Question

The partnership agreement between Maneesh and Girish provides that : 

1. Profits will be shared equally;
2. Maneesh will be allowed a salary of Rs 400 p.m;
3. Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
4. 7% interest will be allowed on partner’s fixed capital;
5. 5% interest will be charged on partner’s annual drawings;
6. The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs 80,000, respectively.
   Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2019 amounted to Rs 40,000; 
   Prepare firm’s Profit and Loss Appropriation Account.

Answer 1

Dr.			Profit and Loss Appropriation Account				Cr.
Particulars			Amount (Rs.)	Particulars			Amount (Rs.)
Partner’s Salary				Profit and Loss			40,000
Maneesh			4,800	Interest on Drawings
Partner’s commission Girish {(40,000 – 4,800) × (10/100)}			3520	Maneesh		800
Interest on Capital				Girish		700	1,500
Mannesh		7,000	12,600
Girish		5,600
Profit transferred to
Maneesh’s Current		10,290	20,580
Girish’s Current		10,290
			41,500				41,500