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Question 54 Chapter 2 of +2-A
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54. Anita, Bimla and Cherry are three partners. On 1st April 2018, their Capitals stood as: Anita 1,00,000, Bimla 2,00,000 and Cherry 3,00,000. It was decided that:
- they would receive interest on Capital @ 5% p.a.,
- Anita would get a salary of 5,000 per month,
- Bimla would receive commission @ 5% of net profit after deduction of commission, and
- 10% of the net divisible 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 54 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 | |||
| Anita’s Capital A/c | 5,000 | ||||
| Bimla’s Capital A/c | 10,000 | ||||
| Cherry’s Capital A/c | 15,000 | 30,000 | |||
| To Anita’s Salary A/c (5,000 ×12) | 60,000 | ||||
| To Commission to Bimla A/c *2 | 23,810 | ||||
| To General Reserve A/c *3 | 38,619 | ||||
| To Profit Transferred to *4 | |||||
| Anita’s Current A/c | 1,15,857 | ||||
| Bimla’s Current A/c | 1,15,857 | ||||
| Cherry’s Current A/c | 1,15,857 | 3,47,571 | |||
| 5,00,000 | 5,00,000 | ||||
| Partners’ Capital Accounts for the year ended 31st March 2019 | |||||||
| Particu lars | Anita | Bimla | Cherry | Particu lars | Anita | Bimla | Cherry |
| 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 | 60,000 | – | – | ||||
| By Commission A/c *2 | – | 23,810 | – | ||||
| By P&L Appropriation A/c*4 | 1,15,857 | 1,15,857 | 1,15,857 | ||||
| To Balance c/d | 2,80,857 | 3,49,667 | 4,30,857 | ||||
| 2,80,857 | 3,49,667 | 4,30,857 | 2,80,857 | 3,49,667 | 4,30,857 | ||
Working Note: –
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*1 Calculation of Interest on Anita’s, Bimla’s, & Cherry’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Anita’s Capital | = | 1,00,000 | X | 5 |
| 100 |
Interest on Anita’s Capital = 5,000/-
| Interest on Bimla’s Capital | = | 2,00,000 | X | 5 |
| 100 |
Interest on Bimla’s Capital = 10,000/-
| Interest on Cherry’s Capital | = | 3,00,000 | X | 5 |
| 100 |
Interest on Cherry’s Capital = 15,000 /-
*2 Calculation of Commission to Bimla
| Commission to Bimla | = | 5% on Net Profits after Commission |
| Net Profit | = | 50,000 |
| Amount of Reserve | = | Net Profit | X | Rate |
| 100 + Rate |
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| Amount of Reserve | = | 50,000 | X | 5 |
| 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 Divisible Profit |
| Divisible Profit | = | Profit – Interest on Capital – Partners’ Salary – Partners’ Commission |
| = | 5,00,000 – 30,000 – 60,000 – 23,810 = Rs 3,86,190 |
| Amount of Reserve | = | 3,86,190 | X | 10 |
| 100 |
Amount of Reserve = 38,619/-
*4: -Calculation of share of profit of Amit’s, Binita’s, & Charu’s
Net Profit after interest & Salary = 3,47,571
Distribution of remaining profit in the ratio of 1:1:1
| Profit share of Anita | = | 3,47,571 X 1/3 |
| Profit share of Anita | = | 1,15,857/- |
| Profit share of Bimla | = | 3,47,571 X 1/3 |
| Profit share of Bimla | = | 1,15,857/- |
| Profit share of Cherry | = | 3,47,571 X 1/3 |
| Profit share of Cherry | = | 1,15,857/- |
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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