Question 76 Chapter 2 of +2-A
76. A and B are partners sharing profits in the ratio of 2: 1. They admitted C, their manager, as a partner form 1st April 2018, for 1/5th share of profit C, while being manager, was getting a salary of 50,000 p.a. plus commission of 10% of net profit after charging such salary and commission. It was also agreed that any excess amount which C receives as a partner Over his salary and commission will be borne by A. Profit for the year ended 31st March 2019 was 6,44,000, before payment of salary and commission. Prepare Profit and Loss Appropriation Account.
The solution of Question 76 Chapter 2 of +2-A:
| Balance Sheet (for the year ended 31st March 2019) |
|||||
| Liabilities |
Amount | Assets |
Amount | ||
| By Profit and Loss A/c | 6,44,000 | ||||
| To Profit Transferred to *2 | |||||
| A’s Capital A/c | 3,35,200 | ||||
| B’s Capital A/c | 1,80,000 | ||||
| C’s Capital A/c | 1,28,800 | 6,44,000 | |||
| 6,44,000 | 6,44,000 | ||||
Working Note: –
*1 Calculation of Remuneration to C as a Manager
| Salary to C | = | 50,000/- |
| Commission to C | = | 10% of Net Profit after Salary and Commission |
| Net Profit after Salary | = | 6,44,000 – 50,000 |
| = | 5,94,000/- |
| Commission to C | = | Net Profit after Salary | X | Rate | |
| 100+Rate |
(Because commission will be charged on the net profit after the charge of such commission)
| Commission to C | = | 5,94,000 | X | 10 |
| 100+10 |
Commission to C = 54,000/-
Total Remuneration to C as a Manager = 50,000 + 54,000 = 1,04,000/-
*2 Calculation of Profit Share of C as a Partner
Profit for the year = Rs 6,44,000/-
| C’s Profit Share | = | 6,44,000 | X | 1 |
| 5 | ||||
| = | 1,28,800/- |
It was also agreed that any excess amount which C receives as a partner Over his salary and commission will be borne by A
Part of C’s Profit Share to be borne by A =1,28,800 – 1,04,000 = Rs 24,800/-
Profit available for distribution between A and B= = 6,44,000 − 1,04,000
= Rs 5,40,000
| A’s Share of Profit | = | 5,40,000 | X | 2 |
| 3 | ||||
| = | 3,60,000 |
| B’s Share of Profit | = | 5,40,000 | X | 1 |
| 3 | ||||
| = | 1,80,000 |
A’s Profit share after adjusting C’s deficiency = 3,60,000 − 24,800
= Rs 3,35,200
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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
