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Profit and Loss Appn Ac

The document provides an example of preparing journal entries for profit appropriation and partner's capital accounts for a partnership firm. It states that Anand, Balan and Chandran entered into a partnership with capital contributions of Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively. Balan receives a salary of Rs. 5,000 and Chandran a commission of Rs. 4,000. The partnership earned a profit of Rs. 50,000 for the year. Journal entries are made for appropriation of profit, interest on capital and drawings. Finally, the partner's individual capital accounts are prepared showing the capital balances as on January 1, 2010.

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Muvarish Elayi
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2K views9 pages

Profit and Loss Appn Ac

The document provides an example of preparing journal entries for profit appropriation and partner's capital accounts for a partnership firm. It states that Anand, Balan and Chandran entered into a partnership with capital contributions of Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively. Balan receives a salary of Rs. 5,000 and Chandran a commission of Rs. 4,000. The partnership earned a profit of Rs. 50,000 for the year. Journal entries are made for appropriation of profit, interest on capital and drawings. Finally, the partner's individual capital accounts are prepared showing the capital balances as on January 1, 2010.

Uploaded by

Muvarish Elayi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as ODP, PDF, TXT or read online on Scribd
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Profit & Loss Appropriation A/c

Profit & Loss Appropriation A/c


Format of P&L Appropriation A/c
Profit and Loss Appropriation A/c
Particulars Amount Particulars Amount

Profit and Loss Account XXX Profit and Loss Account XXX
(If there is loss) (If there is profit)
Interest on Capital XX Interest on drawings XX
Salary to partner XX Partners' Capital Accounts XX
Commission to partner XX (Distribution of Loss)
Interest on partners' loan XX
Partners' Capital Accounts XX
(Distribution of Profit)

XXXX XXXX
Illustration 1
On 1st Jan 2009 Anand, Balan and Chandran entered into
partnership contributing Rs. 60,000, Rs. 40,000 and Rs. 20,000
respectively and sharing profits and losses in the ratio of 5:3:2. Balan
is entitled to a salary of Rs. 5000 and Chandran a commission of Rs.
4000 per year. Interest on capital is to be allowed at 5% per annum.
During the year Anand withdrew Rs. 10000, Balan Rs. 6000 and
Chandran Rs. 5000. Interest on drawings was charged Rs. 250 on
Anand's drawings, Rs. 150 on Balan's drawings and Rs. 200 on
Chandran's drawings. Profit in 2009 before the above mentioned
adjustments was Rs. 50000.
You are required to pass necessary journal entries relating to
appropriation of profit and prepare Profit and Loss Appropriation
Account and the partner's capital accounts.
Solution

Profit and Loss Appropriation A/c


Particulars Amount Particulars Amount

Salary (Balan) 5000 Profit and Loss Account 50000


Commisson (Chandran) 4000 (Net Profit transferred)
Interest on Capital Interest on drawings
Anand 3000 Anand 250
Balan 2000 Balan 150
Chandran 1000 6000 Chandran 200 600

Capital Accounts (Net Profit)


Anand 17800
Balan 10680
Chandran 7120 35600

50600 50600
Anand's Capital Account
Date Particulars Amount Date Particulars Amount

31/12/09 Drawings 10000 01/01/09 Cash 60000


31/12/09 Interest on Drawings 250 31/12/09 Interest on Capital 3000
31/12/09 PlL Appn A/c (Profit) 17800

31/12/09 Balance c/d 70550

80800 80800

01/01/10 Balance b/d 70550


Balan's Capital Account
Date Particulars Amount Date Particulars Amount

31/12/09 Drawings 6000 01/01/09 Cash 40000


31/12/09 Interest on Drawings 150 31/12/09 Salary 5000
31/12/09 Interest on Capital 2000
31/12/09 PlL Appn A/c (Profit) 10680

31/12/09 Balance c/d 51530

57680 57680

01/01/10 Balance b/d 51530


Chandran's Capital Account
Date Particulars Amount Date Particulars Amount

31/12/09 Drawings 5000 01/01/09 Cash 20000


31/12/09 Interest on Drawings 200 31/12/09 Commission 4000
31/12/09 Interest on Capital 1000
31/12/09 PlL Appn A/c (Profit) 7120

31/12/09 Balance c/d 26920

32120 32120

01/01/10 Balance b/d 26920


Mobile : 9995983075

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