cr.
Particulars							Amount Rs	Particulars				Amount Rs
Profit transferred to								Profit and Loss				40,000
Abhay’s Capital							20,000
Siddharth’s Capital					12,000
Less: Guarantee to Kusum’s					(2,000)		10,000
Kusum’s Capital		8,000
Add: Deficiency received from Siddharth						2,000	10,000
							40,000					40,000

Profit and Loss Appropriation Account as on March 31, 2017
Dr.					Cr.
Particulars	Amount Rs			Particulars	Amount Rs
Profit transferred to				Profit and Loss	60,000
Abhay’s Capital	30,000
Siddharth’s Capital	18,000
Kusum’s Capital	12,000
	60,000				60,000