Question

Anwar, Biswas, and Divya are partners in a firm. Their Capital Accounts stood at ₹ 8,00,000, ₹ 6,00,000 and ₹ 4,00,000, respectively, on 1st April, 2023. They shared profits and losses in the ratio of 3 : 2 : 1, respectively. Partners are entitled to interest on capital @ 6% per annum and a salary to Biswas and Divya @ ₹ 4,000 per month and ₹ 6,000 per quarter, respectively, as per the provisions of the Partnership Deed.

Biswas’s share of profit, including interest on capital but excluding salary, is guaranteed at a minimum of ₹ 82,000 p.a. Any deficiency arising on that account shall be met by Divya. Profit for the year ended 31st March, 2024, amounted to ₹ 3,12,000. Prepare a Profit and Loss Appropriation Account for the year ended 31st March, 2024.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital A/c		1,08,000	By Profit and Loss A/c (Net Profit)		3,12,000
Anwar	48,000
Biswas	36,000
Divya	24,000
To Salary A/c		72,000
Biswas	48,000
Divya	24,000
To Balance c/d		1,32,000
		3,12,000			3,12,000
To Net Profit transferred to:			By Balance b/d		1,32,000
Anwar’s Capital A/c		66,000
Biswas’s Capital A/c	44,000	46,000
Add: Transferred from Divya	2,000
Divya’s Capital A/c	22,000	20,000
Less: Transferred to Biswas	2,000
		1,32,000			1,32,000

Working Note:
1. Calculate Interest on Capital:

Rate = 6%

Anwar = `8,00,000 xx 6/100`

= ₹ 48,000

Biswas = `6,00,000 xx 6/100`

= ₹ 36,000

Divya = `4,00,000 xx 6/100`

= ₹ 24,000

2. Biswas’s Share of Profit:

Biswas = `1,32,000 xx 2/6`

= ₹ 44,000

3. Total Amount Earned by Biswas = Share of Profit + Interest on Capital

= 44,000 + 36,000

= ₹ 80,000

4. Guarantee Adjustment:

Guaranteed Amount to Biswas = ₹ 82,000

Deficiency = Guaranteed Amount to Biswas − Total Amount Earned by Biswas

= 82,000 − 80,000

= ₹ 2,000