Question

The partnership agreement between Maneesh and Girish provides that:
(i)    Profits will be shared equally;
(ii)   Maneesh will be allowed a salary of Rs 400 p.m;
(iii)  Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
(iv)  7% interest will be allowed on partner’s fixed capital;
(v)   5% interest will be charged on partner’s annual drawings;
(vi)  The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs 80,000, respectively. Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015 amounted to Rs 40,000;
Prepare firm’s Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account
Dr.							Cr.
Particulars			Amount Rs	Particulars			Amount Rs
Partner’s Salary				Profit and Loss			40,000
Maneesh			4,800	Interest on Drawings
				Maneesh		800
Partner’s commission				Girish		700	1,500
Girish {(40,000 – 4,800) × (10/100)}			3,520
Interest on Capital :
Mannesh		7,000
Girish		5,600	12,600
Profit transferred to :
Maneesh’s Current		10,290
Girish’s Current		10,290	20,580
			41,500				41,500