Question

On 1st April, 2024, Precious, Noble and Perfect entered into a partnership with capitals of ₹ 60,000; ₹ 50,000 and ₹ 30,000, respectively.

Perfect, advanced ₹ 10,000 as a loan to the partnership on 1st October, 2024. The Partnership Deed contained the following clauses:

1. Interest on capitals @ 6% p.a.
2. Interest on drawings @ 6% p.a. Each drew ₹ 4,000 at the end of each quarter commencing from 30th June, 2024.
3. Working partners Precious and Noble get salaries of ₹ 200 and ₹ 300 per month.
4. Interest on the loan was given to Perfect @ 6% p.a.
5. Profits and losses are to be shared in the ratio of 4 : 2 : 1 up to ₹ 70,000 and above ₹ 70,000 equally.

Net profit of the firm for the year ended 31st March, 2025 (before the above adjustments) was ₹ 1,11,000.

Prepare a Profit and Loss Appropriation Account and Personal Accounts of the Partners, assuming capitals to be fixed.

Hints:

(1) Interest on Drawings of each partner:

	₹
On ₹ 4,000 for 9 months	180
On ₹ 4,000 for 6 months	120
On ₹ 4,000 for 3 months	60
On ₹ 4,000 for 0 month	0
	360

(2) Interest on loans will not be credited to Current A/c.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 2025						Cr.
Date	Particulars	Amount (₹)	Amount (₹)	Date	Particulars	Amount (₹)	Amount (₹)
2025				2025
March 31	To Interest on Capital:		8,400	March 31	By Profit and Loss A/c		1,10,700
	Precious	3,600		March 31	By Interest on Drawings		1,080
	Noble	3,000			Precious	360
	Perfect	1,800			Noble	360
March 31	To Salary:		6,000		Perfect	360
	Precious	2,400
	Noble	3,600
March 31	To Profit transferred to:		97,380
	Precious’s Current A/c	49,127
	Noble’s Current A/c	29,127
	Perfect’s Current A/c	19,126
			1,11,780				1,11,780

 

Dr.	Partners’ Current Account								Cr.
Date	Particulars	Precious	Noble	Perfect	Date	Particulars	Precious	Noble	Perfect
2025					2025
March 31	To Drawings	16,000	16,000	16,000	March 31	By Interest on Capital	3,600	3,000	1,800
March 31	To Interest on Drawings	360	360	360	March 31	By Salary	2,400	3,600
March 31	To balance c/d	38,767	19,367	4,566	March 31	By Profit and Loss Appropriation A/c	49,127	29,127	19,126
		55,127	35,727	20,926			55,127	35,727	20,926

Working Notes:

1. Calculation of interest on drawings of each partner @ 6% p.a.

	Amount (₹)
On ₹ 4,000 for 9 months	180
On ₹ 4,000 for 6 months	120
On ₹ 4,000 for 3 months	60
On ₹ 4,000 for 0 months	0
Total interest on drawings for each partner =	360

2. Net profit transferred to Profit and Loss Appropriation Account = Net Profit before adjustments – Interest on loan by Perfect 

= 1,11,000 – `(10,000 xx 6/100 xx 6/12)`

= 1,11,000 – 300

= 1,10,700

3. Calculation of each partner’s share of profit:

	Precious (₹)	Noble (₹)	Perfect (₹)
Profit to be shared in the ratio of 4 : 2 : 1, up to 70,000	40,000	20,000	10,000
Remaining profit (97,380 – 70,000 = 27,380) to be shared equally	9,127	9,127	9,127
	49,127	29,127	19,127