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Question
Which of the following is shown in the Profit and loss appropriation account?
Options
Office expenses
Salary of staff
Partners’ salary
Interest on bank loan
Solution
Partners’ salary
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RELATED QUESTIONS
Why is the Profit and loss appropriation account prepared?
Sibi and Manoj are partners in a firm. Sibi is to get a commission of 20% of net profit before charging any commission. Manoj is to get a commission of 20% on net profit after charging all commission. Net profit for the year ended 31st December 2018 before charging any commission was ₹ 60,000. Find the commission of Sibi and Manoj. Also, show the distribution of profit.
Anand and Narayanan are partners in a firm sharing profits and losses in the ratio of 5 : 3. On 1st January 2018, their capitals were ₹ 50,000 and ₹ 30,000 respectively. The partnership deed specifies the following:
- Interest on capital is to be allowed at 6% per annum.
- Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.
- Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.
Give necessary journal entries and prepare profit and loss appropriation account as on 31st December 2018. Assume that the capitals are fluctuating.
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:
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- 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.
Antony and Ranjith started a business on 1st April 2018 with capitals of ₹ 4,00,000 and ₹ 3,00,000 respectively. According to the Partnership Deed, Antony is to get the salary of ₹ 90,000 per annum, Ranjith is to get 25% commission on profit after allowing salary to Antony and interest on capital @ 5% p.a. but after charging such commission. The profit-sharing ratio between the two partners is 1 : 1. During the year, the firm earned a profit of ₹ 3,65,000.
Prepare profit and loss appropriation account. The firm closes its accounts on 31st March every year.
Anand and Narayanan are partners in a firm sharing profits and losses in the ratio of 5:3. On 1st January 2018, their capital was ₹ 50,000 and ₹ 30,000 respectively. The partnership deed specifies the following:
- Interest on capital is to be allowed at 6% per annum.
- Interest on drawings charged to Anand and Narayanan are ₹ 1,000 and ₹ 800 respectively.
- The net profit of the firm before considering interest on capital and interest on drawings amounted to ₹ 35,000.
Give necessary journal entries and prepare profit and loss appropriation accounts as on 31st December 2018. Assume that the capitals are fluctuating.
