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2.16 Double Entry Book Keeping—CBSE XII
Solution: PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2018 Cr.
Particulars ` Particulars `
To Interest on Capital A/cs: By Profit and Loss A/c—Net Profit 3,69,000
Simran 12,000 (After Interest on Puneet’s Loan)
Puneet 9,600 21,600 (` 3,75,000 – ` 6,000) (WN 1)
To General Reserve A/c (WN 3) 34,950 By Interest on Drawings A/cs:
To Share of Profit transferred to: Simran 1,200
Simran’s Capital A/c 1,57,275 Puneet 900 2,100
Puneet’s Capital A/c 1,57,275 3,14,550
3,71,100 3,71,100

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Particulars Simran (`) Puneet (`) Particulars Simran (`) Puneet (`)
To Bank A/c (Drawings) 40,000 30,000 By Balance b/d 2,00,000 1,60,000
To Interest on Drawings A/c 1,200 900 By Interest on Capital A/c 12,000 9,600
To Balance c/d 3,28,075 2,95,975 By Profit and Loss
Appropriation A/c (Profit) 1,57,275 1,57,275
3,69,275 3,26,875 3,69,275 3,26,875

Working Notes:
1. Interest on Partner’s Loan is allowed @ 6% p.a., as there is no agreement. It will be shown on the debit side
of the Profit and Loss Account being a charge on profit.
2. As the date of drawings is not mentioned, interest is calculated for the average period, i.e., 6 months.
3. General Reserve is calculated @ 10% of ` 3,49,500 (i.e., ` 3,69,000 + ` 1,200 + ` 900 – ` 21,600).

Illustration 11.
X and Y entered into partnership on 1st April, 2017 and contributed ` 4,80,000 and
` 3,60,000 respectively as their capitals. On 1st October, 2017, X granted a loan of
` 1,20,000 to the firm. The terms of the partnership agreement are as follows:
(i) Interest on capital @ 12% p.a. and Interest on Drawings @ 10%.

(ii) X to get a monthly salary of ` 12,000 and Y to get salary of ` 54,000 per quarter.
(iii) X is entitled to a commission of 2% on sales. Sales for the year were ` 21,00,000.

(iv) 20% of profits before charging Interest on Drawings but after making appropriations to
be transferred to General Reserve.

(v) Profits and losses are to be shared in the ratio of their capital contribution up to ` 4,20,000
and above ` 4,20,000 equally.
Profit for the year ended 31st March, 2018, before providing for interest was ` 11,06,400.
Drawings of X and Y were ` 2,40,000 and ` 3,00,000 respectively.
Prepare Profit and Loss Appropriation Account and Partners’ Capital Accounts.