Jain, Gupta and Singh were partners in a firm. Their fixed capitals were : Jain $R s 4, 00, 000$ ; Gupta $R s 6, 00, 000$ and Singh $R s 10, 00, 000$ . They were sharing profits in the ratio of their capitals. The firm was engaged in the processing and distribution of flavoured milk. They partnership deed provided for interest on capital at $10 %$ per annum. During the year ended $3^{s t} M a r c h 2014$ the firm earned a profit of $R s 1, 47, 000$ .
Showing your working notes clearly, prepare Profit and Loss Appropriation Account of the firm.

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Solution

WN1 : Calculation of Interest on capital
On Jain's Capital = $4, 00, 000 \times \frac{10}{100} = R s 40, 000$
On Gupta's Capital = $6, 00, 000 \times \frac{10}{100} = R s 60, 000$
On Singh's Capital = $10, 00, 000 \times \frac{10}{100} = R s 1, 00, 000$
Total Interest = $40, 000 + 60, 000 + 1, 00, 000 = R s 2, 00, 000$
WN2 : Calculation of Proportionate Interest on capital
Proportionate Interest = $\frac{I n t e r e s t t o a p a r t n e r}{T o t a l I n t e r e s t o f a l l p a r t n e r s} \times A v a i l a b l e p r o f i t s$
Proportionate Interest to Jain = $\frac{40, 000}{2, 00, 000} \times 1, 47, 000 = R s 29, 400$
Proportionate Interest to Gupta = $\frac{60, 000}{2, 00, 000} \times 1, 47, 000 = R s 44, 100$
Proportionate Interest to Singh = $\frac{1, 00, 000}{2, 00, 000} \times 1, 47, 000 = R s 73, 500$ .

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