Question

Rubika and Neha are partners in a firm sharing profits and losses in the ratio of 3 : 2. According to partnership deed:

(i) Rubika and Neha to get salary of ₹ 4,500 p.m. and ₹ 9,000 per quarter respectively.

(ii) Interest on capital: Rubika: ₹ 72,000

Neha: ₹ 36,000

(iii) Interest on drawings: Rubika: ₹ 2,500

Neha: ₹ 4,500

Rubika had advanced a loan of ₹ 2,00,000 to the firm on 1st April, 2025. The profit earned by the firm was ₹ 1,37,000 before considering the interest on Rubika’s loan.

Prepare Profit & Loss Appropriation Account for the year ended 31st March 2026.

Answer 1

Dr.	Profit & Loss Appropriation Account For the year ended 31st March, 2026		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Partner’s Capital Accounts		By Net Profit b/d (₹ 1,37,000 - ₹ 12,000)	1,25,000
(Appropriation of profit in 7:4 ratio):		By Interest on Drawings:
Rubika	84,000	Rubika: 2,500
Neha	48,000	Neha: 4,500	7,000
Total	1,32,000	Total	1,32,000

Working Notes:

1. Net Profit for Appropriation

Interest on a partner’s loan is a charge against profit (6% p.a. default rate):

Loan Interest: \[₹2,00,000 \times 6\% = {₹12,000}\]

Adjusted Net Profit: $₹1,37,000 - ₹12,000 = {₹1,25,000}$

2. Total Available Amount

$\text{Adjusted Net Profit } (₹1,25,000) + \text{Interest on Drawings } (₹2,500 + ₹4,500) = {₹1,32,000}$

3. Claim Ratio (Due to Insufficient Profits)

Since the total amount due (₹1,98,000) is greater than the available amount (₹1,32,000), profits are divided in the ratio of their actual claims:

Rubika's Claim: Salary $(₹4,500 \times 12) + \text{IOC } (₹72,000) = {₹1,26,000}$

Neha's Claim: Salary $(₹9,000 \times 4) + \text{IOC } (₹36,000) = {₹72,000}$

Ratio: $₹1,26,000 : ₹72,000 = {7 : 4}$

4. Profit Distribution

Rubika: $₹1,32,000 \times \frac{7}{11} = {₹84,000}$

Neha: $₹1,32,000 \times \frac{4}{11} = {₹48,000}$