Question 45 Chapter 2 of +2-A
45. Sajal and Kajal are partners sharing profits and losses in the ratio of 2: 1. On 1st April 2018
their Capitals were: Sajal – 50,000 and Kajal – 40,000.
Prepare Profit and Loss Appropriation Account and the Partners’ Capital Accounts at the end of the year after considering the following items:
Interest on Capital is to be allowed @ 5% p.a.
Interest on the loan advanced by Kajal for the whole year, the amount of loan is 30,000.
Interest on partners’ drawings @ 6% p.a. Drawings: Sajal 10,000 and Kajal 8,000.
10% of the divisible profit is to be transferred to Reserve.
Net profit for the year ended 31st March 2019 is 68,460.
Note: Net profit means net profit after the debit of interest on the loan by the partner.
The solution of Question 45 Chapter 2 of +2-A
| Profit and Loss Appropriation Account for the year ended 31st March 2019 |
||||
| Particulars |
Amount | Particulars |
Amount | |
| To Interest on Kajal’s loan@ 6% p.a | 1,800 | By Net Profit before interest A/c | 70,260 | |
| To Profit and Loss Appropriation A/c | 68,460 | |||
| 2,20,700 | 2,20,700 | |||
| Profit and Loss Appropriation Account for the year ended 31st March 2019 |
||||||
| Expenditure |
Amount | Income |
Amount | |||
| To Interest on Capital A/c *1 | By Profit and Loss A/c | 68,460 | ||||
| Sajal’s Capital A/c | 2,500 | To Interest on Capital A/c *2 | ||||
| Kajal’s Capital A/c | 2,000 | 4,500 | Sajal’s Capital A/c | 300 | ||
| To Reserve A/c *3 | 6,450 | Kajal’s Capital A/c | 240 | 540 | ||
| To Profit Transferred to *4 | ||||||
| Sajal’s Capital A/c | 38,700 | |||||
| Kajal’s Capital A/c | 19,350 | 58,050 | ||||
| 2,20,700 | 2,20,700 | |||||
| Partners’ Capital Accounts for the year ended 31st March 2019 |
|||||
| Particulars |
Sajal |
Kajal | Particulars |
Sajal | Kajal |
| To Drawings A/c | 10,000 | 8,000 | By Balance B/d | 50,000 | 40,000 |
| To Interest on Drawings A/c | 300 | 240 | By Interest on Capital A/c *1 | 2,500 | 2,000 |
| By P&L Appropriation A/c | 38,700 | 19,350 | |||
| To Balance c/d | 80,900 | 53,110 | |||
| 91,200 | 61,350 | 91,200 | 61,350 | ||
Working Note: –
*1 Calculation of Interest on Sajal’s & Kajal’s Capital by Simple Method
Interest on Capital= Opening Capital X Rate of Interest
| Interest on Sajal’s Capital | = | 50,000 | X | 5 |
| 100 |
Interest on Sajal’s Capital = 2,500/-
| Interest on Kajal’s Capital | = | 20,000 | X | 5 |
| 100 |
Interest on Kajal’s Capital = 2,000/-
*2 Calculation of Interest on Sajal’s & Kajal’s Drawing
Interest on Drawing = Drawing X Rate of Interest X Period
| Interest on Drawing | = | 10,000 | X | 6 | = | 6 |
| 100 | 12 |
Interest on Sajal’s Drawing = 300/-
| Interest on Drawing | = | 8,000 | X | 5 | = | 6 |
| 100 | 12 |
Interest on Kajal’s Drawing = 2,400/-
Note: – No period is given we assume it during the year as per provision of chapter
*3 Calculation of Amount to be transferred to Reserve
| Amount for Reserve | = | 10% of Divisible Profit |
| Divisible Profit | = | Profit + Interest on Drawings − Interest on Capital |
| = | 68,460 + 540 − 4,500 = Rs 64,500 |
| Amount of Reserve | = | 64,500 | X | 10 |
| 100 |
Amount of Reserve = 6,450/-
| Interest on Kajal’s Drawing | = | 8,000 | X | 5 | = | 6 |
| 100 | 12 |
Interest on Kajal’s Drawing = 2,400/-
*4: -Calculation of share of profit of Sajal’s & Kajal’s
Profit-Sharing Ratio = 2: 1
Net Profit after interest & Salary = 58,050
| Profit share of Sajal | = | 58,050 X 2/3 |
| Profit share of Sajal | = | 38,700/- |
| Profit share of Kajal | = | 58,050 X 1/3 |
| Profit share of Kajal | = | 19,350/- |
Comment if you have any questions.
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
