Question

Arvind and Anand are partners sharing profits and losses in the ratio 8 : 3 : 1 Balances in their capital accounts on April 01, 2019 were, Arvind- Rs. 4,40,000 and Anand Rs. 2,60,000. As per their agreement, partners were entitled to interest on capital @ 5% p.a., and interest on drawings was to be charged @ 6% p.a. Arvind was allowed an annual salary of Rs. 35,000/- for the additional responsibilities taken up by him. Partners drawings for the year were, I Arvind Rs. 40,000 and Anand Rs. 28,000. Profit and loss account of the firm for the year ending March 31, 2020 showed a Net Loss of Rs. 32,400. Prepare Profit and Loss Appropriation Account.

Answer 1

Dr.	Profit and Loss Appropriation A/c			Cr.
Particulars	₹	Particulars		₹
To P& L – Loss	32,400	By Interest on drawings
		Arvind	1,200	2040
		Anand	840
		By loss t/fd to capital accounts
		Arvind	22,770	30,360
		Anand	7,590
	32,400			32,400

No salary and interest on capital will be allowed in case of loss.

Interest on drawings:

Arvind = 40,000 × 6/100 × 6/12 = Rs. 1,200

Anand = 28,000 × 6/100 × 6/12 = Rs. 840