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1.14 Double Entry Book Keeping (Section A)—ISC XII

Notes:
1. Salary and Commission to firm’s Accountant are charge against firm’s profits, and not an appropriation
of profit. Hence, these items have been debited to Profit and Loss Account.
2. C’s Commission = 15/100 (` 5,62,500 – ` 55,600 – ` 1,74,000 – ` 60,300 – ` 1,01,250) = ` 25,703.
Illustration 13.
A, B and C are partners sharing profits and losses in proportion to their capitals in the
beginning of the year. They are entitled to draw annually ` 30,000; ` 25,000 and ` 20,000
respectively out of their anticipated share of profit. Any drawings in excess of these
amounts are to be regarded as advances taken from the firm and are to be subject to interest
@ 18% p.a. The capitals in the beginning of the year is to be allowed interest @ 15% p.a.
Capitals of the partners in the beginning of the year were: A ` 4,00,000; B ` 3,00,000 and
C ` 2,00,000. The credit balances of their Current Accounts were: A ` 11,520; B ` 18,640 and
C ` 5,760. Their drawings during the year were: A ` 70,000; B ` 95,000 and C ` 30,000.
The profit for the year was ` 3,04,200 before making any adjustments for interest as above.
Draw up Profit and Loss Appropriation Account, Capital and Current Accounts of the
partners for the year ended 31st March, 2016.
Solution: PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2016 Cr.
Particulars ` Particulars `
To Interest on Capital: By Profit and Loss A/c (Net Profit) 3,04,200
A’s Current A/c 60,000 By Interest on Drawings (Note):
B’s Current A/c 45,000 A on ` 40,000 3,600
C’s Current A/c 30,000 1,35,000 B on ` 70,000 6,300
To Profit transferred to Current A/cs: C on ` 10,000 900 10,800
A (4/9) 80,000
B (3/9) 60,000
C (2/9) 40,000 1,80,000
3,15,000 3,15,000

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Date Particulars A B C Date Particulars A B C
` ` ` ` ` `
2016 2015
Mar. 31 To Balance c/d 4,00,000 3,00,000 2,00,000 Apr. 1 By Balance b/d 4,00,000 3,00,000 2,00,000
4,00,000 3,00,000 2,00,000 4,00,000 3,00,000 2,00,000

Dr. PARTNERS’ CURRENT ACCOUNTS Cr.
Date Particulars A B C Date Particulars A B C
` ` ` ` ` `
2016 2015
Mar. 31 To Drawings A/c 70,000 95,000 30,000 April 1 By Balance b/d 11,520 18,640 5,760
To Interest on 2016
Drawings A/c 3,600 6,300 900 Mar. 31 By Interest on
To Balance c/d 77,920 22,340 44,860 Capital A/c 60,000 45,000 30,000
By Profit and Loss
App. A/c 80,000 60,000 40,000
1,51,520 1,23,640 75,760 1,51,520 1,23,640 75,760

Note: In the absence of actual dates of drawings, interest thereon has been calculated for the average period, i.e., 6 months.