Question

Pappu and Munna are partners in a firm sharing profits in the ratio of 3 : 2. The partnership deed provided that Pappu was to be paid salary of ₹ 2,500 per month and Munna was to get a commission of ₹ 10,000 per year. Interest on capital was to be allowed @ 5% per annum and interest on drawings was to be charged @ 6% per annum. Interest on Pappu's drawings was 1,250 and on Munna's drawings ₹ 425. Capital of the partners were ₹ 2,00,000 and ₹ 1,50,000 respectively, and were fixed. The firm earned a profit of ₹ 90,575 for the year ended 31-3-2024.

Prepare Profit and Loss Appropriation Account of the firm.

Answer 1

Profit and Loss Appropriation Account for the year ended 31st March, 2024
Particulars	Amount (₹)	Particulars	Amount (₹)
To Interest on Capital:		By Net Profit	90,575
Pappu	10,000	By Interest on Drawings:
Munna	7,500	Pappu	1,250
To Pappu's Salary	30,000	Munna	425
To Munna's Commission	10,000
To Profit transferred to:
Pappu's Capital A/c	20,850
Munna's Capital A/c	13,900
Total	92,250	Total	92,250

Working Note:

Step 1: Net Profit

Net Profit for the year = ₹ 90,575

Add: Interest on Drawings (credited to P&L Appropriation A/c)

• Pappu = ₹ 1,250
• Munna = ₹ 425

Total Interest on Drawings = ₹ 1,675

Profit available for appropriation = ₹ 90,575 + ₹ 1,675 = ₹ 92,250

Step 2: Interest on Capital @ 5%

• Pappu: ₹ 2,00,000 × 5% = ₹ 10,000
• Munna: ₹ 1,50,000 × 5% = ₹ 7,500

Total = ₹ 17,500

Step 3: Partner's Salary

Pappu's salary = ₹ 2,500 × 12 = ₹ 30,000

Step 4: Munna's Commission

Commission = ₹ 10,000

Step 5: Balance Profit

Particulars	Amount (₹)
Profit available for appropriation	92,250
Less: Interest on Capital	17,500
Less: Pappu's Salary	30,000
Less: Munna's Commission	10,000
Balance Profit	34,750

Step 6: Share of Profit (3 : 2)

• Pappu: ₹ 34,750 × `3/5` = ₹ 20,850
• Munna: ₹ 34,750 × `2/5` = ₹ 13,900