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Question
On 1-4-2013 Jay and Vijay, entered into the partnership for supplying laboratory equipment to
government schools situated in remote and backward areas. They contributed capitals of `80,000 and Rs 50,000 respectively and agreed to share the profits in the ratio 3: 2. The partnership deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of Rs 7,800. Showing your calculations clearly, prepare Profit and Loss Appropriation Account of Jay and Vijay for the year ended 31-3-2014
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Solution
| Profit and Loss Appropriation Account for the year ended March 2014 |
|||
| Dr. | Cr. | ||
| Particulars | Rs | Particulars | Rs |
|
To Interest on Capital A/c Jay 4,800 Vijay 3,000 |
7,800 |
By Profit and Loss A/c
|
7,800
|
| 7,800 | 7,800 | ||
Working Notes :
WN 1: Calculation of Interest on Capital
On Jay's Capital = `80000 xx 9/100 = 7200`
On Vijay's Capital = `50000 xx 9/100 = 4500`
Total Interest = 7,200 + 4,500 = 11,700
WN 2: Calculation of Proportinate Interest on Capital
Proportionate Interest on Jay = `7200/11700 xx 7800 = 4800`
Proportionate Interest to Vijay = `4500/11700 xx 7800 = 3000`
