Ownclasses

Arun and Arora were partners in a firm sharing profits in the ratio of 5:3. Their fixed capitals on 1-4-2010 were: Arun Rs 60,000 and Arora Rs 80,000. They agreed to allow interest on capital @ 12% p.a. And to charge on drawings @ 15% p.a. The profit of the firm for the year ended 31-3 2011 before all above adjustments were Rs 12,600. The drawings made by Arun were Rs 2,000 and by Arora Rs 4,000 during the year. Prepare Profit and Loss Appropriation Account of Arun and Arora. Show your calculations clearly. The interest on capital will be allowed even if the firm incurs loss. 

Answer

Profit and Loss Appropriation Account:

Particulars

Amount (Rs)

Particulars

Amount(Rs)

Interest on Capital

Arun

Arora

 

 

7200

9600

 

 

Net Profit

Interest on Drawings

Arun:        150

Arora:       300

Loss transferred to partners current a/c

Arun:             Rs 2344

Arora:            Rs 1406

 

12,600

 

 

450

 

 

 

3750

 

16800

 

16800

 

Working note:
Interest on capital
Arun : (60000*12/100)= 7200
Arora: (80000*12/100) = 9600

Interest on drawings:
Arun: (2000*15/100)*6/12= 150
Arora: (4000*15%)*6/12= 300 

Loss transferred to partners current a/c
Arun (3750*5/8) Rs 2344
Arora(3750*3/8) Rs 1406