Question 21 Chapter 2 of Class 12 Part – 1
21. Suchi and Ruchi are in partnership towards which they have contributed Rs. 6,00,000 each The profit for the year ended 31st March, 2018 was Rs. 5,00,000 before allowing interest on partner’s loan. Show the distribution of profit after considering that the loan provided by Suchi amounted to Rs. 2,00,000. Interest on capital has to be provided at 12% pa Drawing made by the partners were Rs. 50,000 each on which interest at 6 p.a. has to be provided. Ruchi is entitled to a commission on sales (Rs. 45,00,000) at 1%. It has also been a between the partners that 20% of the divisible profits is to be kept in Reserve Account.
Record the above in a Profit and Loss Appropriation Account.
The solution of Question 21 Chapter 2 of Class 12 Part – 1: –
Profit and Loss Account
|To Interest On Partner’s Loan A/C||12,000||By Profit b/d||5,00,000|
|To Profit Transferred to Profit and Loss Appropriation A/c||4,88,000|
Profit and Loss Appreciation Account
|To Interest On Capital A/C:||By Profit and Loss A/c||30,000|
|Suchi||72,000||By Interest On Drawings Account:|
|To Ruchi’s Salary A/C||45,000||Ruchi||1,500||3,000|
|To Reserve A/C||60,400|
|To Profit Transferred To Capital A/C’s|
(i). If a partner has given loan to the firm and the rate of interest on such loan has not been given in the question, then as per the Indian Partnership Act, interest @ 6% p.a. is to be allowed on such loan.
(ii). Since interest on partner’s loan is treated as a charge against profit, it is debited to Profit and Loss Account.
(iii). Since the date of drawings is not given, interest on drawings will be calculated for an average period, i.e., six months.
(iv). Amount transferred to Reserve has been calculated at 20% of Rs. 3,02,000 (i.e. 4,88,000 + 3,000 – 1,44,000 – 45,000).
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