Question

$X$ and $Y$ are partners in a firm sharing profits in the ratio of $4:1$. They decide to admit $Z$, their manager, as a partner with effect from 1st April, 2017 for $\frac{1}{8}th$ share in profits. $Z$, as a manager, was getting salary of $Rs.8,000$ per month and commission of $5\%$ of the net profits after charging such salary and commission.
As per the terms of the Partnership Deed, any excess amount which $Z$ shall be entitled to receive as a partner over the amount which have been due to hint as a manager, would be borne by $X$ out of his share of profit.
Profit for the year ended 31st March, 2018, amounted to $Rs.13,56,000$ before salary and commission. Prepare the Profit and Loss Appropriation Account for the period ending 31st March, 2018.

Answer 1

Notes: Profit = 13,56,000

Less:-Amount Due to Z as Manager :

Salary(8000*12) = 96,000

Commission[5/105(1356000-96000) = 60000 (1,56,000)

Net Divisible Profit =12,00,000

X's share= 12,00,000*4/5= 9,60,000

Y's share = 12,00,000*1/5= 2,40,000

When Z admitted as a partner,not entitled to salary and commission. He is now entitled to 1/8th share of profits.

1/8th share of profits= 13,56,000*1/8 = 1,69,500

Deficiency= 1,69,500-1,56,000= 13,500

As deficiency will be borne by X, so X' share of profit= 9,60,000-13,500= 9,46,500

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To Profit Transferred to X's capital A/c-9,46,500 Y's capital A/c-2,40,000 Z's capital A/c-1,69,500	13,56,000	By Profit and Loss A/c	13,56,000
Total	13,56,000	Total	13,56,000