Rabi and Shashi are partners in a firm sharing profits and losses in the ratio of 3 : 1. Net profit of the firm during the year ended 31st December, 2016 amounted to ₹ 3,00,000.
From the following information, prepare Profit and Loss Appropriation Account of the firm for the year ended on 31st December, 2016:
(i) On 1st January, 2016, the balances in the Capital and Current Accounts of the partners were:
| Particulars | Capital Account (₹) | Current Account (₹) |
|---|---|---|
| Rabi | 1,60,000 | 20,000 |
| Shashi | 1,20,000 | 12,000 |
(ii) Interest on Capital @ 5% p.a.
(iii) Interest on partners’ drawings @ 10% p.a.
Drawings during the year were:
| Particulars | ₹ |
|---|---|
| Rabi | 40,000 |
| Shashi | 30,000 |
(iv) Rabi is entitled to a commission of 5% of net profit before considering the above items.
Or
Distinguish between Profit and Loss Account and Profit and Loss Appropriation Account.
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Start your 14-day free trial to unlock the full solution →After charging interest on capital (₹14,000) and Rabi's commission (₹15,000), and crediting interest on drawings (₹3,500), the divisible profit of ₹2,74,500 is shared 3 : 1 — Rabi ₹2,05,875 and Shashi ₹68,625.
This is a standard WBCHSE HS / West Bengal Class-12 Commerce appropriation problem (the syllabus here is aligned with the NCERT/CBSE partnership accounting curriculum).
Step 1 — Interest on Capital @ 5% p.a. (on opening capital balances)
| Partner | Capital (₹) | Interest @ 5% (₹) |
|---|---|---|
| Rabi | 1,60,000 | 8,000 |
| Shashi | 1,20,000 | 6,000 |
| Total | 14,000 |
Step 2 — Interest on Drawings @ 10% p.a. No individual dates are given, so drawings are assumed spread evenly through the year and interest is charged for an average period of 6 months (10% × 6/12 = 5% effective).
| Partner | Drawings (₹) | Interest (₹) |
|---|---|---|
| Rabi | 40,000 | 2,000 |
| Shashi | 30,000 | 1,500 |
| Total | 3,500 |
Step 3 — Rabi's commission = 5% of net profit before any of the above items = 5% × 3,00,000 = ₹15,000.
Step 4 — Profit and Loss Appropriation Account for the year ended 31st December, 2016
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Interest on Capital: Rabi 8,000; Shashi 6,000 | 14,000 | By Profit and Loss A/c (Net Profit) | 3,00,000 |
| To Rabi's Commission | 15,000 | By Interest on Drawings: Rabi 2,000; Shashi 1,500 | 3,500 |
| To Profit transferred to Current A/cs: Rabi 2,05,875; Shashi 68,625 | 2,74,500 | ||
| Total | 3,03,500 | Total | 3,03,500 |
Divisible profit = 3,03,500 − 14,000 − 15,000 = ₹2,74,500; shared 3 : 1 → Rabi 2,74,500 × 3/4 = ₹2,05,875, Shashi 2,74,500 × 1/4 = ₹68,625.
Or — Distinguish between Profit and Loss Account and Profit and Loss Appropriation Account
| Basis | Profit and Loss Account | Profit and Loss Appropriation Account | …
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