Q28. ( Commission to partners and reserve ) Alpha and Beta are partners with a capital Rs. 1,00,000 and Rs. 80,000 respectively. The net profit of the firm for the year ending 31st March, 2016 amounted to Rs.1,05, 625 before considering the following adjustments:
(i) Alpha advanced loan to firm amounting to Rs.50,000 on 1st October, 2015.
(ii) Interest on capital and interest on drawing is 5% p.a.
(iii) Drawing of Alpha is Rs. 20,000 and Beta is Rs. 15,000.
(iv) Alpha was allowed commission @ 3% on conducting sales Rs. 4,00,000.
(v) Beta was allowed commission @ 5% on distributable profit after charging all commission.
(vi) It was also decided to keep 10% of divisible profit to Reserve Fund.
You are required to prepare their Profit and Loss Appropriation Account.
[ Ans. Commission to Beta = Rs.84,000 × 5/105 = Rs. 4,000, Reserve Fund Rs. 8,000, Divisible profit Rs. 72,000 in ratio 1 : 1]
|Profit and Loss Appropriation Account |
for the year ended
|Interest on Capital A/c:||Profit and Loss A/c |
(1,05,625 – 1,500)
|Alpha||5,000||Interest on Drawings A/c:|
|Alpha’s Capital A/c (Commission)||12,000||Beta||375||875|
|Beta’s Capital A/c (Commission)||4,000|
|Profit transferred to:|
|Alpha’s Capital A/c||36,000|
|Beta’s Capital A/c||36,000||72,000|