Question :Akhil and Nikhil were partners sharing profits and losses in the ratio of 3: 2. Their fixed capitals were % 1,00,000 and % 80,000 respectively. Interest on capital was agreed @ 6% p.a. Nikhil was to be allowed an annual salary of % 9,200, During the year 2021-22, the net profit prior to the calculation of interest on capital but after charging Nikhil’s salary amounted to. ¥ 1,20,000. Prepare Profit and Loss Appropriation Account of the firm for the year ending 31%* March, 2022.
The correct answer is -Calculation of Interest on Capital:
Akhil’s Interest on Capital = 6% of % 1,00,000 = % 6,000 Nikhil’s Interest on Capital = 6% of % 80,000 = % 4,800
Calculation of Nikhil’s Salary:
Nikhil’s Salary = % 9,200
Calculation of Profit and Loss Appropriation Account:
Net Profit before Interest on Capital and Salary = % 1,20,000
Less: Nikhil’s Salary = % 9,200
Net Profit before Interest on Capital = % 1,10,800
Akhil’s Interest on Capital = % 6,000
Nikhil’s Interest on Capital = % 4,800
Profit available for appropriation = % 1,00,000
Less: Transfer to General Reserve = % 12,000
Remaining Profit for Appropriation = % 88,000
Akhil’s Share of Profit (3/5th) = % 52,800
Nikhil’s Share of Profit (2/5th) = % 35,200
Add: Interest on Capital to be paid = % 10,800
Add: Nikhil’s Salary = % 9,200
Total Profit and Loss Appropriation = % 1,03,000
Therefore, the Profit and Loss Appropriation Account of Akhil and Nikhil for the year ending 31st March 2022 will be as follows:
| Particulars | Amount (in Rs.) |
|---|---|
| Net Profit before Interest on Capital and Salary | 1,20,000 |
| Less: Nikhil’s Salary | 9,200 |
| Net Profit before Interest on Capital | 1,10,800 |
| Appropriations: | |
| Akhil’s Interest on Capital | 6,000 |
| Nikhil’s Interest on Capital | 4,800 |
| Transfer to General Reserve | 12,000 |
| Remaining Profit for Appropriation | 88,000 |
| Akhil’s Share of Profit (3/5th) | 52,800 |
| Nikhil’s Share of Profit (2/5th) | 35,200 |
| Add: Interest on Capital to be paid | 10,800 |
| Add: Nikhil’s Salary | 9,200 |
| Total Profit and Loss Appropriation | 1,03,000 |
