Question

A and B are partners sharing profits in proportion of 3:2 with capitals of Rs. 40,000 and Rs. 30,000 respectively. Interest on capital is agreed at 5 % p.a. B is to be allowed an annual salary of Rs. 3000 which has not been withdrawn. During 2001 the profits for the year prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,000. A provision of 5% of this amount is to be made in respect of commission to the manager. Prepare profit and loss appropriation account showing the allocation of profits

Answer 1

Net profit transferred to 

A’s Capital A/C Rs. 4,650 

B’s Capital A/C Rs. 3,100