P and Q are partners with capitals of Rs. 6,00,000 and Rs. 4,00,000 re

P and Q are partners with capitals of Rs. 6,00,000 and Rs. 4,00,000 respectively. The profit and Loss Account of the firm showed a net Profit of Rs. 4, 26,800 for the year. Prepare Profit and Loss account after taking the following into consideration:- (i) Interest on P's Loan of Rs. 2,00,000 to the firm(ii) Interest on 'capital to be allowed @ 6% p.a. (iii) Interest on Drawings @ 8% p.a. Drawings were; P Rs 80,000 and Q Rs. 1000,000. (iv) Q is to be allowed a commission on sales @ 3%. Sales for the year was Rs. 1000000(v) 10% of the divisible profits is to be kept in a Reserve Account.

Answer»

Profit and Loss Account for the year ended

Profit and Loss Appropriation Account for the year ended.

Particulars	Amount	Particulars	Amount
To interest on Capital		By profit and Loss A/c (Profit)	414800
P 36000 Q 24000	60000	By interest on drawings P 3200 Q 2000	5200
To Q's commission	60000
To reserve A/c	30000
To profit P's Capital 135000 Q's capital 135000	270000
	420000		420000

Notes:

(i) If the rate of interest on Partners' Loan is not given in the question, it is to be wed @ 6% p.a. according to the Partnership Act.

(ii) Interest on Partners' Loan is treated as a charge against Profit, so it is shown in the debit of Profit and Loss A/c.

(iii) If the date of Drawings is not given in the question, interest on drawings will be charged and average period of 6 months.

(iv) Reserve Fund is calculated at 10% on Rs. 3,00,000 (i.e. Rs. 4,26,800 + Rs. 5,200- 12,000 - Rs. 60,000 - Rs. 60,000.