Question

Prem and Manoj are partners in a firm sharing profits in the ratio of 3 : 2. The Partnership Deed provided that Prem was to be paid salary of ₹ 2,500 per month and Manoj was to ger a commission of ₹ 10,000 per year. Interest on capital was to be allowed @ 5% p.a. and interest on drawings was to be charged @ 6% p.a. Interest on Prem's drawings was ₹ 1,250 and on Manoj's drawings was ₹ 425. Interest on Capitals of the partners were ₹ 10,000 and ₹ 7,500 respectively. The firm earned a profit of ₹ 90,575 for the year ended 31st March, 2018.
Prepare Profit and Loss Appropriation Account of the firm.

Answer 1

Profit and Loss Appropriation Account for the year ended 31st March 2018
Dr.					Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Salary to Prem (Rs 2,500 × 12)		30,000	Profit and Loss A/c (Net Profit)		90,575
Commission to Manoj		10,000	Interest on Drawings A/c:
Interest on Capital:			Prem	1,250
Prem	10,000		Manoj	425	1,675
Manoj	7,500	17,500
Profit transferred to:
Prem’s Current A/c	20,850
Manoj’s Current A/c	13,900	34,750
		92,250			92,250

Working Notes:

WN 1 Calculation of Interest on Capital

WN 2 Calculation of Profit Share of each Partner

Profit available for distribution = 90,575 + 1,675 − 30,000 − 10,000 − 17,500

= Rs 34,750

Profit sharing ratio = 3 : 2