Question

Jain, Gupta and Singh were partners in a firm. Their fixed capitals were: Jain Rs 4,00,000 Gupta Rs  6,00,000 and Singh Rs 10,00,000. They were sharing profits in the ratio of their capitals. The firm was engaged in the processing and distribution of flavoured milk. They partnership deed provided for interest on capital at 10% per annum. During the year ended 31st March 2014, the firm earned a profit of Rs 1,47,000.

Showing your working notes clearly, prepare Profit and Loss Appropriation Account of the firm.

Answer 1

Profit and Loss Appropriation Account For the year ended March 31, 2014
Dr.			Cr.
Particulars	Rs	Particulars	Rs
To Interest on Capital     Jain’s Current A/c      29,400     Gupta’s Current A/c  44,100     Singh’s Current A/c   73,500	1,47,500	By Profit and Loss A/c	1,47,000
	1,47,500		1,47,500

Working Notes

WN1: Calculation of Interest on Capital

On Jain's Capital = `400000 xx 10/100 = 40000`

On Gupta's Capital = `600000 xx 10/100 = 60000`

On Singh's Capital = `1000000 xx 10/100 = 100000`

Total Interest = 40,000 + 60,000 + 1,00,000 = 2,00,000

WN 2: Calculation of Proportionate Interest on Capital

Proportinate Interest = `"Interest to a partner"/"Total Interest of all partners" xx "Available profit"`

Proportionate Interest to Jain = `40000/200000 xx 147000 = 29400`

Proportionate Interest to Gupta = `60000/200000 xx 147000 = 44100`

Proportionate Interest to Singh = `100000/200000 xx 147000 = 73500`