Page 43 - DEBKVOL-1

Chapter 2 Accounting for Partnership Firms—Fundamentals 2.15
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Working Notes:
32
1. X’s Share of Profit = ` 1,40,000 (Y) × ¥ = ` 2,80,000.
13
2. Interest on Drawings:

11 1 10
X = ` 2,40,000 × ¥ ¥ = ` 11,000;
2 12 100
9 1 10
Y = ` 2,40,000 × ¥ ¥ = ` 9,000.
2 12 100
3. Y’s Interest on Capital = ` 1,44,000 – ` 80,000 = ` 64,000.
4. Net Profit = Salary + Interest on Capital + Profit transferred to Capital Accounts – Interest on Drawings.
Illustration 9.
Sharma and Verma were partners in a firm sharing profits in the ratio of 4 : 1. Their
capitals on 1st April, 2008 were: Sharma ` 5,00,000 and Verma ` 1,00,000. The Partnership
Deed provided that Sharma will get a commission of 10% of the net profit after allowing
a salary of ` 5,000 per month to Verma. The profit of the firm for the year ended
31st March, 2009 was ` 2,80,000.
Prepare Profit and Loss Appropriation Account of Sharma and Verma for the year ended
31st March, 2009. (AI 2009 C)

Solution: PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2009 Cr.
Particulars ` Particulars `
To Verma’s Capital A/c (Salary) 60,000 By Profit and Loss A/c (Net Profit) 2,80,000
To Sharma’s Capital A/c (Commission) 22,000
[10/100 (` 2,80,000 – ` 60,000)]
To Profit transferred to:
Sharma’s Capital A/c 1,58,400
(` 1,98,000 × 4/5)
Verma’s Capital A/c 39,600 1,98,000
(` 1,98,000 × 1/5)
2,80,000 2,80,000

Illustration 10.
Simran and Puneet are partners in a firm sharing profits and losses equally. On 1st April,
2017, capitals of the partners were: Simran—` 2,00,000 and Puneet—` 1,60,000. Profit and
Loss Account of the firm showed net profit of ` 3,75,000 (before interest on Puneet’s Loan) for
the year ended 31st March, 2018. Considering following information, prepare Profit and Loss
Appropriation Account of the firm and Partners’ Capital Accounts:
(i) Interest on capital to be allowed @ 6% p.a.
(ii) Interest on Puneet’s Loan Account of ` 1,00,000 for the whole year.
(iii) Interest on drawings of partners @ 6% p.a. Drawings being Simran—` 40,000 and
Puneet—` 30,000.
(iv) Transfer 10% of the distributable profit to General Reserve.