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Question -

Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of ₹ 50,000 and ₹ 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of ₹ 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to ₹ 12,500. A provision of 5% of profits is to be made in respect of manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.



Answer -

 

Profit and Loss Adjustment Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

₹

Particulars

Amount

₹

Interest on Capital

 

 

By Profit and Loss (12,500 + 2,500)

15,000

Lokesh

3,000

 

 

 

 

Azad

1,800

4,800

 

 

 

 

 

 

 

 

 

Partner’s Salaries

 

 

 

 

 

Azad

 

2,500

 

 

 

 

 

 

 

 

 

 

Provision for

Manager’s Commission 15,000 × (5/100)

750

 

 

 

Profit transferred to

 

 

 

 

Lokesh Capital

4,170

 

 

 

 

Azad Capital

2,780

6,950

 

 

 

 

 

15,000

 

 

15,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Lokesh

Azad

Particulars

Lokesh

Azad

 

 

 

Balance b/d

50,000

30,000

 

 

 

Interest on Capital

3,000

1,800

Balance c/d

57,170

37,080

Partner’s Salaries

 

2,500

 

 

 

Profit and Appropriation

4,170

2,780

 

57,170

37,080

 

57,170

37,080

 

 

 

 

 

 

 

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