Question

1. A and B are partners in a firm sharing profits or losses in the ratio of 2:3 with capitals of Rs 4,00,000 and Rs 8,00,000 respectively. Each partner is entitled to 10% p.a. interest on his capital. B is entitled a commission of 10% on net profit remaining after deducting interest on capital but before charging any commission. A is entitled a commission of 8% of net profit remaining after deducting interest on capital and after charging all the commission. The profit for the year prior to calculation of interest on capital was Rs 6,00,000.

Answer 1

Hi Chanchal, the solution to your query is here.

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars			Amount Rs	Particulars	Amount Rs
Interest on Capital A/c:				Profit and Loss A/c	6,00,000
A		40,000
B		80,000	1,20,000
Commission
A		32,000
B		48,000	80,000
Profit transferred to:
A’s Capital A/c	1,60,000
B’s Capital A/c	2,40,000		4,00,000
			2,80,000		2,80,000

Working Notes

Calculation of Commission

$$\begin{gathered} \mathrm{B}=(6,00,000-1,20,000)\times \frac{10}{100}=\mathrm{Rs}48,000 \\ \mathrm{A}=(6,00,000-1,20,000-48,000)\times \frac{8}{108}=\mathrm{Rs}32,000 \end{gathered}$$