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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of ₹8,00,000 and ₹6,00,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of ₹60,000 which has not been withdrawn. Profit for the year ended 31st March, 2025 before interest on capital but after charging Y’s salary amounted to ₹2,40,000. A provision of 5% of the profit is to be made in respect of commission to the manager. Prepare an account showing the allocation of profits.
Profit & Loss Account (for the year ended 31st March, 2025)
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Manager’s Commission (3,00,000 × 5%) | 15,000 | By Net Profit (before Y’s salary) | 3,00,000 |
| To Profit transferred to P & L Appropriation A/c | 2,85,000 | ||
| Total | 3,00,000 | Total | 3,00,000 |
Profit & Loss Appropriation Account (for the year ended 31st March, 2025)
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Salary to Y | 60,000 | By Profit & Loss A/c | 2,85,000 |
| To Interest on Capital: | |||
| X’s Capital A/c | 40,000 | ||
| Y’s Capital A/c | 30,000 | ||
| To Profit transferred to Capital A/cs: | |||
| X (1,55,000 × 3/5) | 93,000 | ||
| Y (1,55,000 × 2/5) | 62,000 | ||
| Total | 2,85,000 | Total | 2,85,000 |
Working Notes:
Net profit before Y’s salary = ₹2,40,000 + ₹60,000 = ₹3,00,000; Manager’s commission = ₹3,00,000 × 5% = ₹15,000.
Interest on capital: X = ₹8,00,000 × 5% = ₹40,000; Y = ₹6,00,000 × 5% = ₹30,000.
Divisible profit = ₹2,85,000 – ₹60,000 – ₹70,000 = ₹1,55,000, shared in 3 : 2.
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 "T.S. Grewal Class 12 Chapter 1 Q.16 - Accounting for Partnership Firm Fundamentals", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 1 - Accounting for Partnership Firm – Fundamentals.
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