Question of 84
Q.R and S are partners sharing profits and losses in the ratio of 3 : 2. On 1st January, 2018 their capitals are R—₹ 40,000 and S—₹ 30,000. Prepare Profit and Loss Appropriation Account for the year ended 31st December, 2018 after considering the following items:
(i) Interest on capital @ 6% p.a.
(ii) R is entitled to get commission @ 2.5% on Sales.
(iii) S is to get salary ₹ 1,000 per month.
(iv) Interest on drawings @ 10% p.a.
(v) 10% on the distributable profit is to be transferred to Reserve Fund.
(vi) Partners’ drawings during the year: R—₹ 10,000 and S—₹ 5,000.
(vii) Total Sales during the year was ₹ 3,00,000.
Net Profit before consideration of the above items was ₹ 1,20,000.
Or
State four differences between Fixed Capital Account and Fluctuating Capital Account.
West Bengal WbchseWBCHSE West Bengal HS (Class-12) Commerce Board 2019Subjective· 4mImportance★★★★★
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Start your 14-day free trial to unlock the full solution →Prepare the P&L Appropriation A/c. Credit net profit 1,20,000 plus interest on drawings 750; charge interest on capital 4,200, commission 7,500 and salary 12,000; transfer 10% of the resulting distributable profit (97,050) to Reserve Fund = 9,705; share the remaining 87,345 between R and S in 3:2 → R 52,407, S 34,938.
Working notes (West Bengal HS Accountancy — partnership appropriation):
- Interest on Capital @ 6% p.a.: R = 40,000 x 6% = 2,400; S = 30,000 x 6% = 1,800. Total 4,200.
- Commission to R @ 2.5% on Sales = 3,00,000 x 2.5% = 7,500.
- Salary to S = 1,000 x 12 = 12,000.
- Interest on Drawings @ 10% p.a. — no drawing dates are given, so interest is charged for an average period of 6 months: R = 10,000 x 10% x 6/12 = 500; S = 5,000 x 10% x 6/12 = 250. Total 750 (credited to the firm).
- Distributable profit before reserve = (1,20,000 + 750) - (4,200 + 7,500 + 12,000) = 1,20,750 - 23,700 = 97,050.
- Transfer to Reserve Fund = 10% of 97,050 = 9,705.
- Profit available for distribution = 97,050 - 9,705 = 87,345, shared 3:2 → R 52,407, S 34,938. Profit and Loss Appropriation Account for the year ended 31st December, 2018
| Dr. Particulars | Amount | Cr. Particulars | Amount |
|---|---|---|---|
| To Interest on Capital: R 2,400; S 1,800 | 4,200 | By Profit and Loss A/c (Net Profit) | 1,20,000 |
| To Commission — R | 7,500 | By Interest on Drawings: R 500; S 250 | 750 |
| To Salary — S | 12,000 | ||
| To Reserve Fund (10% of 97,050) | 9,705 | ||
| To Profit transferred: R 52,407; S 34,938 | 87,345 | ||
| Total | 1,20,750 | Total | 1,20,750 |
| … |
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