X and Y are partners in a firm sharing profits in the ratio of 3 : 2. The have a manager, Z, who gets ₹ 10,000 p.m. salary plus commission of 5% of the profit after charging his salary and commission, Now, they decide to admit Z as a partner, giving him 1/5th share in the profits of the firm. Any excess amount which Z receives as a partner (over his salary and commission) will be borne by X. The profit for the year ended 31st March, 2018 amounted to ₹ 8,40,000 after charging Z’s salary. Prepare Profit and Loss Appropriation Account showing the division of profit for the year.

X and Y are partners in a firm sharing profits in the ratio of 3 : 2.

1.	X and Y are partners in a firm sharing profits in the ratio of 3 : 2. The have a manager, Z, who gets ₹ 10,000 p.m. salary plus commission of 5% of the profit after charging his salary and commission, Now, they decide to admit Z as a partner, giving him 1/5th share in the profits of the firm. Any excess amount which Z receives as a partner (over his salary and commission) will be borne by X. The profit for the year ended 31st March, 2018 amounted to ₹ 8,40,000 after charging Z’s salary. Prepare Profit and Loss Appropriation Account showing the division of profit for the year.
Answer» n: Profit and Loss Appropriation Account for the YEAR ENDED Merck 31,2018 Dr. CR. Particulars Rs. Particulars Rs. To Profit transferred to : By Profit and Loss A/c 9,60,000 X's Capital A/c 4,48,000 (Excluding Z's Salary) Y's Capital A/c 3,20,000 Z's Capital A/c 1,92,000 9,60,000 9,60,000 9,60,000 Working Notes: 1. Calculation of Remuneration to Z as a Manager Salary to Z = Rs.1,20,000 Commission to Z= 5% of Net Profit after salary and commission Net Profit after salary and commission = Rs.8,40,000 s Commission - 8, 40, 000 x = 40000 Remuneration to Z as a Manager = Salary + Commission = 1,20,000 + 40,000 = Rs.1,60,000 2. Calculation of Profit Share of Z as a Partner Total Profit = Rs.9,60,000 Profit on Z's Share - 9, 60, 000 x = 192,000 Z's Profit share to be borne by X = Rs.1,92,000 - Rs.1,60,000 = Rs.32,000 Profits available for distribution between X and Y = Rs.9,60,000 - Rs.1,60,000 = Rs.8,00,000 Profit on X's Share = 8, 00,000 x =4, 80,000 Profit on Y's Share = 8,00, 000 x = 3, 20, 000 X's Share in profits after adjusting Z's deficiency = Rs.4,80,000 - Rs.32,000 = Rs.4,48,000

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