Question

Radha and Rukmani are partners in a firm with fixed capitals of ₹ 2,00,000 and ₹ 3,00,000 respectively.  They share profits in the ratio of 1 : 2. Both partners are entitled to interest on capitals @ 8% per annum. In addition, Rukmani is entitled to a salary of ₹ 20,000 per month. Business is being carried from the property owned by Radha on a yearly rent of ₹ 1,20,000. Net Profit for the year ended 31st March 2024 before providing for rent was ₹ 5,50,000.

You are required to draw Profit & Loss Appropriation Account for the year ended 31st March, 2024.

Answer 1

Profit & Loss Appropriation Account
Particulars	₹	₹	Particulars	₹
To Rukmani's Salary A/c		2,40,000	By Net Profit b/d (₹ 5,50,000 − ₹ 1,20,000 Rent)	4,30,000
To Interest on Capital A/cs:
Radha's Current A/c:	16,000
Rukmani's Current A/c:	24,000	40,000
To Profit transferred to:
Radha's Current A/c:	50,000
Rukmani's Current A/c:	1,00,000	1,50,000
		4,30,000		4,30,000

Working note:

Net Profit After Rent (Charge against Profit):

5,50,000 (Given Profit) − 1,20,000 (Rent to Radha) = 4,30, 000

Rukmani's Salary:

20,000 × 12 months = 2,40, 000

Interest on Capital (@ 8% p.a. on Fixed Capitals):

• Radha: 2,00,000 × 8% = 16,000
• Rukmani: 3,00,000 × 8% = 24,000
• Total Interest on Capital = ₹ 40,000

Divisible Profit:

4,30,000 − 2,40,000 (Salary) − 40,000 (IOC) = 1,50,000

Distribution of Profit (1 : 2 Ratio):

Radha's Share (transferred to Current A/c due to fixed capitals):

`1,50,000 xx 1/3 = 50,000`

Rukmani's Share (transferred to Current A/c due to fixed capitals):

`1,50,000 xx 2/3 = 1,00,000`