Question

X and Y were partners in a firm sharing profits in the ratio of 2 : 1. On 1st April, 2023, their fixed capitals were ₹ 6,20,000 and ₹ 2,40,000, respectively. On 1st Nov., 2023, they decided that their total capital (fixed) should be ₹ 9,00,000 in their profit-sharing ratio. Accordingly, they introduced extra capital or withdrew excess capital.

The partnership deed provided for the following:

1. A monthly salary of ₹ 4,000 to X.
2. Interest on Capital @ 9% p.a.
3. Interest on drawing @ 12% p.a.

The drawings of X and Y during the year were as follows:

	X (₹)	Y (₹)
June 1, 2023	20,000	28,000
Nov. 30, 2023	40,000	-
Feb. 1, 2024	15,000	10,000

During the year ended 31.3.2024, the firm earned a net profit of ₹ 3,00,000. 20% of this profit was to be transferred to the general reserve.

You are required to prepare:

1. Profit and Loss Appropriation Account,
2. Capital Accounts of partners, and
3. Current Accounts of partners.

Hint: Interest on capital X ₹ 55,050 and Y ₹ 23,850. Interest on Drawings X ₹ 3,900 and Y ₹ 3,000.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To X Salary A/c		48,000	By Profit and Loss A/c		3,00,000
To Interest on Capital:		78,900	By Interest on Drawings:		6,900
X	55,050		X	3,900
Y	23,850		Y	3,000
To General Reserve A/c		60,000
To Profit transferred to:		1,20,000
X’s Current A/c	80,000
Y’s Current A/c	40,000
		3,06,900			3,06,900

 

Dr.	Partner’s Capital Account						Cr.
Date	Particulars	X	Y	Date	Particulars	X	Y
2023				2023
November 1	To Bank A/c	20,000	-	April 1	By Balance b/d	6,20,000	2,40,000
				November 1	By Bank A/c	-	60,000
2024
March 31	To balance c/d	6,00,000	3,00,000
		6,20,000	3,00,000			6,20,000	3,00,000

 

Dr.	Partner’s Current Account						Cr.
Date	Particulars	X	Y	Date	Particulars	X	Y
2024				2024
March 31	To Drawings	75,000	38,000	March 31	By Interest on Capital	55,050	23,850
March 31	To Interest on Drawings	3,900	3,000	March 31	By Profit and Loss Appropriation A/c	80,000	40,000
March 31	To balance c/d	1,04,150	22,850	March 31	By Salary	48,000	-
		1,83,050	63,850			1,83,050	63,850

Working Note:

ted Capitals on 1st Nov 2023

Total capital (fixed) decided = ₹ 9,00,000

Profit-sharing ratio = 2 : 1

Capital as per new ratio:

X’s share = `9,00,000 xx 2/3`

= ₹ 6,00,000

Y’s share = `9,00,000 xx 1/3`

= ₹ 3,00,000

Capital before adjustment:

X = ₹ 6,20,000 

Y = ₹ 2,40,000

Adjustment required:

X has excess capital.

= ₹ 6,20,000 − ₹ 6,00,000

= ₹ 20,000 (to be withdrawn)

Y has short capital.

= ₹ 3,00,000 − ₹ 2,40,000

= ₹ 60,000 (to be brought in)

Adjustment on 1st November, 2023:

 X withdraws ₹ 20,000.

Y introduced ₹ 60,000.