Question 56 Chapter 2 of +2 Part-1 - USHA Publication 12 Class Part - 1

Question 56 Chapter 2 of +2-Part-1

56. (Profit and loss App. A/c, Partners Capital and Current A/c) Thread, Needle and Button are in partnership and during the year ended 31-3-2017, they earned a profit of Rs.83,000. Thread and Needle are entitled to get 10% p.a. interest on capital of Rs.60,000 and Rs.1,00,000 respectively. Button who has no capital in the firm is entitled to a salary of Rs.12,000 p.a. Button is also entitled to a commission of 10% on the profits after charging interest, salary and commission.
It is further agreed that the balance of profits should be appropriated as to 20% for charity fund and balance is shared equally by Thread and Needle.
Prepare profit and loss appropriation account and partners capital and current account for the year ended 31st March 2017, if the drawings of the partners during the year were Thread- Rs. 8,000; Needle-Rs.6,000 and Button- Rs.9,000.

The solution of Question 56 Chapter 2 of +2 Part-1: - 

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Profit and Loss App. A/c

Particulars		Amount	Particulars		Amount
To Interest on capital – Thread @10%	6,000		By net profit B/d		83,000
-Needle @10%	10,000	16,000
To Button’s Salary		12,000
To Button’s Commission (WN1)		5,000
To Charity Fund (WN2)		10,000
To Net profit transferred to Capital a/cs
-Thread- 1/2	20,000
-Needle -1/2	20,000	40,000
		83,000			83,000

 

Partners' Capital A/c

Particulars		Thread	Needle	Particulars		Thread	Needle
				By Balance B/d		60,000	1,00,000
To Balance c/d		60,000	1,00,000
		60,000	1,00,000			60,000	1,00,000

 

Partners' Current A/c

Particulars		Thread	Needle	Button	Particulars		Thread	Needle	Button
To Drawings A/c		8,000	6,000	9,000	By Interest on Capital A/c		6,000	10,000	-
					By Commission		-	-	5,000
					By salary		-	-	12,000
					By P&L Appropriation A/c		20,000	20,000
To Balance c/d		18,000	24,000	8,000
		26,000	30,000	17,000			26,000	30,000	17,000

Working Note: -

1. Button’s Commission:

Button’s Commission	=	10% of profits after charging interest, salary and commission
	=	10/110 of (83,000-16,000-12,000)
	=	10/110 of 55,000 = Rs. 5,000
2. Charity Fund:	=	20% of profits after charging all expenses
	=	20% of ( 83,000-16,000-12,000-5,000)
	=	20% of 50,000 = Rs. 10,000

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