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Question
A, B and C are partners sharing profits in 3 : 2 : 1. C’s share of profits for the year ending 31st March 2024 amounts to ₹ 50,000. Interest allowed on the partner’s capital is ₹ 1,50,000, and A is allowed a salary of ₹ 5,000 per month. Interest charged on the partner’s drawings is ₹ 2,000. What was the net profit of the firm before any appropriations?
Options
₹ 5,08,000
₹ 92,000
₹ 2,12,000
₹ 4,53,000
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Solution
₹ 5,08,000
Explanation:
The total distributable profit is calculated by dividing C’s share of profit by C’s share in the ratio:
Total Distributable Profit = `(50,000)/(1/6)`
= 50,000 × 6
= ₹ 3,00,000
Interest on Partner’s Capital = ₹ 1,50,000
A’s Annual Salary = ₹ 5,000 × 12
Total Expenses = ₹ 1,50,000 + ₹ 60,000
= ₹ 2,10,000
Interest on Partner’s Drawings = ₹ 2,000
Net Appropriations = Total Expenses − Total Income
= 2,10,000 − 2,000
= ₹ 2,08,000
Net Profit Before Appropriations = Total Distributable Profit + Net Appropriations
= 3,00,000 + 2,08,000
= ₹ 5,08,000
