Question

(Profit and Loss Appropriation Account). $A$ and $B$ started a business on 1st April, 2017 with capitals of $Rs.3,00,000$ and $Rs.2,00,000$ respectively. According to the Partnership Deed, B is to get salary of $Rs.5,000$ per month, $A$ is to get $10\%$ commission on Profit after allowing salary to $B$ and interest is to be allowed on capitals @ $6\%$ p.a. Profit-sharing ratio`between the two partners is $3:2$. During the year, the firm earned a profit of $Rs.2,50,000$.
Pass Journal entries for division of profits and prepare Profit and Loss Appropriation Account. The firm doses its accounts on 31st March every year.

Answer 1

Journal Entries

Profit and loss A/c Dr. 2,50,000

To Profit and loss App A/c 2,50,000

(Being profit transferred to P&L app account)

B's salary A/c Dr. 60,000

To B's capital A/c 60,000

(Being salary paid to partner)

A's commission A/c Dr. 19,000

To A's capital A/c 19,000

(Being commission paid to partner)

Profit and loss App A/c Dr. 79,000

To B's salary A/c 60,000

To A's commission A/c 19,000

(Being salary and commission transferred)

Interest on capital A/c Dr. 30000

To A's capital A/c 18,000

To B's capital A/c 12,000

(Being interest allowed)

Profit and loss App A/c Dr. 30,000

To Interest on capital A/c 30,000

(Being interest transferred)

Profit and loss App A/c Dr. 1,41,00

To A's capital A/c 84,600

To B's capital A/c 56,400

(Being profit distributed)

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To B's salary A/c	60,000	By net profit	2,50,000
To A's commission A/c	19,000
To Interest on capital A/c A- 18,000 B- 12,000	30,000
To profit transferred to- A's capital A/c - 84,600 B's capital A/c- 56,400	141000
Total	250000	Total	250000