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Calculate the appropriations for a partnership and prepare the Profit and Loss Appropriation Account.

Accounting

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Here's the solution for the partnership accounting problem.

  1. Calculate appropriations

    • Interest on Capital:
      • A's Interest on Capital =₹50,000×6100=₹3,000= ₹50,000 \times \frac{6}{100} = ₹3,000
      • B's Interest on Capital =₹30,000×6100=₹1,800= ₹30,000 \times \frac{6}{100} = ₹1,800
    • A's Commission:
      • A's Commission =₹3,00,000×2100=₹6,000= ₹3,00,000 \times \frac{2}{100} = ₹6,000
    • B's Salary:
      • B's Salary =₹500×12=₹6,000= ₹500 \times 12 = ₹6,000
    • B's Commission:
      • Profit before B's commission (after other appropriations) =Net Profit−Interest on Capital−A’s Commission−B’s Salary= \text{Net Profit} - \text{Interest on Capital} - \text{A's Commission} - \text{B's Salary}
      • Profit before B's commission =₹50,000−₹(3,000+1,800)−₹6,000−₹6,000= ₹50,000 - ₹(3,000 + 1,800) - ₹6,000 - ₹6,000
      • Profit before B's commission =₹50,000−₹4,800−₹6,000−₹6,000=₹33,200= ₹50,000 - ₹4,800 - ₹6,000 - ₹6,000 = ₹33,200
      • B's Commission (after charging such commission) =₹33,200×5100+5=₹33,200×5105=₹1,580.95≈₹1,581= ₹33,200 \times \frac{5}{100+5} = ₹33,200 \times \frac{5}{105} = ₹1,580.95 \approx ₹1,581

  2. Prepare Profit and Loss Appropriation Account

    \begin{array}{l r | l r} \multicolumn{4}{c}{\textbf{Profit and Loss Appropriation Account}} \\ \multicolumn{4}{c}{\textbf{For the year ended 31st March, 2015}} \\ \hline \textbf{Particulars} & \textbf{Amount (₹)} & \textbf{Particulars} & \textbf{Amount (₹)} \\ \hline \text{To Interest on Capital:} & & \text{By Net Profit (as per P&L A/c)} & 50,000 \\ \quad \text{A} & 3,000 & & \\ \quad \text{B} & 1,800 & & \\ \text{To A's Commission} & 6,000 & & \\ \text{To B's Salary} & 6,000 & & \\ \text{To B's Commission} & 1,581 & & \\ \text{To Partners' Capital A/cs (Divisible Profit):} & & & \\ \quad \text{A} & 23,714 & & \\ \quad \text{B} & 7,905 & & \\ \hline \textbf{Total} & \textbf{50,000} & \textbf{Total} & \textbf{50,000} \\ \hline \end{array}

  3. Calculate Divisible Profit and distribute it

    • Total appropriations =₹4,800(Interest on Capital)+₹6,000(A’s Commission)+₹6,000(B’s Salary)+₹1,581(B’s Commission)=₹18,381= ₹4,800 (\text{Interest on Capital}) + ₹6,000 (\text{A's Commission}) + ₹6,000 (\text{B's Salary}) + ₹1,581 (\text{B's Commission}) = ₹18,381
    • Divisible Profit =Net Profit−Total appropriations= \text{Net Profit} - \text{Total appropriations}
    • Divisible Profit =₹50,000−₹18,381=₹31,619= ₹50,000 - ₹18,381 = ₹31,619
    • Profit sharing ratio is 3:1.
    • A's Share of Profit =₹31,619×34=₹23,714.25≈₹23,714= ₹31,619 \times \frac{3}{4} = ₹23,714.25 \approx ₹23,714
    • B's Share of Profit $= ₹31,619 \times \frac{1}{4} = ₹7,904.75 \approx
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