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Introduction to Banking

On 1st April,...

Question

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

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Solution

PROFIT AND LOSS APPROPRIATION A/C
(for the year ended 31st March, 2018)
Dr. Cr.
Particulars Amount Particulars Amount
To Salary to B 12000 By Net profit a/c 35000
To Interest on Capital
- A
- B
6000
4500 By interest on drawings a/c
- A
- B
150
210
To Profit transferred to:
- A's Capital a/c
- B's Capital a/c
7716
5144
35360 35360

PARTNER'S CAPITAL A/C
Dr. Cr.
Particulars A B Particulars A B
To Drawings a/c 9000 18000 By Balance b/d 60000 45000
To Interest on drawings a/c 150 210 By Interest on capital a/c 6000 4500
By Salary 12000
By Profit and loss appropriation a/c 7716 5144
To Balance b/d 64566 48434
73716 66644 73716 66644

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Q. 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.

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Particulars	Amount	Particulars	Amount
To Salary to B	12000	By Net profit a/c	35000
To Interest on Capital - A - B	6000 4500	By interest on drawings a/c - A - B	150 210
To Profit transferred to: - A's Capital a/c - B's Capital a/c	7716 5144
	35360		35360

Particulars	A	B	Particulars	A	B
To Drawings a/c	9000	18000	By Balance b/d	60000	45000
To Interest on drawings a/c	150	210	By Interest on capital a/c	6000	4500
			By Salary		12000
			By Profit and loss appropriation a/c	7716	5144
To Balance b/d	64566	48434
	73716	66644		73716	66644