Question

Sudhir and Rajeev were partners in a firm sharing profits and losses in the ratio of 4 : 3. Their partnership deed provided that Sudhir will be allowed a commission of 7% of the net profit.

The net profit of the firm for the year ended 31st March, 2025, was ₹ 1,00,000.

Pass necessary journal entries for allowing commission to Sudhir and transferring the same to Profit and Loss Appropriation Account.

Answer 1

Journal Entries in the Books of the Firm
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2025
Mar 31	Commission A/c   ... Dr.		7,000	-
	To Sudhir’s Capital A/c		-	7,000
	Being commissioned due to Sudhir @ 7% on net profit credited to his capital account)
Mar 31	Profit and Loss Appropriation A/c   ... Dr.		7,000	-
	To Commission A/c		-	7,000
	(Being partner’s commission transferred to P&L Appropriation Account)

Working Note:

Calculation of Commission payable to Sudhir:

Net Profit = ₹ 1,00,000

Commission Rate = 7%

Sudhir’s Commission = `1,00,000 xx 7/100`

= 7,000