Question

Asha and Lata are partners sharing profits in the ratio of 1 : 2. Asha is entitled to a salary of ₹ 2,00,000 p.a. and a commission of 8% of net profit before charging any commission. Lata is entitled to a commission of 8% of net profit after charging her commission. Net Profit for the year ended 31st March, 2024 amounted to ₹ 5,40,000.

Prepare Profit & Loss Appropriation Account.

Answer 1

Asha's Salary = ₹2,00,000

Asha's Commission = 8% of ₹ 5,40,000

= ₹ 43,200

Lata's Commission

Since it is 8% of net profit after charging her own commission,

Commission = `8/108 xx 5,40,000 = 40,000`

Profit available for division

5,40,000 − 2,00,000 − 43,200 − 40,000 = ₹ 2,56,800

Share of Profit (1 : 2)

Asha's Share

`2,56,800 xx 1/3 = 85,600`

Lata's Share

`2,56,800 xx 2/3 = 1,71,200`

Dr.	Profit & Loss Appropriation Account		Cr.
To Asha's Salary A/c	2,00,000	By Profit & Loss A/c	5,40,000
To Asha's Commission A/c	43,200
To Lata's Commission A/c	40,000
To Asha's Capital A/c (Share of Profit)	85,600
To Lata's Capital A/c (Share of Profit)	1,71,200
Total	5,40,000	Total	5,40,000