Question

Reema and Seema are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly salary of Rs 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were Rs 5,00,000 each and drawings during the year were Rs 60,000 each. The firm incurred a loss of Rs 1,00,000 during the year ended 31st March, 2018. Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.

Answer 1

Profit and Loss Appropriation Account
for the year ended March 31, 2018

Dr.					Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Profit and Loss A/c		1,00,000	Interest on Drawings A/c:
			Reema	3,000
			Seema	3,000	6,000
			Loss transferred to
			Reema	47,000
			Seema	47,000	94,000
		1,00,000			1,00,000

Note: Since the firm has incurred loss, no interest on capital and salary will be allowed to the partners. However, interest on drawings will be charged from each of them @ 10% p.a. on the amounts withdrawn by them for an average period of six months.

Answer 2

Working Notes:

1. calculation of interest on drawings of each partner 

In the no given of dates of drawings, Interest thereon has been calculated for the average period

2. Loss share of each partner Ratio 1:1.

3. Interest on capital is charge against profit.