Amit and Vijay started a partnership business on 1st April, 2017. Their capital contributions were Rs. 2,00,000 and Rs. 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 before above appropriations was Rs. 2,16,000. Interest on drawings amounted to Rs. 2,200 for Amit and Rs. 2,500 for Vijay. Which account is prepared to give effect to the above transaction ?

Profit and Loss apprpriation account

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Partners Capital Account

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Both A & B

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None of these

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Solution

The correct option is C Both A & B
In the given question,both the profit and Loss Appropriation Account and partners capital account needs to be prepared. The adjustments like interest,salary are appropriation of profits so they need to be reflected through Profit and Loss appropriation account.
For deriving the partners capital balances for the year 2018,partners capital account needs to be prepared incorporating the adjustments.

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Q. 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.
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