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Appropriation of Profits

Reema and See...

Question

Reema and Seema are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly salary of Rs 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were Rs 5,00,000 each and drawings during the year were Rs 60,000 each.
The firm incurred a loss of Rs 1,00,000 during the year ended 31st March, 2018.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.

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Solution

Profit and Loss Appropriation Account

for the year ended March 31, 2018

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit and Loss A/c
1,00,000
Interest on Drawings A/c:

Reema
3,000

Seema

3,000

6,000

Loss transferred to

Reema
47,000

Seema
47,000

94,000

1,00,000

1,00,000

Note: Since the firm has incurred loss, no interest on capital and salary will be allowed to the partners. However, interest on drawings will be charged from each of them @ 10% p.a. on the amounts withdrawn by them for an average period of six months.

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Profit and Loss Appropriation Account for the year ended March 31, 2018
Dr.					Cr.
Particulars	Amount Rs	Particulars		Amount Rs
Profit and Loss A/c	1,00,000	Interest on Drawings A/c:
		Reema	3,000
		Seema	3,000	6,000
		Loss transferred to
		Reema	47,000
		Seema	47,000	94,000
	1,00,000			1,00,000