Sarthaks Test
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Prem and Manoj are partners in a firm sharing profits in the ratio of 3:2. The Partnership Deed provided that Prem was to be paid salary of Rs.2,500 per month and Manoj was to get a commission of Rs.10,000 per year. Interest on capital was to be allowed @ 5% p.a. and interest on drawings was to be charged @ 6% p.a. Interest on Prem’s drawings was Rs.1,250 and on Manoj’s drawings was Rs.425. Capitals of the partners were Rs.2,00,000 and Rs.1,50,000 respectively, and were fixed. The firm earned a profit of Rs.90,575 for the year ended 31st March, 2016. Prepare Profit and Loss Appropriation Account of the firm.

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Working Notes:

1. Calculation of interest on capital

2. Calculation of profit share of each partner

Profit available for distribution = 90,575 +1,675,-30,000-10,000 =Rs.34,750

Profit sharing Ratio = 3:2

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