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A, B and C are partners in a firm. Their profit-sharing ratio is 2 : 2 : 1. C is guaranteed a minimum amount of ₹ 10,000 as share of profit every year. Any deficiency arising on that amount shall be met by B. The profits for the two years ended 31st March, 2017 and 2018 were ₹ 40,000 and ₹ 60,000 respectively. Prepare Profit and Loss Appropriation Account for the two years. |
| Answer» N: PROFIT and LOSS Appropriation Account For the year ended 2017 Dr Cr Particulars Rs. Particulars Rs. To Profit transferred to : By Profit and Loss A/c 40,000 A's Capital A/c 16,000 (Net Profit) B's Capital A/c 14,000 C's Capital A/c 10,000 40,000 40.000 40,000 Profit and Loss Appropriation Account For the year ended 2018 Dr Cr Particulars Rs. Particulars Rs. To Profit transferred to : By Profit and Loss A/c 60,000 A's Capital A/c 24,000 (Net Profit) B's Capital A/c 24,000 C's Capital A/c 12,000 60,000 60,000, 60,000 Working Notes : 1. Distribution of Profit for the year 2017 Profit for 2017 = Rs.40,000 Profit sharing RATIO = 2 : 2 :1 C is a given a guarantee of minimum profit of Rs.10,000 A's Profit Share = 40,000 x =16 000 B's Profit Share = 40,000 x =16 000 Cs Profit Share = 40,000 x = 8 ,000 Deficiency in C's Profit Share = Rs.10,000 - Rs.8,000 = Rs.2,000 This deficiency is to be borne by B Therefore , Final Profit Share of A =Rs. 16,000 Final Profit Share of B = Rs.16,000 - Rs.2,000 = Rs.14,000 Final Profit Share of C = Rs.8,000 + Rs.2,000 = Rs.10,000 2. Distribution of Profit for the year 2018 Profit for 2018 Profit sharing ratio = 2:2 : 1 C is given a guarantee of minimum profit of Rs.10,000 A's Profit Share = 60,000 x =24, 000 B's Profit Share = 60,000 x =24, 000 C's Profit Share =60,000 x = 12,000 | |