Question 30 of 50intermediate🔧 ApplyNumerical6 marks

Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2020 shows a net profit of Rs. 1,50,050. Prepare the Profit and Loss Appropriation Account and partners current account by taking into consideration the following information: (i) Partners capital on April 1, 2019; Simmi, Rs. 30,000; Sonu, Rs. 60,000; (ii) Current accounts balances on April 1, 2019; Simmi, Rs. 30,000 (cr.); Sonu, Rs. 15,000 (cr.); (iii) Partners drawings during the year amounted to Simmi, Rs. 20,000; Sonu, Rs. 15,000; (iv) Interest on capital was allowed @ 5% p.a.; (v) Interest on drawing was to be charged @ 6% p.a. at an average of six months; (vi) Partners’ salaries: Simmi Rs. 12,000 and Sonu Rs. 9,000.

Correct Answer

PROFIT AND LOSS APPROPRIATION ACCOUNT Dr. for the year ending March 31, 2020 Cr.

ParticularsAmount (Rs.)Amount (Rs.)ParticularsAmount (Rs.)Amount (Rs.)
To Interest on Capital:By Net Profit1,50,050
Simmi (30,000×5000 \times 5%)1,500By Interest on Drawings:
Sonu (60,000×5000 \times 5%)3,0004,500Simmi (20,000×6000 \times 6% × 6/12)600
To Partners’ Salaries:Sonu (15,000×6000 \times 6% × 6/12)4501,050
Simmi12,000
Sonu9,00021,000
To Profit transferred to:
Simmi’s Current A/c94,200
Sonu’s Current A/c31,4001,25,600
Total1,51,100Total1,51,100

PARTNERS’ CURRENT ACCOUNTS Dr. Cr.

ParticularsSimmi (Rs.)Sonu (Rs.)ParticularsSimmi (Rs.)Sonu (Rs.)
To Drawings20,00015,000By Balance b/d30,00015,000
To Interest on Drawings600450By Interest on Capital1,5003,000
To Balance c/d1,17,10042,950By Partners’ Salaries12,0009,000
By Profit & Loss Appropriation A/c94,20031,400
Total1,37,70058,400Total1,37,70058,400

(Note: The solution above uses the Net Profit figure of Rs. 1,50,050 stated in the question text. The answer key provided in the context suggests a profit transfer of Rs. 94,162 and Rs. 31,388, which corresponds mathematically to a Net Profit of Rs. 1,50,000. The difference is Rs. 50.)

Exercise: Numerical Questions | Q: 10 | (Page 39)
For More Understanding

Explanation

The solution is prepared by first calculating the appropriations. Interest on Capital is calculated at 5% on opening capitals (Simmi: Rs. 1,500; Sonu: Rs. 3,000). Interest on Drawings is calculated at 6% p.a. for an average of 6 months (Simmi: Rs. 600; Sonu: Rs. 450). The Net Profit (Rs. 1,50,050) is increased by the interest on drawings (Total Rs. 1,050) to determine the total available surplus. From this, interest on capital and partners' salaries are deducted to find the divisible profit. The divisible profit of Rs. 1,25,600 is shared in the 3:1 ratio. Note that the provided answer key in the context (Rs. 94,162/31,388) implies a Net Profit of Rs. 1,50,000 rather than the stated Rs. 1,50,050, creating a Rs. 50 discrepancy.

Solution Steps

  1. Step 1: Calculate Interest on Capital. Simmi: 30,000×5000 \times 5% = Rs. 1,500; Sonu: 60,000×5000 \times 5% = Rs. 3,000. Total = Rs. 4,500.

  2. Step 2: Calculate Interest on Drawings (Average 6 months). Simmi: 20,000×6000 \times 6% × 6/12 = Rs. 600; Sonu: 15,000×6000 \times 6% × 6/12 = Rs. 450. Total = Rs. 1,050.

  3. Step 3: Prepare Profit and Loss Appropriation Account. Start with Net Profit (Rs. 1,50,050) + Interest on Drawings (Rs. 1,050) = Rs. 1,51,100.

  4. Step 4: Deduct Appropriations. Interest on Capital (Rs. 4,500) + Salaries (Simmi Rs. 12,000 + Sonu Rs. 9,000 = Rs. 21,000). Total Deductions = Rs. 25,500.

  5. Step 5: Calculate Divisible Profit. Rs. 1,51,100 - Rs. 25,500 = Rs. 1,25,600. Distribute in 3:1 ratio. Simmi: 1,25,600×3600 \times 3/4 = Rs. 94,200; Sonu: 1,25,600×1600 \times 1/4 = Rs. 31,400.

  6. Step 6: Prepare Partners' Current Accounts by adding credits (Opening balance, interest on capital, salary, share of profit) and deducting debits (drawings, interest on drawings).

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