Question

A, B and C entered into a partnership on 1st April, 2023, with capitals of ₹ 80,000, ₹ 50,000 and ₹ 40,000, respectively. Each partner is entitled to interest on his capital @ 8% p.a. B is entitled to a salary of ₹ 8,000 p.a., and C a salary of ₹ 6,000 p.a. They decided to share profits and losses in the ratio of 5 : 3 : 2.

A guaranteed that the firm would earn a profit of ₹ 60,000 before allowing interest on capital and partners’ salaries. The actual profit for the year ending 31st March, 2024, before interest and salaries, amounted to ₹ 56,000. Prepare the Profit and Loss Appropriation A/c and the Partner’s Capital Accounts.

Answer 1

Dr.	Profit and Loss Appropriation A/c for the year ended 31st March, 2025				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		13,600	By Profit and Loss A/c (Net Profit)		56,000
A	6,400		By A’s Capital A/c		4,000
B	4,000
C	3,200
To Salary:		14,000
B	8,000
C	6,000
To Profit transferred to:		32,400
A’s Capital A/c	16,200
B’s Capital A/c	9,720
C’s Capital A/c	6,480
		60,000			60,000

 

Dr.	Partner’s Capital Accounts								Cr.
Date	Particulars	A (₹)	B (₹)	C (₹)	Date	Particulars	A (₹)	B (₹)	C (₹)
2024					2023
March 31	To Profit and Loss Appropriation A/c	4,000	-	-	April 1	By Bank A/c	80,000	50,000	40,000
					2024
					March 31	By Interest on Capital	6,400	4,000	3,200
2024					March 31	By Salary	-	8,000	6,000
March 31	By Balance c/d	98,600	71,720	55,680	March 31	By Profit and Loss Appropriation A/c	16,200	9,720	6,480
		1,02,600	71,720	55,680			1,02,600	71,720	55,680