Question

Amal, Bimal and Kamal are three partners. On 1st April, 2018, 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, net profit for the year ended 31st March, 2019 was ₹ 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the Partners.

Answer 1

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr.					Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
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