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Question -

Rakhi and Shikha are partners in a firm, with capitals of ₹ 2, 00,000 and ₹ 3, 00,000 respectively. The profit of the firm, for the year ended 2016-17 is ₹ 23,200. As per the Partnership agreement, they share the profit in their capital ratio, after allowing a salary of ₹ 5,000 per month to Shikha and interest on Partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew ₹ 7,000 and Shikha ₹ 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.
If interest on capital and Partners’ salaries will be provided even if firm involves in loss.



Answer -

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

₹

Particulars

Amount

₹

Partner’s Salaries

 

 

Profit and Loss

 

23,200

Shikha

 

60,000

Loss transferred to

 

 

 

 

 

 

Rakhi Capital

34,720

 

Interest on Capital

 

 

Shikha’s Capital

52,080

86,800

Rakhi

20,000

 

 

 

 

Shikha

30,000

50,000

 

 

 

 

 

1,10,000

 

1,10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Rakhi

Shikha

Particulars

Rakhi

Shikha

Drawings

7,000

10,000

Balance b/d

2,00,000

3,00,000

Profit & Loss Appropriation

34,720

52,080

Partner’s Salaries

 

60,000

Balance c/d

1,78,280

3,27,920

Interest on Capital

20,000

30,000

 

 

 

 

 

 

 

2,20,000

3,90,000

 

2,20,000

3,90,000

 

 

 

 

 

 

 

Ifinterest on capital and salaries will be provided out of profit

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

₹

Particulars

Amount

₹

Partner’s Salaries

 

 

Profit and Loss

23,200

Shikha  {23,200 × (6/11)}

 

12,655

 

 

Interest on Capital

 

 

 

 

Rakhi {23,200 × (2/11)}

4,218

 

 

Shikha {23,200 × (3/11)}

6,327

 

 

 

 

 

23,200

 

23,200

 

 

 

 

 

 

 

 

 

 

 

 

 Ifprofit is less than the sum of distributable items, distribution shall be inproportion of items for distribution.

 

Partners Salaries

Ratio

 

 

Shikhar (₹ 60,000)

6

23,200 × (6/11)

12,655

Interest on Capital

 

 

 

Rakhi (₹ 20,000)

2

23,200 × (2/11)

4,218

Shikhar (₹ 30,000)

3

23,200 × (3/11)

6,327

 

11

 

23,200

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Rakhi

Shikha

Particulars

Rakhi

Shikha

Drawings

7,000

10,000

Balance b/d

2,00,000

3,00,000

 

 

 

Partner’s Salaries

 

12,655

Balance c/d

1,97,218

3,08,972

Interest on Capital

4,218

6,327

 

 

 

 

 

 

 

2,04,218

3,18,972

 

2,04,218

3,18,972

 

 

 

 

 

 

 

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