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Question

Amal, Bimal and kamal are three partners. On 1st April, 2017, their Capitals stood as: Amal ₹ 40,000, Bimal ₹ 30,000 and Kamal ₹ 25,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amal would get a salary of ₹ 250 per month,
(c) Bimal would receive commission @ 4% on net profit after deducting commission, interest on capital and salary, and
(d) After deducting all of these 10% of the profit should be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2018 was ₹ 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the Partners.

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Solution

Profit and Loss Appropriation Account

for the year ended March 31, 2018

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital:

Profit and Loss A/c

33,360

Amal

2,000

(Net Profit)

Bimal

1,500

Kamal

1,250

4,750

Salary to Amal (250 × 12)

3,000

Commission to Bimal

985

General Reserve

2,462

Profit transferred to:

Amal’s Capital A/c

7,388

Bimal’s Capital A/c

7,388

Kamal’s Capital A/c

7,387

22,163

33,360

33,360

Partners’ Capital Accounts

Dr.

Cr.

Particulars

Amal

Bimal

Kamal

Particulars

Amal

Bimal

Kamal

Balance b/d

40,000

30,000

25,000

Interest on Capital A/c

2,000

1,500

1,250

Salary A/c

3,000

-

-

Commission

-

985

-

Balance c/d

52,388

39,873

33,637

P/L Appropriation A/c

7,388

7,388

7,387

52,388

39,873

33,637

52,388

39,873

33,637

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Commission to Bimal

Commission to Bimal = 4% on Net Profits after Commission

Profit after expenses = 33,360 4,750 3,000 = Rs 25,610

WN 3 Calculation of Amount to be transferred to General Reserve

Amount for General Reserve = 10% of Profit

WN 4 Calculation of Profit Share of each Partner

Profit available for Distribution = 33,360 − 4,750 − 3,000− 985 − 2,462

= Rs 22,163


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