Question

Amit and Vijay started a partnership business on 1st April,2017. Their capital contributions were ₹ 2,00,000 and ₹ 1,50,000 respectively. The Partnership Deed provided that:
(a) Interest on capital be allowed @ 10% p.a.
(b) Amit to get a salary of ₹ 2,000 per month and Vijay ₹ 3,000 per month.
(c) Profits are to be shared in the ratio of 3 : 2.
Profit for the year ended 31st March, 2018 befor above appropriations was ₹ 2,16,000. Interest on drawings amounted to ₹ 2,200 for Amit and ₹ 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.

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 (Net Profit)		2,16,000
Amit	20,000		Interest on Drawings A/c:
Vijay	15,000	35,000	Amit	2,200
Salary to:			Vijay	2,500	4,700
Amit (2,000 × 12)	24,000
Vijay (3,000 × 12)	36,000	60,000
Profit transferred to:
Amit’s Capital A/c	75,420
Vijay’s Capital A/c	50,280	1,25,700
		2,20,700			2,20,700

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Divisible Profit = 2,16,000 + 4,700 − 35,000 − 60,000 = Rs 1, 25,700

Profit sharing ratio = 3 : 2