lata and mamta are partners with capitals of Rs 300000 and Rs 200000 respectively sharing profits as lata 70% and mamta 30% during the year ended 31 march 2005 they earned a profit of Rs 226440 before allowing interest on partner's loan. the terms of partnership are as follows:
1. interest on capital is to be allowed @ 7% p.a
2. lata to get a salary of Rs 2500 per month.
3. interest on mamta's loan account of Rs 80000 for the whole yr.
4. interest on drawings of partner's at 8% per annum . drawings being lata Rs 36000 and mamta Rs 48000.
5. 1/10 of the distributable profit should be transferred to general reserve. prepare the profit and loss appropriation account.
rply me the solution to this ques. in detail.
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Dr. |
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Cr. |
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Particulars |
Amount Rs |
Particulars |
Amount Rs |
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Interest on Capital at 7% to: |
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Profit and Loss A/c (after charging Interest on Mamta’s Loan) (2,26,440 – 4,800*) |
2,21,640 |
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Lata (3,00,000 × 7%) |
21,000 |
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Interest on Drawings @ 8%: |
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Mamta (2,00,000 × 7%) |
14,000 |
35,000 |
Lata (36,000 × 8% × ½) |
1,440 |
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Mamta (48,000 × 8% × ½) |
1,920 |
3,360 |
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Salary to Lata (2,500 × 12) |
30,000 |
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General Reserve (1,60,000** × 10%) |
16,000 |
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Profit transferred to: |
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Lata (70% of 1,44,000) |
1,00,800 |
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Mamta (30% of 1,44,000) |
43,200 |
1,44,000 |
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2,25,000 |
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2,25,000 |
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* Interest on Mamta’s Loan is provided @ 6% as there is no rate of interest on Partner’s Loan is given in the agreement.
Interest on Mamta’s Loan = 80,000 × 6% = 4,800
** Distributable Profit is calculated as:
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Net Profit |
2,21,640 |
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Add: Interest on Drawings |
3,360 |
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Less: Interest on Capital |
(35,000) |
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Salary |
(30,000) |
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Distributable Profit |
1,60,000 |
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Regards