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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipment to government schools situated in remote and backward areas. They contributed capitals of ₹80,000 and ₹50,000 respectively and agreed to share profits in the ratio of 3 : 2. The Partnership Deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of ₹7,800. Showing your calculations clearly, prepare the Profit & Loss Appropriation Account of Jay and Vijay for the year ended 31st March, 2014.
Profit & Loss Appropriation Account (for the year ended 31st March, 2014)
| Particulars (Dr.) | ₹ | Particulars (Cr.) | ₹ |
|---|---|---|---|
| To Interest on Capital: | By Profit & Loss A/c (Net Profit) | 7,800 | |
| Jay’s Capital A/c | 4,800 | ||
| Vijay’s Capital A/c | 3,000 | ||
| Total | 7,800 | Total | 7,800 |
Working Notes:
Interest on capital (full): Jay = ₹80,000 × 9% = ₹7,200; Vijay = ₹50,000 × 9% = ₹4,500; Total = ₹11,700.
As interest on capital is an appropriation, it is allowed only to the extent of available profit (₹7,800), distributed in the ratio of interest (7,200 : 4,500):
Jay = ₹7,800 × 7,200/11,700 = ₹4,800; Vijay = ₹7,800 × 4,500/11,700 = ₹3,000.
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.26 - 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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