Question

Pratima, Ekta and Shikha are partners in a firm. Their profit sharing ratio is 5 : 3 : 2. However, Shikha is guaranteed a minimum amount of Rs 20,000 as share of profit every year. Any deficiency arising on the account shall be met by Ekta. The profits for the two years ending 31st March, 2016 and 2017 are Rs 80,000 and Rs 1,20,000 respectively. Prepare Profit and Loss Appropriation Account for two years.

Answer 1

$\text{PROFIT AND LOSS APPROPRIATION ACCOUNT}\text{Dr.}\text{for the year ended 31st March, 2016}\text{Cr.}\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \left(\text{Rs}\right)& & \left(\text{Rs}\right)\\ \text{To Profit:}& & \text{By Profit and Loss A/c}& 80,000\\ \text{Pratima}(80,000\times \frac{5}{10})& 40,000& & \\ \text{Ekta}(80,000\times \frac{3}{10})24,000& & & \\ (-)\text{Transfer to Shikha}\underset{–}{(4,000)}& 20,000& & \\ \text{Shikha}(80,000\times \frac{2}{10})16,000& & & \\ \text{+ Transfer from Ekta}4,000& 20,000& & \\ & 80,000& & 80,000\end{array}$

PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2017 Cr
$\begin{array}{cccc}\text{Particulars}& \text{Amount}& \text{Particulars}& \text{Amount}\\ & \left(\text{Rs}\right)& & \left(\text{Rs}\right)\\ \text{To Profit:}& & \text{By Profit and Loss A/c}& 1,20,000\\ \text{Pratima}(1,20,000\times \frac{5}{10})& 60,000& & \\ \text{Ekta}(1,20,000\times \frac{3}{10})& 36,000& & \\ \text{Shikha}(1,20,000\times \frac{2}{10})& 24,000& & \\ & 1,20,000& & 1,20,000\end{array}$