Question 48 Chapter 2 of +2-A
A and B are partners sharing profits in the ratio of 3: 2 with capitals of 50,000 and 30,000 respectively. Interest on capital is agreed @ 6% p.a. B to be allowed an annual salary of 2,500. During the year profit prior to interest on capital but after charging B’s salary amounted to 12,500. A provision of 5% of the profits is to be made in respect of the Manager’s Commission.
The solution of Question 48 Chapter 2 of +2-A
| Profit and Loss Appropriation Account for the year ended 31st March 2019 |
||||||
| Expenditure |
Amount | Income |
Amount | |||
| To Manager’s Commission @ 5% *1 | 750 | By Net Profit before B’s Salary A/c | 15,000 | |||
| To Profit and Loss Appropriation A/c | 14,250 | 12,500+2,500 | ||||
| 15,000 | 15,000 | |||||
| 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 | 14,250 | ||||
| A’s Capital A/c | 3,000 | |||||
| B’s Capital A/c | 1,800 | 4,800 | ||||
| To B’s Salary A/c *3 | 2,500 | |||||
| To Profit Transferred to *2 | ||||||
| A’s Capital A/c | 4,170 | |||||
| B’s Capital A/c | 2,780 | 6,950 | ||||
| 14,250 | 14,250 | |||||
| Particulars |
A | B | Particulars |
A | B |
| By Balance B/d | 50,000 | 30,000 | |||
| By Interest on Capital A/c *1 | 3,000 | 1,800 | |||
| By Salaries A/c | – | 2,500 | |||
| By P&L Appropriation A/c | 4,170 | 2,780 | |||
| To Balance c/d | 57,170 | 37,080 | |||
| 57,170 | 37,080 | 57,170 | 37,080 |
Working Note: –
*1 Calculation of Managers’ Commission
Managers’ Commission = 5% on Net Profit before Salary
| Managers’ Commission | = | 15,000 | X | 5 |
| 100 |
Managers’ Commission = 750/-
*2 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 | 6 |
| 100 |
Interest on A’s Capital = 3,000/-
| Interest on B’s Capital | = | 30,000 | X | 6 |
| 100 |
Interest on B’s Capital = 1,800/-
*3: -Calculation of share of profit of A’s & B’s
Profit Sharing Ratio = 3: 2
Net Profit after interest & Salary = 6,950
| Profit share of A | = | 6,950 X 3/5 |
| Profit share of A | = | 4,170/- |
| Profit share of B |
= | 6,950 X 2/5 |
| Profit share of B | = | 2,780/- |
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
