Question 56 Chapter 2 of +2-Part-1
56. (Profit and loss App. A/c, Partners Capital and Current A/c) Thread, Needle and Button are in partnership and during the year ended 31-3-2017, they earned a profit of Rs.83,000. Thread and Needle are entitled to get 10% p.a. interest on capital of Rs.60,000 and Rs.1,00,000 respectively. Button who has no capital in the firm is entitled to a salary of Rs.12,000 p.a. Button is also entitled to a commission of 10% on the profits after charging interest, salary and commission.
It is further agreed that the balance of profits should be appropriated as to 20% for charity fund and balance is shared equally by Thread and Needle.
Prepare profit and loss appropriation account and partners capital and current account for the year ended 31st March 2017, if the drawings of the partners during the year were Thread- Rs. 8,000; Needle-Rs.6,000 and Button- Rs.9,000.
The solution of Question 56 Chapter 2 of +2 Part-1: –
| Profit and Loss App. A/c |
|||||
| Particulars |
Amount | Particulars |
Amount | ||
| To Interest on capital – Thread @10% | 6,000 | By net profit B/d | 83,000 | ||
| -Needle @10% | 10,000 | 16,000 | |||
| To Button’s Salary | 12,000 | ||||
| To Button’s Commission (WN1) | 5,000 | ||||
| To Charity Fund (WN2) | 10,000 | ||||
| To Net profit transferred to Capital a/cs | |||||
| -Thread- 1/2 | 20,000 | ||||
| -Needle -1/2 | 20,000 | 40,000 | |||
| 83,000 | 83,000 | ||||
| Partners’ Capital A/c |
|||||||
| Particulars |
Thread | Needle | Particulars |
Thread | Needle | ||
| By Balance B/d | 60,000 | 1,00,000 | |||||
| To Balance c/d | 60,000 | 1,00,000 | |||||
| 60,000 | 1,00,000 | 60,000 | 1,00,000 | ||||
| Partners’ Current A/c |
|||||||||
| Particulars |
Thread | Needle | Button | Particulars |
Thread | Needle | Button | ||
| To Drawings A/c | 8,000 | 6,000 | 9,000 | By Interest on Capital A/c | 6,000 | 10,000 | – | ||
| By Commission | – | – | 5,000 | ||||||
| By salary | – | – | 12,000 | ||||||
| By P&L Appropriation A/c | 20,000 | 20,000 | |||||||
| To Balance c/d | 18,000 | 24,000 | 8,000 |
||||||
| 26,000 | 30,000 | 17,000 |
26,000 | 30,000 | 17,000 |
||||
Working Note: –
1. Button’s Commission:
| Button’s Commission |
= | 10% of profits after charging interest, salary and commission |
| = | 10/110 of (83,000-16,000-12,000) | |
| = | 10/110 of 55,000 = Rs. 5,000 | |
| 2. Charity Fund: | = | 20% of profits after charging all expenses |
| = | 20% of ( 83,000-16,000-12,000-5,000) | |
| = | 20% of 50,000 = Rs. 10,000 |
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Chapter No. 1 – Accounting Not-for-Profit Organisations (Deleted from the Syllabus)
Chapter No. 2 – Partnership Accounts – I (Introduction)
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Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
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