Question

Asif and Ravi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. Their fixed capitals as on 1st April, 2016, were ₹ 6,00,000 and ₹ 4,00,000, respectively.

Their partnership deed provides for the following:

1. Partners are to be allowed interest on their capital @ 10% per annum.
2. They are to be charged interest on drawings @ 4% per annum.
3. Asif is entitled to a salary of ₹ 2,000 per month.
4. Ravi is entitled to a commission of 5% of the correct net profit of the firm before charging such commission.
5. Asif is entitled to a rent of ₹ 3,000 per month for the use of his premises by the firm.

The net profit of the firm for the year ended 31st March, 2017, before providing for any of the above clauses was ₹ 4,00,000.

Both partners withdrew ₹ 5,000 at the beginning of every month for the entire year.

You are required to prepare a Profit and Loss Appropriation Account for the year ended 31^st March, 2017.

Hint: Commission 5% on ₹ 3,64,000 = ₹ 18,200.

Answer 1

Dr.	Profit and Loss Appropriation A/c for the year ended 31st March, 2017				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To interest on capital A/c		1,00,000	By Profit and Loss A/c (Net Profit)	4,00,000	3,64,000
Asif’s Current A/c	60,000		Less: Rent	36,000
Ravi’s Current A/c	40,000		By interest on drawings:		2,600
To Asif’s Current A/c (Salary)		24,000	Asif’s Current A/c	1,300
To Ravi’s Current A/c (Commission)		18,200	Ravi’s Current A/c	1,300
To Asif’s Current A/c		1,34,640
To Ravi’s Current A/c		89,760
		3,66,600			3,66,600