Q.A and B are partners sharing profits and losses in the ratio 3:2. Their partnership deed provides for interest on capital at 10% per annum on their fixed capitals of ₹2,00,000 (A) and ₹1,00,000 (B), a monthly salary of ₹1,000 to A, and a commission of ₹6,000 to B. The net profit for the year, before any of these appropriations, is ₹1,20,000. Prepare the Profit and Loss Appropriation Account and show the final amount payable to each partner.
Step 1 — Interest on capital. A: ₹2,00,000 × 10% = ₹20,000. B: ₹1,00,000 × 10% = ₹10,000. Total = ₹30,000.
Step 2 — Salary and commission. A's salary = ₹1,000 × 12 months = ₹12,000. B's commission = ₹6,000 (given as a flat figure).
Step 3 — Residual (divisible) profit. Net profit ₹1,20,000 − (₹30,000 interest + ₹12,000 salary + ₹6,000 commission) = ₹1,20,000 − ₹48,000 = ₹72,000.
Step 4 — Divide the residual profit 3:2. A = ₹72,000 × 3/5 = ₹43,200. B = ₹72,000 × 2/5 = ₹28,800.
Profit and Loss Appropriation Account
| Dr. | Particulars | Amount (₹) | Cr. | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| To Interest on Capital: A ₹20,000, B ₹10,000 | 30,000 | By Net Profit b/d | 1,20,000 | ||
| To A's Salary A/c | 12,000 | ||||
| To B's Commission A/c | 6,000 | ||||
| To Profit transferred: A ₹43,200, B ₹28,800 | 72,000 | ||||
| Total | 1,20,000 | Total | 1,20,000 |
Step 5 — Cross-check (dual solve). Total amount finally due to A = ₹20,000 (interest) + ₹12,000 (salary) + ₹43,200 (share) = ₹75,200. Total amount finally due to B = ₹10,000 (interest) + ₹6,000 (commission) + ₹28,800 (share) = ₹44,800. Adding these two independently-built totals: ₹75,200 + ₹44,800 = ₹1,20,000, which exactly matches the original net profit — confirming no arithmetic error.
A's total share of profit = ₹75,200 (interest ₹20,000 + salary ₹12,000 + profit share ₹43,200); B's total share of profit = ₹44,800 (interest ₹10,000 + commission ₹6,000 + profit share ₹28,800); together accounting for the full ₹1,20,000 net profit.
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