Question

Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs 50,000 and Rs 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of Rs 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to Rs 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 1

Profit and Loss Adjustment Account
Dr.						Cr.
Particulars			Amount Rs	Particulars		Amount Rs
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