3.4 Preparation of Profit and loss appropriation account

12th BOOK KEEPING BY AJAYSANTHOSH MOURYA

Illustration : 6
Mahesh and Ramesh are partners sharing profits in the ratio of 3:2 with capitals of Rs.50,000 and Rs.40,000 respectively. Interest on capital is agreed at 8% p.a. Interest on drawings is fixed at 10% p.a. The drawings of the partners were Rs.15,000 and Rs.10,000, the interest for Mahesh Rs.750 and for Ramesh Rs.500. Mahesh is entitled to a salary of Rs.12,000 p.a. and Ramesh is entitled to get a commission of 10% on the Net Profit before charging such commission. The Net Profit of the firm before making the above adjustments was Rs.60,000 for the year ended 31st March, 2005.
Prepare the profit and loss appropriation account.

Illustration : 7
X and Y are partners in a firm, sharing profits and losses equally. X is entitled to a salary of Rs.5,000 p.m. Y is entitled to a commission of 10% of Net profit after charging such commission. Net profit before charging commission and salary was Rs.1,48,000. Show the Profit and loss appropriation account.
 

Solution:
a) Calculation of salary to X:
    5,000 p.m. for 12 months = 12 x 5,000
    = Rs. 60,000