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Question 53 Chapter 2 of +2-A
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53. Amit, Binita and Charu are three partners. On 1st April 2018, their Capitals stood as: Amit
1,00,000, Binita 2,00,000 and Charu 3,00,000. It was decided that:
a they would receive interest on Capital @ 5% p.a.,
b Amit would get a salary of 10,000 per month,
c Binita would receive commission @ 5% of net profit after deduction of commission, and
d 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March 2019 was 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.
The solution of Question 53 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 | 5,00,000 | |||
| Amit’s Capital A/c | 5,000 | ||||
| Binita’s Capital A/c | 10,000 | ||||
| Charu’s Capital A/c | 15,000 | 30,000 | |||
| To Amit’s Salary A/c (10, 000 ×12) | 1,20,000 | ||||
| To Commission to Binita A/c *2 | 23,810 | ||||
| To General Reserve A/c *3 | 50,000 | ||||
| To Profit Transferred to *4 | |||||
| Amit’s Current A/c | 92,063 | ||||
| Binita’s Current A/c | 92,063 | ||||
| Charu’s Current A/c | 92,064 | 2,76,190 | |||
| 5,00,000 | 5,00,000 | ||||
| Partners’ Capital Accounts for the year ended 31st March 2019 | |||||||
| Particu lars | Amit | Binita | Charu | Particu lars | Amit | Binita | Charu |
| By Balance B/d | 1,00,000 | 2,00,000 | 3,00,000 | ||||
| By Interest on Capital A/c *1 | 5,000 | 10,000 | 15,000 | ||||
| By Salaries A/c | 1,20,000 | – | – | ||||
| By Commission A/c *2 | – | 23,810 | – | ||||
| By P&L Appropriation A/c*4 | 92,063 | 92,063 | 92,064 | ||||
| To Balance c/d | 3,17,063 | 3,25,873 | 4,07,064 | ||||
| 3,17,063 | 3,25,873 | 4,07,064 | 3,17,063 | 3,25,873 | 4,07,064 | ||
Working Note: –
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*1 Calculation of Interest on Amit’s, Binita’s, & Charu’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Amit’s Capital | = | 1,00,000 | X | 5 |
| 100 |
Interest on Amit’s Capital = 5,000/-
| Interest on Binita’s Capital | = | 2,00,000 | X | 5 |
| 100 |
Interest on Binita’s Capital = 10,000/-
| Interest on Charu’s Capital | = | 3,00,000 | X | 5 |
| 100 |
Interest on Charu’s Capital = 15,000 /-
*2 Calculation of Commission to Binita
| Commission to Binita | = | 5% on Net Profits after Commission |
| Net Profit | = | 5,00,000 |
| Amount of Reserve | = | Net Profit | X | Rate |
| 100 + Rate |
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| Amount of Reserve | = | 5,00,000 | X | 4 |
| 100+5 |
Amount of Reserve = 23,810/-
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*3 Calculation of Amount to be transferred to General Reserve
| Amount for Reserve | = | 10% of Net Profit |
| Net Profit | = | 5,00,000 |
| Amount of Reserve | = | 5,00,000 | X | 10 |
| 100 |
Amount of Reserve = 50,000/-
*4: -Calculation of share of profit of Amit’s, Binita’s, & Charu’s
Net Profit after interest & Salary = 2,76,190
Distribution of remaining profit in the ratio of 1:1:1
| Profit share of Amit | = | 2,76,190 X 1/3 |
| Profit share of Amit | = | 92, 063/- |
| Profit share of Binita | = | 2,76,190 X 1/3 |
| Profit share of Binita | = | 92, 063/- |
| Profit share of Charu | = | 2,76,190 X 1/3 |
| Profit share of Charu | = | 92, 064/- |
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
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