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Standard XII

Accountancy

Interest on Capital Exceeds Profits

X and Y are p...

Question

X and Y are partners with capital of Rs 1,00,000 and Rs. 80,000 respectively on 1st April 2016 and their profit sharing ratio is 2:1. Interest on capital is agreed @12% p.a. Y is to be allowed an annual salary of Rs. 6,000. The profit for the year ended 31st March, 2017 amounted to Rs.50,000.Manager is entitled to a commission of 10% of the profits. Prepare Profit and Loss Appropriation Account.

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Solution

Profit & Loss appropriation A/C

Particulars Amount Particulars Amount
Interest on capital
X 12,000
Y 9,600
Y's salary
Manager's commission
Profit transferred to partners capital A/c
21,600
6,000
5,000
17,400 Net profit 50,000
50,000 50,000

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Particulars	Amount	Particulars	Amount
Interest on capital X 12,000 Y 9,600 Y's salary Manager's commission Profit transferred to partners capital A/c	21,600 6,000 5,000 17,400	Net profit	50,000
	50,000		50,000

Profit & Loss appropriation A/C ParticularsAmountParticulars Amount Interest on capitalX 12,000Y 9,600Y's salaryManager's commissionProfit transferred to partners capital A/c 21,600 6,000 5,000 17,400 Net profit 50,000 50,000 50,000

Profit & Loss appropriation A/C

Particulars Amount Particulars Amount
Interest on capital
X 12,000
Y 9,600
Y's salary
Manager's commission
Profit transferred to partners capital A/c
21,600
6,000
5,000
17,400 Net profit 50,000
50,000 50,000