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a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1
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a,b and c have capitals of 60000 ,30000and 12000 respectively on whic...
I.O.C = a(3000 .
b(1500
c(600
profit = a(17340
b(8670
c(2890
b(1500
c(600
profit = a(17340
b(8670
c(2890
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a,b and c have capitals of 60000 ,30000and 12000 respectively on whic...
Introduction
Partnership firms are business entities that are owned and controlled by two or more individuals who share profits and losses in a pre-agreed ratio. Accounting for partnership firms involves maintaining proper books of accounts and preparing financial statements, including a profit and loss appropriation account, which shows how profits or losses are distributed among partners.
Given Information
In this case, a, b, and c have invested capitals of 60,000, 30,000, and 12,000, respectively, and are entitled to receive interest at 5% per annum. The profits before charging interest on the capital amounted to 34,000, and the partners share profits and losses in the ratio of 6:3:1.
Preparation of Profit and Loss Appropriation Account
To prepare a profit and loss appropriation account, follow the steps below:
1. Start by calculating the total interest payable to the partners based on their capital investments.
- a = 60,000 x 5% = 3,000
- b = 30,000 x 5% = 1,500
- c = 12,000 x 5% = 600
- Total Interest = 5,100
2. Subtract the interest payable from the profits before charging interest to arrive at the net profits for distribution.
- Net Profits = 34,000 - 5,100 = 28,900
3. Allocate the net profits among the partners based on their profit sharing ratio.
- Share of a = 28,900 x 6/10 = 17,340
- Share of b = 28,900 x 3/10 = 8,670
- Share of c = 28,900 x 1/10 = 2,890
4. Add the interest payable and the allocated profits to arrive at the total amount available for distribution.
- Total Available for Distribution = 5,100 + 28,900 = 34,000
5. Prepare the profit and loss appropriation account using the following format:
Profit and Loss Appropriation Account
Particulars Amount
Net Profits for Distribution 28,900
Add: Interest on Capital
a 3,000
b 1,500
c 600
Total Interest 5,100
Total Amount Available for Distribution 34,000
Less: Allocated Profits
a 17,340
b 8,670
c 2,890
Total Allocated Profits 28,900
Balance Carried Down to Balance Sheet 5,100
Conclusion
In conclusion, preparing a profit and loss appropriation account is essential in accounting for partnership firms, as it shows how profits or losses are distributed among partners based on their profit sharing ratio. In this case, a, b, and c received interest on their capital investments, and the net profits were allocated among them in the ratio of 6:3:1, resulting in a total amount available for distribution of 34,000.
Partnership firms are business entities that are owned and controlled by two or more individuals who share profits and losses in a pre-agreed ratio. Accounting for partnership firms involves maintaining proper books of accounts and preparing financial statements, including a profit and loss appropriation account, which shows how profits or losses are distributed among partners.
Given Information
In this case, a, b, and c have invested capitals of 60,000, 30,000, and 12,000, respectively, and are entitled to receive interest at 5% per annum. The profits before charging interest on the capital amounted to 34,000, and the partners share profits and losses in the ratio of 6:3:1.
Preparation of Profit and Loss Appropriation Account
To prepare a profit and loss appropriation account, follow the steps below:
1. Start by calculating the total interest payable to the partners based on their capital investments.
- a = 60,000 x 5% = 3,000
- b = 30,000 x 5% = 1,500
- c = 12,000 x 5% = 600
- Total Interest = 5,100
2. Subtract the interest payable from the profits before charging interest to arrive at the net profits for distribution.
- Net Profits = 34,000 - 5,100 = 28,900
3. Allocate the net profits among the partners based on their profit sharing ratio.
- Share of a = 28,900 x 6/10 = 17,340
- Share of b = 28,900 x 3/10 = 8,670
- Share of c = 28,900 x 1/10 = 2,890
4. Add the interest payable and the allocated profits to arrive at the total amount available for distribution.
- Total Available for Distribution = 5,100 + 28,900 = 34,000
5. Prepare the profit and loss appropriation account using the following format:
Profit and Loss Appropriation Account
Particulars Amount
Net Profits for Distribution 28,900
Add: Interest on Capital
a 3,000
b 1,500
c 600
Total Interest 5,100
Total Amount Available for Distribution 34,000
Less: Allocated Profits
a 17,340
b 8,670
c 2,890
Total Allocated Profits 28,900
Balance Carried Down to Balance Sheet 5,100
Conclusion
In conclusion, preparing a profit and loss appropriation account is essential in accounting for partnership firms, as it shows how profits or losses are distributed among partners based on their profit sharing ratio. In this case, a, b, and c received interest on their capital investments, and the net profits were allocated among them in the ratio of 6:3:1, resulting in a total amount available for distribution of 34,000.
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a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals?
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a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals?.
a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals?.
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a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals?, a detailed solution for a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? has been provided alongside types of a,b and c have capitals of 60000 ,30000and 12000 respectively on which they are entitled to get interest at 5% p.a the profits for the years be fore charging interest on capital amounted to 34,000 prepare profits and loss appration account it they share profits and losses in the ratio of 6:3:1 Related: Key Notes - Accounting for partnership firms: Fundamentals? theory, EduRev gives you an
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