On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipments to government schools situated in remote and backward areas. They contributed capitals of Rs. 80,000 and Rs. 50,000 respectively and agreed to share the profits in the ratio of 3 : 2. The Partnership Deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of Rs. 7,800. Showing your calculations clearly, prepare 'Profit and Loss Appropriation Account' of Jay and Vijay for the year ended 31st March, 2014.

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Solution

Profit and Loss Appropriation a/c
(for the year ended 31st March,2014)
Dr. Cr.
Particulars Amount Particulars Amount
To Interest on Capital
- Jay
- Vijay
4800
3000 By Profit and Loss a/c 7800
7800 7800
Working Note:
1. Calculation of interest on capital:
Jay's interest on Capital= 9/100 * 80000 = 7200
Vijay's Interest on capital= 9/100 * 50000 = 4500
Total interest= 7200+4500= 11700
2. Proportionate interest on Capital:
Jay's share= [7200/11700]7800
= 4800
Vijay's share= [4500/11700]7800
= 3000

Note: interest on capital can only be provided to the extent of the profits.

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On 1-04-2013 Jay and Vijay, entered into partnership for supplying laboratory equipment to government schools situated in remote and backward areas. They contributed capital of Rs 80,000 and Rs 50,000 respectively and agreed to share the profit in the ratio of 3:2. The partnership deed provided that interest on capital shall be allowed @9% per annum. During the year the firm earned a profit Rs 7,800.

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Particulars	Amount	Particulars	Amount
To Interest on Capital - Jay - Vijay	4800 3000	By Profit and Loss a/c	7800
	7800		7800