T.S. Grewal Class 12 Chapter 1 Q.35 - Accounting for Partnership Firm Fundamentals

Question 35

X and Y are partners in a firm. X is entitled to a salary of ₹10,000 per month and a commission of 10% of the net profit after partners’ salaries but before charging commission. Y is entitled to a salary of ₹25,000 p.a. and a commission of 10% of the net profit after charging all commission and partners’ salaries. Net profit before providing for partners’ salaries and commission for the year ended 31st March, 2025 was ₹4,20,000. Show the distribution of profit.

Solution

Profit & Loss Appropriation Account (for the year ended 31st March, 2025)

Particulars (Dr.)	₹	Particulars (Cr.)	₹
To Partners’ Salary:		By Profit & Loss A/c (Net Profit)	4,20,000
X (₹10,000 × 12)	1,20,000
Y	25,000
To Partners’ Commission:
X’s Capital A/c	27,500
Y’s Capital A/c	22,500
To Profit transferred to Capital A/cs:
X (2,25,000 × 1/2)	1,12,500
Y (2,25,000 × 1/2)	1,12,500
Total	4,20,000	Total	4,20,000

Working Notes:
Partners’ salaries = ₹1,20,000 + ₹25,000 = ₹1,45,000.
X’s commission = 10% of (₹4,20,000 – ₹1,45,000) = 10% of ₹2,75,000 = ₹27,500.
Y’s commission = 10% after charging such commission = (₹2,75,000 – ₹27,500) × 10/110 = ₹2,47,500 × 10/110 = ₹22,500.
Divisible profit = ₹4,20,000 – ₹1,45,000 – ₹50,000 = ₹2,25,000, shared equally.