Question

Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3 : 1. The profit and loss account of the firm for the year ending March 31, 2024 shows a net profit of ₹ 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:

1. Partners capital on April 1, 2023;
   Simmi, ₹ 30,000; Sonu, ₹ 60,000;
2. Current accounts balances on April 1, 2023,
   Simmi, ₹ 30,000 (cr.); Sonu, ₹ 15,000 (cr.);
3. Partners drawings during the year amounted to
   Simmi, ₹ 20,000; Sonu, ₹ 15,000;
4. Interest on capital was allowed @ 5% p.a.;
5. Interest on drawing was to be charged @ 6% p.a. at an average of six months;
6. Partners’ salaries: Simmi ₹ 12,000 and Sonu ₹ 9,000. Also show the partners’ current accounts.

Answer 1

Profit and Loss Appropriation Account
Dr. Particulars	₹	Cr. Particulars	₹
To Interest on Capital A/c:		By Profit & Loss A/c	1,50,000
Simmi	1,500	By Interest on Drawings:
Sonu	3,000	Simmi	600
To Partners' Salary:		Sonu	450
Simmi	12,000
Sonu	9,000
To Profit transferred to Current A/cs:
Simmi	94,163
Sonu	31,387
Total	1,51,050	Total	1,51,050

Divisible Profit

₹ 1,50,000 + ₹ 1,050 − ₹ 4,500 − ₹ 21,000

= ₹ 1,25,550

Distributed in ratio 3 : 1:

Simmi’s share ≈ ₹ 94,163

Sonu’s share ≈ ₹ 31,387​

Partners' Current Accounts
Particulars	Simmi ₹	Sonu ₹	Particulars	Simmi ₹	Sonu ₹
To Drawings A/c	20,000	15,000	By Balance b/d	30,000	15,000
To Interest on Drawings A/c	600	450	By Interest on Capital A/c	1,500	3,000
To Balance c/d	1,17,063	42,937	By Salary A/c	12,000	9,000
			By P&L Appropriation A/c	94,163	31,387
Total	1,37,663	58,387	Total	1,37,663	58,387

Working note:

1. Interest on Capital @ 5% p.a.

Simmi:

₹ 30,000 × 5% = ₹ 1,500​

Sonu:

₹ 60,000 × 5% = ₹ 3,000​

Total Interest on Capital = ₹ 4,500

2. Interest on Drawings @ 6% p.a. for average 6 months

Simmi:

₹ 20,000 × 6% × `6/12` = 600

Sonu:

₹ 15,000 × 6% × `6/12` = 450

Total Interest on Drawings:

₹ 600 + ₹ 450 = ₹ 1,050

3. Partners' Salaries

• Simmi = ₹ 12,000
• Sonu = ₹ 9,000

Total = ₹ 21,000