Question

C and D are partners in a firm; C has contributed ₹ 1,00,000 and D ₹ 60,000 as capital. Interest in payable @ 6% p.a. and D is entitled to a salary of ₹ 3,000 per month. In the year ended 31st March, 2019, the profit was ₹ 80,000 before interest and salary. Divide the amount between C and D.

Answer 1

Profit and Loss Appropriation Account for the year ended 2018-2019
Dr.					Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
Interest on Capital:				Profit and Loss A/c (Net Profit)	80,000
C		6,000
D		3,600	9,600
Salary to D (3000 × 12)			36,000
Profit transferred to :
C’s Capital A/c	17,200
D’s Capital A/c	17,200		34,400
			80,000		80,000

Working Notes:

WN 1 Calculation of Interest on Capital

$$\begin{gathered} \mathrm{Interest}\mathrm{on}\mathrm{C}\text{'}\mathrm{s}\mathrm{Capital}=1,00,000\times \frac{6}{100}=6,000 \\ \mathrm{Interest}\mathrm{on}\mathrm{D}\text{'}\mathrm{s}\mathrm{Capital}=60,000\times \frac{6}{100}=3,600 \end{gathered}$$

WN 2 Calculation of Profit Share of each Partner

Profit available for distribution = 80,000 − 9,600 − 36,000 = Rs 34,400
$\mathrm{Profit}\mathrm{share}\mathrm{of}\mathrm{C}\mathrm{and}\mathrm{D}\mathrm{each}=34,400\times \frac{1}{2}=17,200$
Total amount received by C = Interest on Capital + Profit Share = 6,000 + 17,200 = Rs 23,200

Total amount received by D = Interest on Capital + Salary + Profit Share = 3,600 + 36,000 + 17,200 = Rs 56,800