Question

Varun and Vivek were partners in a firm, sharing profits in the ratio of 3 : 2. The balance in their capital and current accounts as on 1st April, 2022 were as under:

Particulars	Varun (₹)	Vivek (₹)
Capital accounts	3,00,000 (Cr.)	2,00,000 (Cr.)
Current accounts	1,00,000 (Cr.)	28,000 (Dr.)

The partnership deed provided that Varun was to be paid a salary of ₹ 5,000 p.m. whereas Vivek was to get a commission of ₹ 30,000 for the year. Interest on capital was to be allowed @ 8% p.a. whereas interest on drawings was to be charged @ 6% p.a. The drawings of Varun were ₹ 3,000 at the beginning of each quarter while Vivek withdrew ₹ 30,000 on 1st September, 2022. The net profit of the firm for the year, 2022-23, before making the above adjustments was ₹ 1,20,000.

Prepare Profit and Loss Appropriation Account and Partners' Capital and Current Accounts.

Answer 1

Dr.	Profit & Loss appropriation A/c of Varun and Vivek For the year ended on March 31, 2023		Cr.
Particulars	Amount	Particulars	Amount
To Partners Current A/c		By Profit & Loss A/c - Net Profit	1,20,000
Varun	78,508	By Interest on Drawings
Vivek	42,992	Varun	450
		Vivek	1,050
	1,21,500		1,21,500

As divisible profits are insufficient, available profits are distributed in a ratio of appropriations, i.e., 42 : 23.

Dr.	Partner’s capital A/c				Cr.
Particulars	Varun	Vivek	Particulars	Varun	Vivek
To Balance c/d	3,00,000	2,00,000	By Balance b/d	3,00,000	2,00,000
	3,00,000	2,00,000		3,00,000	2,00,000

 

Dr.	Partner’s Current A/c				Cr.
Particulars	Varun	Vivek	Particulars	Varun	Vivek
To Balance c/d		28,000	By Balance b/d	1,00,000
To Drawings	12,000	30,000	By Profit and Loss Appropriation A/c	78,508	42,992
To Interest on Drawings	450	1,050	By Balance c/d		16,058
To Balance c/d	1,66,058
	1,78,508	59,050		1,78,508	59,050