Question

Ravi and Tiku are partners in a firm. According to their partnership deed:

1. Interest on capital will be allowed @ 5% per annum.
2. Interest on drawings will be charged @ 4% per annum.
3. Each partner will be given a salary of ₹ 1,000 per month.
4. Partners will share profits and losses in the ratio of 2 : 1.

Following are the particulars of the capitals and drawings of the partners:

	Ravi (₹)	Tiku (₹)
Capital (1st April, 2017)	60,000	50,000
Drawings (made on 1st June, 2017)	3,000	6,000

Ravi had taken a loan of ₹ 10,000 from the firm, on which interest of ₹ 200 was due by him to the firm.

The accounts for the year 2017-18 showed that the firm had made a profit of ₹ 77,000 before taking into account any interest, partner’s salaries and the manager’s salary of ₹ 18,000.

You are required to prepare:

1. Profit and Loss Appropriation Account for the year 2017-18.
2. Partner’s Capital Accounts.

Hints:

1. Net profit as per Profit and Loss A/c ₹ 59,200 (i.e., ₹ 77,000 + ₹ 200 − ₹ 18,000).
2. Interest on the loan of ₹ 200 will also be debited to Ravi’s Capital A/c.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 2017-18				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital		5,500	By Net Profit as per Profit and Loss A/c		77,000
Ravi	3,000		By Interest on Ravi’s Loan		200
Tiku	2,500		By Interest on drawings		300
To Salary		24,000	Ravi	100
Ravi	12,000		Tiku	200
Tiku	12,000
To Manager’s Salary		18,000
To Profit Transfer to:		30,000
Ravi	20,000
Tiku	10,000
		77,500			77,500

 

Dr.	Partner’s Capital Account				Cr.
Particulars	Ravi (₹)	Tiku (₹)	Particulars	Ravi (₹)	Tiku (₹)
To Interest on drawings	100	200	By Balance b/d	60,000	50,000
To drawings	3,000	6,000	By Profit and Loss A/c	20,000	10,000
To Interest on loan	200	-	By Interest on Capital	3,000	2,500
To Balance c/d	91,700	68,300	By Salary	12,000	12,000
	95,000	74,500		95,000	74,500

Working Notes:

Calculate Interest on drawing:

Ravi = `3000 xx 4/100 xx 10/12`

= 100

Tiku = `6000 xx 4/100 xx 10/12`

= 200