A,B and c are partners sharing profits and losses in the ratio of 3:2:1. their capitals were Rs.80,000;Rs.60,000;and Rs. 40,000 respectively. according to the partnership agreement partners are entitled to receive the following:
i) interest on capital @12%
ii)salaries @Rs.300 per month to each partner
iii)interest on drawing is to be charged @12%,irrespective of the period. Partners drawings amount to Rs.8,000 for A,Rs.6,000 for B and Rs. 5000 for C.
The profit earned by the firm after charging partners salaries but before allowing interest on capital and charging interest on drawing amountsb to Rs. 44,000.prepare profit and loss appropriation account to disgtribute the profit among the partners.
|Profit and Loss Appropriation Account|
|Interest on Capital A/c:||Profit and Loss A/c
|A||9,600||Interest on Drawings A/c:|
|Profit transferred to:|
|A’s Capital A/c||13,340|
|B’s Capital A/c||8,893|
|C’s Capital A/c||4,447||26,680|