Question

A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. The balance in their capital and current accounts as on 1-4-2023 were as under:

	A (₹)	B (₹)
Capital Account	40,000	20,000
Current Account (Cr.)	16,000	12,000

The partnership deed provided that A is to be paid salary @ ₹ 500 p.m., whereas B is to get a commission of ₹ 4,000 for the year.

Interest on capital is to be allowed @ 6% p.a. The drawings of A and B for the year were ₹ 5,000 and ₹ 2,000, respectively. Interest on drawings for A and B works out at ₹ 225 and ₹ 75, respectively. The net profit of the firm for the year ended 31st March, 2024, before making these adjustments, was ₹ 35,700.

Prepare the Profit and Loss Appropriation Account and the Partner’s Capital and Current Accounts.

Answer 1

Dr.	Profit and Loss Appropriation Account firm for the year ended 31st March 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		3,600	By Net profit		35,700
A	2,400		By Interest on Drawings:		300
B	1,200		A	225
To A’s salary		6000	B	75
To B’s commission		4000
To Partner’s Current A/c:		22,400
A	13,440
B	8,960
		36,000			36,000

 

Dr.	Partner’s Capital Account				Cr.
Particulars	A (₹)	B (₹)	Particulars	A (₹)	B (₹)
To Balance c/d	40,000	20,000	By Balance b/d	40,000	20,000
	40,000	20,000		40,000	20,000

 

Dr.	Partner’s Current Account				Cr.
Particulars	A (₹)	B (₹)	Particulars	A (₹)	B (₹)
To Interest on Drawings A/c	225	75	By Balance b/d	16,000	12,000
To Drawings A/c	5,000	2,000	By Salary A/c	6,000	-
To balance c/d	32,615	24,085	By commission	-	4,000
			By Interest on capital	2,400	1,200
			By Profit and Loss Appropriation A/c	13,440	8,960
	37,840	26,160		37,840	26,160

Working Note:

Interest on capital:

A = `40,000 xx 6/100`

= 2,400

B = `20,000 xx 6/100`

= 1,200