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Question

Amit and Vijay started a partnership business on 1st April, 2018. Their capital contributions were ₹ 2,00,000 and ₹ 1,50,000 respectively. The Partnership Deed provided as follows:
(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.
Net profit for the year ended 31st March, 2019 was ₹ 2,16,000. Interest on drawings amounted to ₹ 2,200 for Amit and ₹ 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.

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Solution

Profit and Loss Appropriation Account
for the year ended 31st March, 2019

Dr.

Cr.

Particulars

Amount

(₹)

Particulars

Amount

(₹)

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

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