Amitabh and Babul are partners sharing profits in the ratio of 3:2 with capitals of Rs.50,000 and Rs.30,000 respectively. Interest on capital is agreed @ 6% p.a. Babul is to be allowed an annual salary of Rs.2,500. During the year 2005-06,the profits prior to the calculation of interest on capital but after charging Babul's salary amounted to Rs.12,500. A provision of 5% of the profit is to be made in respect of commission to the manager.
prepare profit and loss appropriation account showing the distribution of profit and the partners capital accounts for the year ending march 31,2006.
|Profit and Loss Appropriation Account
for the year ended
|Interest on Capital A/c:||Profit and Loss A/c before Babul’s Salary (12,500+2,500)||15,000|
|Salary to Babul||2,500|
|Provision for Manger’s Commission
|Profit transferred to:|
|Amitabh’s Capital A/c||4,170|
|Babul’s Capital A/c||2,780||6,950|
|Partners’ Capital Accounts|
|Interest on Capital A/c||3,000||1,800|
|Balance c/d||57,170||37,080||P/L Appropriation A/c||4,170||2,780|