English

Prepare the Profit and Loss Appropriation Account by Taking into Consideration the Following Information:

Advertisements
Advertisements

Question

Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
(i) Partners capital on April 1, 2016;
    Simmi, Rs 30,000; Sonu, Rs 60,000;
(ii) Current accounts balances on April 1, 2016;       
     Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.);
(iii) Partners drawings during the year amounted toSimmi, Rs 20,000; Sonu, Rs 15,000;
(iv) Interest on capital was allowed @ 5% p.a.;
(v) Interest on drawing was to be charged @ 6% p.a. at an
average of six months;
(vi) Partners’ salaries : Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current accounts.

Ledger
Advertisements

Solution

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount (Rs.)

Particulars

Amount (Rs.)

Interest on Capital :

 

 

Profit and Loss Account

1,50,000

Simmi

1,500

 

Interest on Drawings :

 

Sonu

3,000

4,500

Simmi

600

 

 

 

 

Sonu

450

1,050

Partners’ Salaries :

 

 

 

 

 

Simmi

12,000

 

 

 

 

Sonu

9,000

21,000

 

 

 

Profit transferred to :

 

 

 

 

Simmi’s Current

94,162

 

 

 

 

Sonu’s Current

31,388

1,25,550

 

 

 

 

 

1,51,050

 

 

1,51,050

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

 

 

 

Balance b/d

30,000

60,000

Balance c/d

30,000

60,000

 

 

 

 

30,000

60,000

 

30,000

60,000

 

Partners’ Current Account

Dr.

 

 

 

 

Cr.

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

Drawings

20,000

15,000

Balance b/d

30,000

15,000

Interest on Drawings

600

450

Interest on Capital

1,500

3,000

 

 

 

Partners’ Salaries

12,000

9,000

Balance c/d

1,17,662

43,388

Profit and Loss Appropriation

94,162

31,388

 

1,37,662

58,388

 

1,37,662

58,388

shaalaa.com
Distribution of Profit Among Partners
  Is there an error in this question or solution?
Chapter 1: Accounting for Partnership Firms-Fundamentals - Exercises [Page 100]

APPEARS IN

TS Grewal Accountancy Double Entry Book Keeping Volume 1 and 2 [English] Class 12
Chapter 1 Accounting for Partnership Firms-Fundamentals
Exercises | Q 22 | Page 100

RELATED QUESTIONS

Why is Profit and Loss Adjustment Account prepared? Explain.


Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2020 shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:

  1. Partners capital on April 1, 2019;
    Simmi, Rs 30,000; Sonu, Rs 60,000;
  2. Current accounts balances on April 1, 2016,
    Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.);
  3. Partners drawings during the year amounted to
    Simmi, Rs 20,000; Sonu, Rs 15,000;
  4. Interest on capital was allowed @ 5% p.a.;
  5. Interest on drawing was to be charged @ 6% p.a. at an average of six months;
  6. Partners’ salaries: Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current accounts.

Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were Rs 80,000 and Rs 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of Rs 2,000 and Rs 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was Rs 1,00,300. The drawings of Ramesh and Suresh were Rs 40,000 and Rs 50,000, respectively. Interest on drawings amounted to Rs 2,000 for Ramesh and Rs 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.


Rahul, Rohit and Karan started partnership business on April 1, 2019 with capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for the year ended March 2020 amounted to Rs 1,35,000 and the partner’s drawings had been Rahul Rs 50,000, Rohit Rs 50,000 and Karan Rs 40,000. The profits are distributed among partner’s in the ratio of 3:2:1. Calculate the interest on capital @ 5% p.a.


On March 31, 2017, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of Rs 24,000 Rs 18,000 and Rs 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017, amounted to Rs 36,000 and the partner’s drawings had been Ram, Rs 3,600; Shyam, Rs 4,500 and Mohan, Rs 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.


Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn:

  1. at the beginning of every month,
  2. at the middle of every month, and
  3. at the end of every month.

Bharam is a partner in a firm. He withdraws Rs 3,000 at the starting of each month for 12 months. The books of the firm closes on March 31 every year. Calculate interest on drawings if the rate of interest is 10% p.a.


Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of Rs 5,00,000 and Rs 3,00,000 respectively on October 01, 2016. Aakriti Advanced. Rs 20,000 by way of loan to the firm without any agreement as to interest. Profit and Loss account for the year ended March 2017 showed profit of Rs 43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them giving reason for your solution.


Rakhi and Shikha are partners in a firm, with capitals of Rs 2,00,000 and Rs 3,00,000 respectively. The profit of the firm, for the year ended 2016-17 is Rs 23,200. As per the Partnership agreement, they share the profit in their capital ratio, after allowing a salary of Rs 5,000 per month to Shikha and interest on Partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew Rs 7,000 and Shikha Rs 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.


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.


Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were Rs 80,000 and Rs 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of Rs 2,000 and Rs 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was Rs 1,00,300. The drawings of Ramesh and Suresh were Rs 40,000 and Rs 50,000, respectively. Interest on drawings amounted to Rs 2,000 for Ramesh and Rs 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.


Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

  1. Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
  2. 5% interest is to be allowed on capital;
  3. Vanita should be paid a monthly salary of Rs 600.
    The following balances are extracted from the books of the firm on March 31, 2017.
 

Sukesh
   (Rs.)

Verma
 (Rs.)

Capital Accounts

 40,000

40,000
Current Accounts (Cr.) 7,200 2,800
Drawings (Cr.)  10,850 8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary was Rs 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.


On March 31, 2017, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of Rs 24,000 Rs 18,000 and Rs 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017, amounted to Rs 36,000 and the partner’s drawings had been Ram, Rs 3,600; Shyam, Rs 4,500 and Mohan, Rs 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.


Pinki, Deepati and Kaku are partner’s sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than Rs 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to Rs 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.


Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.


Raka, Seema, and Mahesh were partners sharing profits and losses in the ratio of 5: 3: 2. With effect from 1st April, 2019, they mutually agreed to share profits and losses in the ratio of 2: 2: 1.
On that date, there was a workmen's compensation fund of ₹ 90,000 in the books of the firm. It was agreed that:
(i) Goodwill of the firm be valued at ₹ 70,000.
(ii) Claim for workmen's compensation amounted to ₹ 40,000.
(iii) Profit on revaluation of assets and re-assessment of liabilities amounted to ₹ 40,000.
Pass necessary journal entries for the above transactions in the books of the firm.


E, F and G are partners sharing profits in the ratio of 3:3:2. According to the partnership agreement, G is to get a minimum amount of ₹80,000 as his share of profits every year and any deficiency on this account is to be personally borne by E. The net profit for the year ended 31st March 2021 amounted to ₹3,12,000. Calculate the amount of deficiency to be borne by E?


Abhay and Baldwin are partners sharing profit in the ratio 3 : 1. On 31st March 2021, the firm’s net profit is ₹ 1,25,000. The partnership deed provided interest on capital to Abhay and Baldwin ₹ 15,000 and ₹ 10,000, respectively, and interest on drawings for the year amounted to ₹ 6,000 from Abhay and ₹ 4,000 from Baldwin. Abhay is also entitled to commission @ 10% on net divisible profits. Calculate profit to be transferred to Partners Capital A/c’s.


Mickey, Tom, and Jerry were partners in the ratio of 5 : 3 : 2. On 31st March 2021, their books reflected a net profit of ₹ 2,10,000. As per the terms of the partnership deed, they were entitled to interest on capital which amounted to ₹ 80,000, ₹ 60,000 and ₹ 40,000, respectively. Besides this, a salary of ₹ 60,000 each was payable to Mickey and Tom.

Calculate the ratio in which the profits would be appropriated.


On 1st September 2020, twenty students of Modern College started their Partnership Firm in the name of “Be Safe” for selling sanitizers on digital mode. Since they were good friends of each other, they were not having any explicit agreement in place. All of them have agreed to invest ₹15,000/- each as capital. The books were closed on 31st March 2021, on which date the following information was provided by the firm:

PARTICULARS AMOUNT (₹)
Sale of Sanitisers 1,20,000
Cost of goods sold 50,000
Total Remuneration to partners 2,000 per month
Rent to a partner 1,000 per month
Manager’s Commission 5,000
Closing Stock as on March 31,2021 9,000
6% Fixed Deposit (made on 31.3.2021) 20,000

On 31st March 2021, Remuneration to Partners will be provided to the partners of “Be Safe” but only out of ______.


On 1st September 2020, twenty students of Modern College started their Partnership Firm in the name of “Be Safe” for selling sanitizers on digital mode. Since they were good friends of each other, they were not having any explicit agreement in place. All of them have agreed to invest ₹15,000/- each as capital. The books were closed on 31st March 2021, on which date the following information was provided by the firm:

PARTICULARS AMOUNT (₹)
Sale of Sanitisers 1,20,000
Cost of goods sold 50,000
Total Remuneration to partners 2,000 per month
Rent to a partner 1,000 per month
Manager’s Commission 5,000
Closing Stock as on March 31,2021 9,000
6% Fixed Deposit (made on 31.3.2021) 20,000

On 1st December 2020 one of the partners of the firm introduced additional capital of ₹30,000 and also advanced a loan of ₹40,000 to the firm. Calculate the amount of interest that Partner will receive for the current accounting period.


In a case where a partner may be guaranteed a minimum amount by way of his share in profits. If in any year, the share of profits is less than the guaranteed amount, the deficiency is made good by the guaranteeing partners' in which ratio?


Mohan and Sham are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

"Shyam wants interest on capital to be credited @6% per annum".


Which of the following items is not dealt through Profit and Loss Appropriation Account?


Ram, Shyam and Balweer are partners. They share profit and loss equally. Ram is guaranteed to get ₹ 30,000 profit. Any deficiency that arises, will be borne by Shyam. During the year, they earned a profit of ₹ 60,000. Which of the following statement/statements is/are correct as per the above information:


Pick the odd one out:


Rahul and Shubham are partners in a partnership Rahul withdraw ₹ 4,000 during the year as drawings. Interest on drawings is charged @ 15% p.a. The amount of interest on drawings at the end of the year will be ______.


Read the following information and answer the given question:

Krishika alumni of IIM Ahemdabad initiated her startup Krishika Ltd. in 2018. The profits of Krishika Ltd. in the year 2019-20 after all appropriations was ₹ 31,25,000. This profit was arrived after taking into consideration the following items:

S. No. Particulars Amount (₹)
1. Gain on sale of fixed tangible assets 12,50,000
2. Goodwill written off 7,80,000
3. Transfer to General Reserve 8,75,000
4. Provision for taxation 4,37,500

Additional information:

Particulars 31.3.2020 (₹) 31.3.2019 (₹)
Prepaid Expenses 7,50,000 5,00,000
Inventory 10,50,000 8,20,000
Trade Payable 4,50,000 3,50,000
Trade Receivables 6,20,000 5,90,000

Operating profit before working capital changes will be ₹ ______.


The Journal Entry to transfer interest on capital to Profit and Loss Appropriation Account would be:


What will be the interest on drawing @ 12.5% p.a. for Abhishek if he withdraws ₹ 5,000 once in month?


Pick the odd one out: 


What will be the interest on capital for C @ 6% p.a for A, B and C who have invested ₹ 15,000, ₹ 25,000 and ₹ 30,000 and share profits in the ratio 1 : 2 : 3?


Share
Notifications

Englishहिंदीमराठी


      Forgot password?
Use app×