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Question 85 Chapter 2 of +2-A
85. A and B are in partnership sharing profits and losses in the ratio of 3: 2. They admit C, their Manager, as a partner with effect from 1st April 2018, for 1/4th share of profits. C, while a Manager, was in receipt of a salary of 27,000 p.a. and a commission of 10% of the net profits after charging such salary and commission. In terms of the Partnership Deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the manager, would have to be personally borne by A out of his share of profit. Profit for the year ended 31st March 2019 amounted to 2,25,000. You are required to show Profit and Loss Appropriation Account for the year ended 31at March 2019.
Balance Sheet (for the year ended 31st March 2019)
| Liabilities |
Amount | Assets |
Amount | ||
|---|---|---|---|---|---|
| By Profit and Loss A/c | 2,25,000 | ||||
| To Profit Transferred to *2 | |||||
| A's Capital A/c | 96,750 | ||||
| B's Capital A/c | 72,000 | ||||
| C's Capital A/c | 56,250 | 2,25,000 | |||
| 2,25,000 | 2,25,000 | ||||
Working Note: -
*1 Calculation of Remuneration to C as a Manager
Salary to C =27,000
Commission to C = 10% of Net Profit after Salary and Commission
Net Profit after Salary and Commission =2,25,000 − 27,000 = Rs 1,98,000
| Commission to C | 1,98,000 | X | 10 |
| 100 + 10 |
| Commission to C | 1,98,000 | X | 10 |
| 110 |
Commission to C =18,000
| C’s remuneration as Manager | = | Salary | + | Commission |
| = | 27,000 | + | 18,000 | |
| = | 45,000 |
Calculation of distribution of Profits among the partners
| Profit for 2019 | = | 2,25,000 |
| C's Profit share | = | 1/4th of a firm’s profit |
| C's Share of Profit | = 2,25,000 | X | 1 |
| 4 |
C's Share of Profit= 56,250
Remaining Profit for remaining partner2,25,000 − 45,000 = Rs 1,80,000
| A's Share of Profit | = 1,80,000 | X | 3 |
| 5 |
A's Share of Profit= 1,08,000
| B's Share of Profit | =1,80,000 | X | 2 |
| 5 |
B's Share of Profit= 72,000
Part of C’s Profit Share to be borne by A= 56,250 − 45,000 = Rs 11,250
any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the manager, would have to be personally borne by A out of his share of profit.
A's Share of Profit= 1,08,000 - 11,250 = 96,750
Also, Check out the solved question of previous Chapters: -
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "Q.No.85 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1.
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