Question

Sukesh and Vanita were partners in a firm. Their partnership agreement provides that

(i) Profits would be shared by Sukesh and Vanita in the ratio of 3 : 2;

(ii) 5% interest is to be allowed on capital ;

(iii) Vanita should be paid a monthly salary of Rs 600.

The following balances are extracted from the books of the firm, on December 31, 2006.

$\begin{array}{ccc}\text{Items}& \text{Sukesh (Rs)}& \text{Vanita (Rs)}\\ \text{Capital Accounts}& 40,000& 40,000\\ \text{Current Accounts}& \text{(Cr)7,200}& \text{(Cr)2,800}\\ \text{Drawings}& 10,850& 8,150\end{array}$

Net Profit for the year, before charging interest on capital and after charging partner's salary was Rs 9,500. Prepare the profit and loss appropriation account and the partner's current accounts.

Answer 1

$\begin{array}{ccccccccccc}\text{Dr}& & & & & \text{Profit and Loss Appropriation Account}& & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Interest on Capital}& & & \text{Profit and Loss}& & 9,500\\ \text{Sukesh's Current A/c}& 2000& & & & \\ \text{Vanita's Salary}& 2000& 4,000& & & \\ \text{Vanita's Salary}& \overline{7,200}& & & & \\ \ast \text{(Already Charged)}& & & & & \\ \text{Profit Transferred to}& & & & & \\ \text{Sukesh's Current A/c}& 3,300& & & & \\ \text{Vanita's Current A/c}& \underset{–}{2,200}& \underset{–}{5,500}& & & \\ & & \underset{–}{\underset{–}{9,500}}& & & \overline{\underset{–}{\underset{–}{9,500}}}\end{array}$

$\begin{array}{ccccccccccccc}\text{Dr}& & & & & & & \text{Partner's Current Account}& & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& \text{Sukesh}& \text{Vanita}& \text{Particulars}& \text{Sukesh}& \text{Vanita}\\ \text{Drawings}& 10,850& 8,150& \text{Balance b/d}& 7,200& 2,800\\ & & & \text{Salary}& & 7,200\\ & & & \text{Interest on Capital}& 2,000& 2,000\\ & & & \text{Profit and Loss}& 3,300& 2,200\\ & & & \text{Appropriation}& & \\ \text{Balance c/d}& 1,650& 6,050& & & \\ & \overline{\underset{–}{\underset{–}{12,500}}}& \overline{\underset{–}{\underset{–}{14,200}}}& & \overline{\underset{–}{\underset{–}{12,500}}}& \overline{\underset{–}{\underset{–}{14,200}}}\end{array}$

Note Sukesh's Profit $=5,500\times \frac{3}{5}=3,300$

Vanita's Profit $=5,500\times \frac{2}{5}=2,200$

$\ast$ Vanita's salary will not be taken as it is already charged.