Question

A, B and C entered into partnership on 1st April, 2008 to share profits & losses in the ratio of 4:3:3. A, however, personally guaranteed that C's share of profit after charging interest on Capital @ 5% p.a. would not be less than Rs. 40,000 in any year. The Capital contributions were:  A, Rs. 3, 00,000; B, Rs. 2, 00,000 and C, Rs. 1, 50,000. The profit for the year ended on 31st March, '2008 amounted to Rs. 1, 60,000. Show the Profit & Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account (for the year ending on 31st March 2008)

Particulars	Amount	Particulars	Amount
To Interest on Capital A 15,000 B 10,000 C 7,500	32,500	By Profit before adjustments	1,60,000
To net Profit transferred A. (51,000-1,750) 49,250 B. (1,27,500 x 3/10) 38,250 C. (38,250+1,750) 40,000	1, 27,500		1,60,000
	1,60,000		1,60,000