Question

P, Q and R are in a partnership and as at 1st April, 2018 their respective capitals were: ₹ 40,000, ₹ 30,000 and ₹ 30,000. Q is entitled to a salary of ₹ 6,000 and R ₹ 4,000 p.a. payable before division of profits. Interest is allowed on capital @ 5% p.a. and is not charged on drawings. Of the divisible profits, P is entitled to 50% of the first ₹ 10,000, Q to 30% and R to 20%, rest of the profit are shared equally. Profits for the year ended 31st March, 2019, after debiting partners' salaries but before charging interest on capital was ₹ 21,000 and the partners had drawn ₹ 10,000 each on account of salaries, interest and profit.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2019 showing the distribution of profit and the Capital Accounts of the partners.

Answer 1

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr.					Cr.
Particulars			Amount (₹)	Particulars	Amount (₹)
Interest on Capital:				Profit (after Salary)	21,000
P		2,000
Q		1,500
R		1,500	5,000
Profit transferred to:
P’s Capital A/c	7,000
Q’s Capital A/c	5,000
R’s Capital A/c	4,000		16,000
			21,000		21,000

Partners’ Capital Accounts
Dr.							Cr.
Particulars	P	Q	R	Particulars	P	Q	R
Drawings A/c	10,000	10,000	10,000	Balance b/d	40,000	30,000	30,000
				Salaries A/c	-	6,000	4,000
				Interest Capital A/c	2,000	1,500	1,500
Balance c/d	39,000	32,500	29,500	P/L Appropriation A/c	7,000	5,000	4,000
	49,000	32,500	29,500		49,000	42,500	39,500

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Profit available for distribution = 21,000 − 5000 = Rs 16,000

a. Distribution of first Rs 10,000 (50%, 30% and 20%)

b. Distribution of Reaming Profit i.e. Rs 6,000 (16,000 − 10,000) equally

Therefore,