Question

Basu, Harish and Jadav are partners in a firm with capital contributions of ₹ 50,000, ₹ 40,000 and ₹ 30,000, respectively.

Their partnership agreement provides for the following:

1. Interest on capitals to be allowed @ 10% p.a.
2. Interest on drawings to be charged @ 10% p.a.
3. Harish and Jadav are each to be paid salaries @ ₹ 500 per month.
4. Basu is to be paid a commission of 5% of the net profit.
5. 10% of the net profit be carried to a reserve account.
6. The remaining profits are to be divided as follows:
   40% to Basu; 30% to Harish; 30% to Jadav.

The net profit for the year ended 31.12.2008 was ₹ 50,000. Basu withdrew ₹ 1,000 per month at the beginning of each month, Harish withdrew ₹ 1,000 per month in the middle of each month and Jadav withdrew ₹ 1,000 per month at the end of each month.

You are required to prepare the Profit and Loss Appropriation Account for the year ended 31.12.2008 only.

Hint: Interest on drawings: Basu ₹ 650; Barish ₹ 600 and Jadav ₹ 550.

Answer 1

Dr.	Profit and Loss Appropriation Account  for the year ended 31st Dec, 2008						Cr.
Date	Particulars	Amount (₹)	Amount (₹)	Date	Particulars	Amount (₹)	Amount (₹)
2008				2008
Dec. 31	To Interest on Capital:		12,000	Dec. 31	By Profit and Loss A/c		50,000
	Basu	5,000		Dec. 31	By Interest on Drawings:		1,800
	Harish	4,000			Basu	650
	Jadav	3,000			Harish	600
Dec. 31	To Salary:		12,000		Jadav	550
	Harish	6,000
	Jadav	6,000
Dec. 31	To Commission (Basu)		2,500
Dec. 31	To Transfer to Reserve A/c		5,000
Dec. 31	To Profit transferred to:		20,300
	Basu’s Capital A/c	8,120
	Harish’s Capital A/c	6,090
	Jadav’s Capital A/c	6,090
			51,800				51,800

Working Notes:

Calculation of interest on drawings:

(a) Interest on drawings of Basu = `12,000 xx 10/11 xx 6.5/12`

= ₹ 650

(b) Interest on drawings of Harish = `12,000 xx 10/100 xx 6/12`

= ₹ 600

(c) Interest on drawings of Jadav = `12,000 xx 10/100 xx 5.5/12`

= ₹ 550