# A and B start business on 1st july 2004 each partner contributing Rs.150000 as his share of capital . Three months later on 1st oct 2004 B makes an additional contribution of Rs. 100000 which is treated as a loan. The profit for the period ended march 2005 was Rs.85000 before charging any interest. Both the partners were entitled to a salary of Rs.3000 each, per quarter. The partners had drawn rs.24000 each on 1st january 2005. prepare the profit and loss account for the period ended 31st march 2005 and pass journal entries.

 Profit and Loss Appropriation Accountfor the year ended March 31, 2005 Dr. Cr. Particulars AmountRs Particulars AmountRs Salary to: Profit and Loss A/c A (3,000 × 3) 9,000 (Net Profit) 82,000 B (3,000 × 3) 9,000 18,000 Profit transferred to: A’s Capital A/c 32,000 B’s Capital A/c 32,000 64,000 82,000 82,000

Working Note:

Calculation of Interest on Loan to B

As the partnership deed is silent regarding rate of interest on loan to the partner, so it is to be provided at the rate of 6% p.a.

The interest on loan is to be deducted from the net profit as it is charged against profits. Therefore,

Net profit to be shown in Profit and Loss Appropriation A/c = 85,000 – 3,000 = Rs 82,000

 Journal Date Particulars L.F. DebitAmountRs CreditAmountRs Profit and Loss Appropriation A/c Dr. 18,000 To A’s Capital A/c 9,000 To B’s Capital A/c 9,000 (Salary paid to A and B) Profit and Loss Appropriation A/c Dr. 64,000 To A’s Capital A/c 32,000 To B’s Capital A/c 32,000 (Profit transferred to A and B)

• 8
What are you looking for?