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Question -

Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were ₹ 80,000 and ₹ 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹ 2,000 and ₹ 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was ₹ 1, 00,300. The drawings of Ramesh and Suresh were ₹ 40,000 and ₹ 50,000, respectively. Interest on drawings amounted to ₹ 2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.



Answer -

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

₹

Particulars

Amount

₹

Interest on Capital 

 

 

Profit and Loss

 

1,00,300

Ramesh

9,600

 

Interest on Drawings

 

 

Suresh

7,200

16,800

Ramesh

2,000

 

 

 

 

 

Suresh

2,500

4,500

Partners’ Salaries

 

 

 

 

Ramesh

24,000

 

 

 

 

Suresh

36,000

60,000

 

 

 

 

 

 

 

 

 

Profit Transferred to

 

 

 

 

 

Ramesh’s Capital {28,000 × (4/7)}

16,000

 

 

 

Suresh’s Capital {28,000 × (3/7)}

12,000

 

 

 

 

 

1,04,800

 

 

1,04,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Ramesh

Suresh

Particulars

Ramesh

Suresh

Drawings

40,000

50,000

Cash

80,000

60,000

Interest on Drawings

2,000

2,500

Interest on Capital

9,600

7,200

Balance c/d

87,600

62,700

Partners’ Salaries

24,000

36,000

 

 

 

Profit & Loss Appropriation

16,000

12,000

 

1,29,600

1,15,200

 

1,29,600

1,15,200

 

 

 

 

 

 

   

                                            

Capital Ratio

=

Ramesh

:

Suresh

 

 

80,000

:

60,000

 

 

4

:

3

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