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Question
Dinesh and Sugumar entered into a partnership agreement on 1st January 2018, Dinesh contributing ₹ 1,50,000 and Sugumar ₹ 1,20,000 as capital. The agreement provided that:
- Profits and losses to be shared in the ratio 2 : 1 as between Dinesh and Sugumar.
- Partners to be entitled to interest on capital @ 4% p.a.
- Interest on drawings to be charged Dinesh: ₹ 3,600 and Sugumar: ₹ 2,200
- Dinesh to receive a salary of ₹ 60,000 for the year, and
- Sugumar to receive a commission of ₹ 80,000
During the year ended on 31st December 2018, the firm made a profit of ₹ 2,20,000 before adjustment of interest, salary and commission. Prepare the Profit and loss appropriation account.
Solution
| Dr. | Profit and Loss Appropriation Account | Cr. | |||
| Particulars | Amount | Amount | Particulars | Amount | Amount |
| To Interest on Capital: | By Interest on drawings: | ||||
| Dinesh: | 6,000 | Dinesh: | 3,600 | ||
| Dinesh: | 4,800 | 10,800 | Sugumar: | 2,200 | 5,800 |
| To Dinesh's Salary | 60,000 | By profit and loss A/c | 2,20,000 | ||
| To Sugumar's Commission | 80,000 | ||||
| To share of profit | |||||
| Dinesh's capital 50,000 | 50,000 | ||||
| Sugumar's capital 25,000 | 25,000 | 75,000 | |||
| 2,25,800 | 2,25,800 | ||||
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