Question

Anshul and Asha are partners sharing profits and losses in the ratio of 3 : 2. Anshul being a non-working partner contributed ₹ 8,00,000 as her capital. Asha being a working partner did not contribute capital. The partnership Deed provides for interest on capital @ 5% and salary to every working partner @ ₹ 2,000 per month. Net profit (before providing for interest on capital and partner's salary) for the year ended 31st March, 2019 was ₹ 32,000.

Answer 1

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr.			Cr.
Particulars	Amount (₹)	Particulars		Amount (₹)
Interest on Anshul’s Capital	20,000	Profit and Loss A/c		32,000
Asha’s Salary	12,000
	32,000			32,000

Working Note:

Salary to Asha = Rs 24,000

Total appropriation to be made = 40,000 + 24,000 = Rs 64,000

Profit earned during the year = 32,000

Here, profit available for distribution (i.e. Rs 32,000) is less than the sum total of Interest on Capital and Salary (i.e. Rs 64,000).

Therefore, profit will be distributed in the ratio of Interest on Capital and Salary.