Question

Shree and Hari were partners in a firm sharing profits and losses in the ratio of 2 : 3. Their fixed capitals were ₹ 4,00,000 and ₹ 3,00,000 respectively. The partnership deed provided that Hari is to be allowed a commission of 5% of net profit.

The net profit of the firm for the year ended 31st March, 2025, was ₹ 1,00,000.

Pass the following journal entries in the books of the firm:

1. For crediting Hari’s commission to his current account.
2. For transferring the commission to the Profit and Loss Appropriation Account.

Answer 1

Journal Entries in the Books of the Firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
(i)	Commission A/c   ... Dr.		5,000	-
	To Hari’s Current A/c		-	5,000
	(Being commissioned due to Hari credited to his current account)
(ii)	Profit and Loss Appropriation A/c ... Dr.		5,000	-
	To Commission A/c		-	5,000
	(Being commissioned, transferred to P&L Appropriation Account)

Working note:

Calculation of commission payable to Hari:

Net Profit = ₹ 1,00,000

Commission rate = 5%

Commission = `1,00,000 xx 5/100`

= 5,000