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Goodwill Valuation (Retirement)

X, Y and Z ...

Question

$X, Y$ and $Z$ are partners in a firm sharing profits in $2 : 2 : 1$ ratio. The fixed capitals of the partners were: $X R s . 5, 00, 000; Y R s . 5, 00, 000$ and $R s . 2, 50, 000$ respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. $Z$ is to be allowed a salary of $R s .2, 000$ per month. The profit of the firm for the year ended 31st March, 2018 after debiting Z's salary was $R s . 4, 00, 000$
Prepare Profit and Loss Appropriation. Account.

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Solution

Profit and Loss Appropriation a/c
(for the year ended 31st March,2018)
Dr. Cr.
Particulars Amount Particulars Amount
To Interest on Capital:
- X
- Y
- Z
50000
50000
25000 By Profit and Loss a/c
(after charging Z's salary) 400000
To Profit transferred to:
- X's Capital a/c
- Y's Capital a/c
- Z's Capital a/c
110000
110000
55000
400000 400000

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Particulars	Amount	Particulars	Amount
To Interest on Capital: - X - Y - Z	50000 50000 25000	By Profit and Loss a/c (after charging Z's salary)	400000
To Profit transferred to: - X's Capital a/c - Y's Capital a/c - Z's Capital a/c	110000 110000 55000
	400000		400000