- Dinesh and Sugumar entered into partnership agreement on 1st January 2018, Dinesh contributing ₹ 5,00,000 and Sugumar ₹ 4,00,000 as capital.
The agreement provided that :
- Profits and losses to be shared in the ratio 2 : 1 as between Dinesh and Sugumar.
- Partners to be entitled to interest on capital @ 6% p.a.
- Interest on drawings to be charged : Dinesh : ₹ 3,600 and Sugumar : ₹ 2,300.
- Dinesh to receive a salary of ₹ 62,000 for the year, and
- Sugumar is to receive a commission of 10% on the net profit after charging such commission. During the year ended on 31st December 2018, the firm made a profit of ₹ 1,20,000 before adjustment of interest, salary and commission. Prepare the profit and loss appropriation account. OR
- From the following information, calculate trend percentages for Mullai Ltd.
| Particulars | 2015-16 (₹ in lakhs) | 2016-17 | 2017-18 |
|---|---|---|---|
| Revenue from operations | 100 | 120 | 160 |
| Other income | 20 | 24 | 20 |
| Expenses | 20 | 14 | 40 |
| Income tax | 30% | 30% | 30% |
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Start your 14-day free trial to unlock the full solution →(a) After interest on capital (54,000), interest on drawings (5,900) and Dinesh's salary (62,000), the profit before commission is 9,900; commission @ 10% after charging it = 900; divisible profit 9,000 split 2:1. (b) Using 2015-16 = 100, trend percentages are computed for each item.
PART (a) - Profit and Loss Appropriation Account
Interest on capital: Dinesh 5,00,000 x 6% = 30,000; Sugumar 4,00,000 x 6% = 24,000 (total 54,000). Commission is 10% of net profit after charging such commission, where the net profit base is the profit remaining after interest on capital, salary and interest on drawings.
Net profit before commission = 1,20,000 + 5,900 (interest on drawings) - 54,000 (interest on capital) - 62,000 (salary) = 9,900.
Commission = 9,900 x 10/110 = 900.
Divisible profit = 9,900 - 900 = 9,000, shared 2 : 1 (Dinesh 6,000; Sugumar 3,000).
Profit and Loss Appropriation Account for the year ended 31.12.2018
| Particulars | Rs. | Particulars | Rs. |
|---|---|---|---|
| To Interest on capital: | By Profit and Loss A/c (net profit) | 1,20,000 | |
| Dinesh 30,000 | By Interest on drawings: | ||
| Sugumar 24,000 | 54,000 | Dinesh 3,600 | |
| To Salary - Dinesh | 62,000 | Sugumar 2,300 | 5,900 |
| To Commission - Sugumar | 900 | ||
| To Profit transferred to capital A/cs: | |||
| Dinesh (2/3) 6,000 | |||
| Sugumar (1/3) 3,000 | 9,000 | ||
| 1,25,900 | 1,25,900 |
PART (b) - Mullai Ltd.: Trend Percentages (base year 2015-16 = 100)
Trend % = (Current year figure / Base year figure) x 100.
| Particulars | 2015-16 | 2016-17 | 2017-18 | 2015-16 % | 2016-17 % | 2017-18 % | …
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