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Question 43 Chapter 2 of +2-A
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43. Amit and Vijay started a partnership business on 1st April 2018. Their capital contributions were 2,00,000 and 1,50,000 respectively. The Partnership Deed provided as follows:
a. Interest on capital be allowed @ 10% p.a.
b. Amit to get a salary of 2,000 per month and Vijay 3,000 per month.
c. Profits are to be shared in the ratio of 3: 2.
Net profit for the year ended 31st March 2019 was 2,16,000. Interest on drawings amounted to 2,200 for Amit and 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.
The solution of Question 43 Chapter 2 of +2-A
| Profit and Loss Appropriation Account for the year ended 31st March 2019 | ||||||
| Expenditure | Amount | Income | Amount | |||
| To Salaries to Partners A/c | By Profit and Loss Adjustment A/c | 2,16,000 | ||||
| Amit 2,000 X 12 | 24,000 | By Interest on Drawing A/c | ||||
| Vijay 3,000 X 12 | 36,000 | 60,000 | Amit’s Capital A/c | 2,200 | ||
| To Interest on Capital A/c *1 | Vijay’s Capital A/c | 2,500 | 4,700 | |||
| Amit’s Capital A/c | 20,000 | |||||
| Vijay’s Capital A/c | 15,000 | 35,000 | ||||
| To Profit Transferred to *2 | ||||||
| Amit’s Capital A/c | 75,420 | |||||
| Vijay’s Capital A/c | 50,280 | 1,25,700 | ||||
| 2,20,700 | 2,20,700 | |||||
Working Note: –
*1: -Calculation of Total Interest on Amit’s Capital, and Vijay’s Capital
Interest on Capital = Capital X Rate of Interest X Period
Rate of Interest = 10%
Period = Whole year(So we don’t need to add period in the formula)
Amit’s Capital = 2,00,000
Interest on Amit’s Capital = 2,00,000 X 10/100
Interest on Amit’s Capital = 20,000/-
Vijay’s Capital = 1,50,000
Interest on Vijay’s Capital = 1,50,000 X 10/100
Interest on Vijay’s Capital = 15,000/-
*2: -Calculation of share of profit of Amit’s and Vijay’s
Profit-Sharing Ratio = 3: 2
Net Profit after interest & Salary = 1,25,700
Profit share of Amit = 1,25,700 X 3/5
The profit share of Amit = 75,420/-
Profit share of Vijay = 1,25,700 X 2/5
The profit share of Vijay = 50,280/-
Comment if you have any questions.
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Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
