Question

Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs 50,000 and 30,000, respectively. Interest on capital is agreed to be paid at 6% pa. Azad is allowed a salary of Rs 2,500 pa. During 2006, the profits prior to the calculation of interest on capital but after charging Azad's salary amounted to Rs 12,500. A provision of 5% of profits is to be made in respect of manager's commission. Prepare accounts showing the allocation of profits and partner's capital accounts.

Answer 1

$\begin{array}{ccccccccc}\text{Dr}& & & & \text{Profit and Loss Appropriation Account}& & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Interest on Capital}& & & \text{Profit and Loss}& & 15,000\\ \text{Lokesh}& 3,000& & (12,500+2,500)& & \\ \text{Azad}& \underset{–}{1,800}& 4,800& & & \\ \text{Azad's Salary}& & 2,500& & & \\ \text{Provision for Manager's}& & & & & \\ \text{Commision}(15000\times \frac{5}{100})& & 750& & & \\ \text{Profit Transferred to}& & & & & \\ \text{Lokesh's Capital A/c}& 4,170& & & & \\ \text{Azad's Capital A/c}& \underset{–}{2,780}& \underset{–}{6,950}& & & \\ & & \underset{–}{\underset{–}{15,000}}& & & \overline{\underset{–}{\underset{–}{15,000}}}\end{array}$

$\begin{array}{cccccccccccc}& \text{Dr}& & & & & & \text{Partners' Capital Account}& & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& \text{Lokesh}& \text{Azad}& \text{Particulars}& \text{Lokesh}& \text{Azad}\\ & & & \text{Balance b/d}& 50,000& 30,000\\ & & & \text{Interest on Capital}& 3,000& 1,800\\ & & & \text{Salary}& & 2,500\\ \text{Balance c/d}& 57,170& 37,080& \text{Profit and Loss}& 4,170& 2,780\\ & & & \text{Appropriation}& & \\ & \underset{–}{\overline{57,170}}& \underset{–}{\overline{37,080}}& & \underset{–}{\overline{57,170}}& \underset{–}{\overline{37,080}}\end{array}$