Question

X and Y are partners with capitals of ₹ 1,00,000 and ₹ 80,000, respectively, on 1st April, 2023, and their profit sharing ratio is 2 : 1. Interest on capital is agreed @ 12% p.a. Y is to be allowed an annual salary of ₹ 6,000. The profit for the year ending 31st March, 2024, amounted to ₹ 50,000. The manager is entitled to a commission of 10% of the profits.

Prepare Profit and Loss Appropriation Account and Capital Accounts.

Answer 1

Dr.	Profit and Loss Appropriation A/c				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		21600	By Profit and Loss A/c (50,000 − 5,000)		45,000
X	12,000
Y	9,600
To Y’s salary A/c		6,000
To profit transferred to:		17,400
X	11,600
Y	5,800
		45,000			45,000

 

Dr.	Partner’s Capital Account				Cr.
Particulars	X	Y	Particulars	X	Y
To Balance c/d	1,23,600	1,01,400	By Balance b/d	1,00,000	80,000
			By Y’s salary A/c		6,000
			By Profi and Loss Appropriation A/c	11,600	5,800
			By Interest on capital A/c	12,000	9,600
	1,23,600	1,01,400		1,23,600	1,01,400

Working Note:

Manager’s Commission = `50,000 xx 10/100`

= 5,000