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2.24 Double Entry Book Keeping—CBSE XII

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Date Particulars A (`) B (`) Date Particulars A (`) B (`)
2018 2017
March 31 To Drawings A/c 8,000 6,000 April 1 By Balance b/d 50,000 30,000
March 31 To Balance c/d 74,714 41,286 2018
March 31 By Interest on Capital A/c 3,000 1,800
March 31 By Partner’s Salary A/c ... 6,000
March 31 By Commission A/c 6,000 1,581
March 31 By Profit and Loss
Appropriation A/c (Profit) 23,714 7,905
82,714 47,286 82,714 47,286
Working Notes:
1. A’s Commission = 2/100 × ` 3,00,000 = ` 6,000
2. B’s Commission:
Net profit after charging interest, salary and A’s Commission
but before charging B’s Commission = ` (50,000 – 4,800 – 6,000 – 6,000) = ` 33,200
Profit after Commission Commission Profit before Commission
100 5 105
x 33,200
∴ x = 5/105 × ` 33,200 = ` 1,581.
3. Rent payable to a partner for the use of his premises is a charge against profit not an appropriation of profit.
Hence, Amount transferred to Profit and Loss Appropriation Account is ` 50,000 (i.e., ` 74,000 – ` 24,000).
Illustration 18.
A, B and C are partners sharing profits in the ratio of 5 : 4 : 1. C is given a guarantee that his
share of profit in any given year would be ` 50,000. Deficiency, if any, would be borne by
A and B equally. Profit for the year ending 31st March, 2018 was ` 4,00,000.
Pass necessary entries in the books of the firm.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
2018
March 31 Profit and Loss A/c ...Dr. 4,00,000
To Profit and Loss Appropriation A/c 4,00,000
(Net profit transferred to Profit and Loss Appropriation Account)
Profit and Loss Appropriation A/c ...Dr. 4,00,000
To A’s Capital A/c 2,00,000
To B’s Capital A/c 1,60,000
To C’s Capital A/c 40,000
(Net profit distributed among the partners in the ratio of 5 : 4 : 1)
A’s Capital A/c ...Dr. 5,000
B’s Capital A/c ...Dr. 5,000
To C’s Capital A/c (` 50,000 – ` 40,000) 10,000
(Deficiency of C’s share in profits, met by A and B equally)
Working Note: When the net profit of ` 4,00,000 is distributed amongst the partners in the ratio of 5 : 4 : 1,
C gets ` 40,000 (i.e., 1/10th of ` 4,00,000). But his guaranteed profit is ` 50,000. The shortfall of
` 10,000 (i.e., ` 50,000 – ` 40,000) is to be borne by A and B equally. In effect, shortfall borne by
A is ` 5,000 (i.e., 1/2 of ` 10,000) and B is ` 5,000 (i.e., 1/2 of ` 10,000).