Question

On 1st April, 2017, A and B entered into partnership contributing ₹ 60,000 and ₹ 45,000 respectively. They agreed to share profits and losses in the ratio of 3 : 2. B is allowed salary of ₹ 12,000 per year. Interest on capital is to be allowed @ 10% p.a. During the year, A withdrew ₹ 9,000 and B withdrew ₹ 18,000 as drawings, Interest on drawings paid by A and B were ₹ 150 and ₹ 210 respectively. Profit for the year ended 31st March, 2018 before the above adjustments was ₹ 35,000. Show distribution of profits by preparing Profit and Loss Appropriation Account of the firm. Prepare Partners' Capital Accounts also.

Answer 1

Profit and Loss Appropriation Account for the year ended 31st March, 2018
Dr.						Cr.
Particulars			Amount Rs	Particulars		Amount Rs
Salary to B			12,000	Profit and Loss A/c (Net Profit)		35,000
Interest on Capital:				Interest on Drawings A/c:
A		6,000		A	150
B		4,500	10,500	B	210	360
Profit transferred to:
A’s Capital A/c	7,716
B’s Capital A/c	5,144		12,860
			35,360			35,360

Partners’ Capital Accounts
Dr.					Cr.
Particulars	A	B	Particulars	A	B
Drawings A/c	9,000	18,000	Balance b/d	60,000	45,000
Interest on Drawings A/c	150	210	Interest Capital A/c	6,000	4,500
			Salary A/c	-	12,000
Balance c/d	64,566	48,434	P&L Appropriation A/c	7,716	5,144
	73,716	66,644		73,716	66,644

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Profit available for Distribution = 35,000 + 360 − 12,000 − 10,500 = Rs 12, 860