Question

On 1st April, 2023 the balances of A and B were as follows:

	Capital Account (₹)	Current Account (₹)
A	l,00,000	(Cr.) 8,420
B	40,000	(Dr.) 3,200

On 1st July, 2023, A withdrew ₹ 20,000 from his capital, and B introduced ₹ 10,000 as further capital on the same date. According to the deed, interest on capitals is to be allowed at 8% p.a. but no interest is to be allowed or charged on current account balances and drawings. A is entitled to `3/5` and B `2/5` of the profit. The manager of the firm is entitled to a commission of 10% of the profit before any adjustment is made according to the deed. For the year ended 31st March, 2024, the profit was ₹ 40,000 and the drawings of A and B were ₹ 12,000 and ₹ 10,000 respectively. Prepare the Profit and Loss Appropriation A/c, Capital Accounts and Current Accounts.

Answer 1

Dr.	Profit and Loss Appropriation A/c for the year ended 31st March, 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		10,600	By Net profit		40,000
A	6,800
B	3,800
To Manager’s Commission		4,000
To Partner’s Current A/c:		25,400
A	15,240
B	10,160
		40,000			40,000

 

Dr.	Partner’s Capital Account				Cr.
Particulars	A (₹)	B (₹)	Particulars	A (₹)	B (₹)
To Bank A/c	20,000	-	By Balance b/d	l,00,000	40,000
To Balance c/d	80,000	50,000	By Bank A/c	-	10,000
	1,00,000	50,000		1,00,000	50,000

 

Dr.	Partner’s Current Account				Cr.
Particulars	A (₹)	B (₹)	Particulars	A (₹)	B (₹)
To Balance b/d	-	3,200	By Balance b/d	8,420	-
To Drawings	12,000	10,000	By Interest on Capital	6,800	3,800
To Balance c/d	18,460	760	By Profit and Loss Appropriation A/c	15,240	10,160
	30,460	13,960		30,460	13,960

Working Note:
Capital to be withdrawn by A = l,00,000 − 20,000

= ₹ 80,000

Capital to be introduced by B = 40,000 + 10,000

= ₹ 50,000

Calculation of Interest on Capital:

Interest on rate = 8%

For A, Capital from 1 April 2023 to 30 June 2023 (3 months) = ₹ 1,00,000

Interest = `1,00,000 xx 8/100 xx 3/12`

= ₹ 2,000

Capital from 1 July 2023 to 31 March 2024 (9 months) = ₹ 80,000

Interest = `80,000 xx 8/100 xx 9/12`

= ₹ 4,800

Total interest on A’s capital = 2,000 + 4,800

= ₹ 6,800

For B, Capital from 1 April 2023 to 30 June 2023 (3 months) = ₹ 40,000

Interest = `40,000 xx 8/100 xx 3/12`

= ₹ 800

Capital from 1 July 2023 to 31 March 2024 (9 months) = ₹ 50,000

Interest = `50,000 xx 8/100 xx 9/12`

= ₹ 3,000

Total interest on B’s capital = 800 + 3,000

= ₹ 3,800