A, B and C were partners in a firm having capitals of Rs.50,000; Rs.50,000 and Rs.1,00,000 respectively. Their Current Account balances were A: Rs.10,000; B: 5,000 and C: 2,000 (Dr.). According to the Partnership Deed the partners were entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of Rs.12,000 p.a.
The profits were to be divided as:
a. The first Rs.20,000 in proportion to their capitals.
b. Next Rs.30,000 in the ratio of 5 : 3 : 2.
c. Remaining profits to be shared equally.
The firm made a profit of Rs.1,72,000 before charging any of the above items. Prepare Profit and Loss Appropriation Account and pass necessary Journal entry for the appropriation of profits.
