Page 47 - DEBKVOL-1

Chapter 2 Accounting for Partnership Firms—Fundamentals 2.19
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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 9,00,000
A (` 3,00,000 × 10/100) 30,000 —Net Profit
B (` 2,50,000 × 10/100) 25,000
C (` 1,50,000 × 10/100) 15,000
D (` 1,00,000 × 10/100) 10,000 80,000
To C’s Salary A/c (` 10,000 × 12) 1,20,000
To Share of Profit transferred to Capital A/cs:
[(` 9,00,000 – ` 80,000 –
` 1,20,000) = ` 7,00,000]
A: 4/10 of ` 7,00,000 2,80,000
Less: Firm’s Deficiency
borne (WN 1)
(` 1,80,000 × 4/9) 80,000
Deficiency borne of C 25,000 1,75,000
B: 3/10 of ` 7,00,000 2,10,000
Less: Firm’s Deficiency
(` 1,80,000 × 3/9) 60,000 1,50,000
C: 2/10 of ` 7,00,000 1,40,000
Less: Firm’s Deficiency
(` 1,80,000 × 2/9) 40,000
1,00,000
Add: Deficiency recovered
from A (WN 2) 25,000 1,25,000
D: 1/10 of ` 7,00,000 70,000
Add: Deficiency recovered
from A, B and C 1,80,000 2,50,000
9,00,000 9,00,000

Working Notes:
1. Calculation of firm’s deficiency: `
D’s share of profit excluding interest on Capital has
been guaranteed by the firm 2,50,000
Less: D’s share of profits (` 7,00,000 × 1/10) 70,000
Firm’s deficiency borne by A, B and C 1,80,000
2. Calculation of deficiency recovered by C from A:
C’s share of profits (` 7,00,000 × 2/10) 1,40,000
Less: C’s share in firm’s deficiency (` 1,80,000 × 2/9) 40,000
1,00,000
Add: Interest on Capital 15,000
Salary 1,20,000 1,35,000
2,35,000
Deficiency recovered from A (Balancing Figure) 25,000
C’s share of profits including interest on capital
and salary is guaranteed by A 2,60,000