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
Dr.     Cr.
Particulars Amount
Particulars Amount
Interest on Capital A/c:   Profit and Loss A/c before Babul’s Salary (12,500+2,500) 15,000
Amitabh 3,000      
Babul 1,800 4,800    
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    
  15,000   15,000
Partners’ Capital Accounts
Dr.   Cr.
Particulars Amitabh Babul Particulars Amitabh Babul
      Balance b/d 50,000 30,000
      Interest on Capital A/c 3,000 1,800
      Salary A/c   2,500
Balance c/d 57,170 37,080 P/L Appropriation A/c 4,170 2,780
  57,170 37,080   57,170 37,080

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