Question

Ali and Bahadur are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1st April, 2017 stand as Ali Rs. 25,000 and Bahadur Rs. 20,000. The partners are allowed interest on capitals @ 5% p.a. Drawing's of the partners during the year ended 31st march 2018 amounted to Rs. 3,500 and Rs. 2,500 respectively.
Profit for the year, before charging interest on capital and annual salary of Bahadur @ Rs. 3,000, amounted to Rs. 40,000, 10% of divisible profit is to be transferred to Reserve.
You are asked to show Partners' Current Accounts and Capital Accounts recording the above transactions.

Answer 1

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To Interest on Capital Ali- 25000*5%=1250 Bahadur=20000*5%= 1000	2250	By net profit	40000
To Bahadur's salary	3000
To reserve	3475
To profit transferred to Ali's Capital A/c 21892 Bahadur's Capital A/c 9383	31275
Total	40000	Total	40000

PARTNER'S CAPITAL ACCOUNT

Particulars	ALI	BAHADUR	Particulars	ALI	BAHADUR
To bal c/d	25000	20000	By bal b/d	25000	20000
Total	25000	20000	Total	25000	20000

PARTNER'S CURRENT ACCOUNT

Particulars	ALI	BAHADUR	Particulars	ALI	BAHADUR
To Drawings	3500	2500	By interest on capital	1250	1000
			By salary		3000
			By P/L Appropriation A/c	21892	9383
By bal c/d	19642	10883
Total	22775	13225	Total	22775	13225

Working Notes: Calculation of amount to be transferred to reserve
10% of divisible profit
10% of (40,000-2250-3000) = 3475