Question

Sudha, Naresh and Geeta were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Their fixed capitals were ₹ 6,00,000, ₹ 4,00,000 and ₹ 2,00,000 respectively. Besides her capital Geeta had given a loan of 75,000 to the firm. There partnership deed provided for the following:

1. Interest on capital @ 9% p.a.
2. Interest on partner’s drawings @ 12% p.a.
3. Salary to Sudha ₹ 30,000 per month and to Naresh ₹ 40,000 per quarter.
4. Interest on Geeta’s loan @ 9% p.a.

During the year Sudha withdrew ₹ 50,000 at the end of each quarter. Naresh withdrew ₹ 50,000 in the beginning of each half year and Geeta withdrew ₹ 70,000 at the end of each half year.

The profit of the firm for the year ended 31.3.2019 before allowing interest on Geeta’s loan was ₹ 7,06,750. Prepare Profit and Loss Appropriation Account.

Answer 1

In the Books of Firm
Dr.	Profit and Loss Appropriation Account For the Year Ending 31st March, 2019				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		1,08,000	By P & L A/c	7,06,750	7,00,000
Sudha’s Current A/c	54,000		Less: Interest on Geeta’s Loan	6,750
Geeta’s Current A/c	18,000		By Interest on Drawings		22,200
Naresh’s Current A/c	36,000		Sudha’s Current A/c	9,000
To Salaries:		5,20,000	Naresh’s Current A/c	9,000
Sudha’s Current A/c	3,60,000		Geeta’s Current A/c	4,200
Naresh’s Current A/c	1,60,000
To Profit Transferred to Current A/cs:		94,200
Sudha	47,100
Naresh	28,260
Geeta	18,840
		7,22,200			7,22,200

Working Note:

Interest on Drawings:

Sudha = `(₹ 50,000xx4)xx12/100xx4/12` = ₹ 9,000

Naresh = `(₹ 50,000xx2)xx12/100xx9/12` = ₹ 9,000

Geeta = `(₹ 70,000xx2)xx12/100xx3/12` = ₹ 4,200