# Question 47 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 47 Chapter 2 of +2-A

A, B and C were partners in a firm having capitals of 50,000 ; 50,000 and 1,00,000
respectively. Their Current Account balances were A: 10,000; B: 5,000 and C: 2,000 Dr. .
According to the Partnership Deed, the partners were entitled to interest on capital @ 10% p.a. C being the working partner was also entitled to a salary of 12,000 p.a. The profits were
to be divided as:

1. The first 20,000 in proportion to their capitals.
2. Next 30,000 in the ratio of 5 : 3: 2.
3. Remaining profits to be shared equally.

The firm earned a net profit of 1,72,000 before charging any of the above items.
Prepare Profit and Loss Appropriation Account and pass necessary Journal entry for the appropriation of profits.

The solution of Question 47 Chapter 2 of +2-A

:

 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 1,72,000 A’s Capital A/c 5,000 B’s Capital A/c 5,000 C’s Capital A/c 10,000 20,000 To C’s Salary A/c 12,000 To Profit Transferred to *2 A’s Capital A/c 50,000 B’s Current A/c 44,000 C’s Capital A/c 46,000 1,40,000 1,72,000 1,72,000

 Date Particulars L.F. Debit Credit Interest on Capital A/c Dr 20,000 To A’s Capital A/c 5,000 To B’s Capital A/c 5,000 To C’s Capital A/c 10,000 (Being Interest on partners′ capital allowed to partners) Salaries A/c Dr 20,000 To C’s Current A/c 20,000 (Being Interest on partners′ capital allowed to partners) Interest on Capital A/c Dr 1,40,000 To A’s Current A/c 50,000 To B’s Current A/c 44,000 To C’s Current A/c 46,000 (Being Profit available for distribution transferred to partners′ current accounts)

Working Note: –

*1 Calculation of Interest on A’s, B’s, & C’s Capital
Interest on Capital= Opening Capital X Rate of Interest

 Interest on A’s Capital = 50,000 X 10 100

Interest on A’s Capital  = 5,000/-

 Interest on B’s Capital = 50,000 X 10 100

Interest on B’s Capital  = 5,000/-

 Interest on C’s Capital = 1,00,000 X 10 100

Interest on C’s Capital = 10,000/-

*2: -Calculation of share of profit of A’s, B’s, & C’s

Net Profit after interest & Salary = 1,40,000
Distribution of first Rs 20,000 in the Capital Ratio i.e. 1:1:2

 Profit share of A = 20,000 X 1/4 Profit share of A = 5,000/- Profit share of B = 20,000 X 1/4 Profit share of B = 5,000/- Profit share of C = 20,000 X 2/4 Profit share of C = 10,000/-

Distribution of Next Rs 30,000 in the ratio of 5:3:2

 Profit share of A = 30,000 X 5/10 Profit share of A = 15,000/-` Profit share of B = 30,000 X 3/10 Profit share of B = 9,000/- Profit share of C = 30,000 X 2/10 Profit share of C = 6,000/-

Distribution of remaining profit in the ratio of 1:1:1
Remaining Profit available for distribution = Rs 1,40,000 − 20,000 − 30,000 = Rs 90,000

 Profit share of A = 90,000 X 1/3 Profit share of A = 30,000/- Profit share of B = 90,000 X 1/3 Profit share of B = 30,000/- Profit share of C = 90,000 X 1/3 Profit share of C = 30,000/-

Total Profit Share of A = 5,000 + 15,000 + 30,000 = Rs 50,000
Total Profit Share of B = 5,000 + 9,000 + 30,000 = Rs 44,000
Total Profit Share of C = 10,000 + 6,000 + 30,000 = Rs 46,000

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. 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