Question

X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 80,000 and ₹ 60,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of ₹ 6,000 which has not been withdrawn. Profit for the year ended 31st march, 2018 before interest on capital but after chargingY's salary amounted to ₹ 24,000.
A provision of 5% of the profit is to be made in respect commission to the manager. Prepare an account showing the allocation profits.

Answer 1

Profit and Loss Adjustment Account for the year ended 31st March 2018
Dr.			Cr.
Particulars	Amount Rs	Particulars	Amount Rs
Manager’s Commission (30,000×5%)	1,500	Profit and Loss A/c (Net Profit after Y’s salary)	24,000
		Y’s Salary	6,000
Profit transferred to Profit and Loss
Appropriation A/c	28,500
	30,000		30,000

Profit and Loss Appropriation Account for the year ended 31st March 2018
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Salary to Y		6,000	Profit and Loss Adjustment A/c	28,500
Interest on Capital:			(After manager’s commission)
X	4,000
Y	3,000	7,000
Profit transferred to:
X’s Capital A/c	9,300
Y’s Capital A/c	6,200	15,500
		28,500		28,500

Working Notes:

WN 1 Calculation of Manager’s Commission

Profit for making Managers’ Commission = 24,000 + 6,000 (Y’s Salary) = Rs 30,000

WN 2 Calculation of Interest on Capital

WN 3 Calculation of Profit Share of each Partner

Profit available for distribution = 28,500 − 6,000 − 7,000 = Rs 15,500