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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]

Dear student,
Profit and Loss Appropriation Account
for the year ended
Dr.     Cr.
Particulars Amount
Particulars Amount
Interest on Capital A/c:   Profit and Loss A/c
(1,05,625 – 1,500)
Alpha 5,000   Interest on Drawings A/c:  
Beta 4,000 9,000 Alpha 500  
Alpha’s Capital A/c (Commission) 12,000 Beta 375 875
Beta’s Capital A/c (Commission)84,000×5105 4,000    
Profit transferred to:      
Alpha’s Capital A/c 36,000      
Beta’s Capital A/c 36,000 72,000    
  1,05,000   1,05,000


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