Question

Akruti and Vibhuti were partners in a firm sharing profits in the ratio 2 : 1. The balances in their capital and current accounts as on 1st April, 2023 were as under:

	Akruti (₹)	Vibhuti (₹)
Capital Accounts	3,00,000	2,00,000
Current Accounts	60,000 (Dr.)	12,000 (Cr.)

The partnership deed provided that Akruti was to be paid a salary of ₹ 22,500 per quarter, whereas Vibhuti was to get a commission of 15% on net profit before charging such commission.

Interest on capital was to be allowed @ 6% p.a. whereas interest on drawings was to be charged @ 10% p.a. The drawings of Akruti were ₹ 40,000 drawn on 1st July 2023, and Vibhuti withdrew ₹ 30,000 on 1st Dec., 2023. The net profit of the firm for the year ended 31st March 2024 before making the above adjustments was ₹ 1,00,000.

Prepare a profit and loss appropriation account and partner’s current accounts.

Hint: Available profit is ₹ 1,04,000. Since it is less than appropriations, it will be divided in the ratio of 1,08,000 : 27,000 i.e., 4 : 1.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Profit transferred to:		1,04,000	By Net Profit b/d		1,00,000
Akruti	83,200		By Interest on Drawings:		4,000
Vibhuti	20,800		Akruti	3,000
			Vibhuti	1,000
		1,04,000			1,04,000

 

Dr.	Partner’s current accounts						Cr.
Date	Particulars	Akruti (₹)	Vibhuti  (₹)	Date	Particulars	Akruti  (₹)	Vibhuti (₹)
2023				2023
Apr. 1	To balance b/d	60,000		Apr. 1	By balance b/d		12,000
2024				2024
Mar. 31	To Interest on Drawings A/c	3,000	1,000	Mar. 31	By Salary A/c	90,000
Mar. 31	To Drawings A/c	40,000	30,000	Mar. 31	By commission		15,000
Mar. 31	To balance c/d	88,200	28,800	Mar. 31	By Interest on capital	18,000	12,000
				Mar. 31	By Profit and Loss Appropriation A/c	83,200	20,800
		1,91,200	59,800			1,91,200	59,800

Working Note:

1. Calculate Vibhuti’s Commission:

Net profit before commission = ₹ 1,00,000

Vibhuti’s Commission = `1,00,000 xx 15/100`

= 15,000

2. Calculate Interest on Capital 6%:

Akruti’s Capital = ₹ 3,00,000

= `3,00,000 xx 6/100`

= 18,000

Vibhuti’s Capital = ₹ 2,00,000

= `2,00,000 xx 6/100`

= 12,000

3. Appropriations:

Particulars	Akruti (₹)	Vibhuti (₹)
To Salary	90,000
To Commission		15,000
To Interest on Capitals	18,000	12,000
	1,08,000	27,000

Total amount to be paid = 1,08,000 + 27,000

= 1,35,000

Since profits available are 1,00,000 + 4,000 = 1,04,000 which is less than appropriations of 1,35,000, appropriations will be made to the extent of 1,04,000 only in the ratio of 1,08,000: 27,000 or 4 : 1.

Akruti’s share = `1,04,000 xx 4/5`

= 83,200

Vibhuti’s share = `1,04,000 xx 1/5`

= 20,800

4. Calculate Interest on Drawings 10%:

Akruti withdrew ₹ 40,000 (1st July to 31 March = 9 months)

= `40,000 xx 10/100 xx 9/12`

= 3,000

Vibhuti withdrew ₹ 30,000 (1st Dec to 31 March = 4 months).

= `30,000 xx 10/100 xx 4/12`

= 1,000

5. Calculate Salary to Akruti:

Quarterly salary = ₹ 22,500

For one year = 4 quarters

= 22,500 × 4

= 90,000