Profit and Loss Appropriation Account

The Profit and Loss Appropriation Account shows how the profit of a partnership firm is distributed among the partners. In this case, we need to prepare the Profit and Loss Appropriation Account for partners A and B.

Calculation of Profit for the Current Year

To calculate the profit for the current year, we need to consider the following components:

1. Interest on Capital: A is entitled to 6% interest on his capital of 100000, which amounts to 6000. B is entitled to 6% interest on his capital of 60000, which amounts to 3600. Therefore, the total interest on capital is 6000 + 3600 = 9600.

2. Salary to B: B is entitled to a salary of 3000 per month. Assuming there are 12 months in a year, the total salary for B is 3000 * 12 = 36000.

3. Remaining Profit: The remaining profit is calculated by deducting the interest on capital and salary to B from the total profit. In this case, the remaining profit is 80000 - 9600 - 36000 = 34400.

Profit and Loss Appropriation Account

The Profit and Loss Appropriation Account for partners A and B can be prepared as follows:

| Particulars | Amount (₹) |
|------------------|------------|
| Interest on Capital - A | 6000 |
| Interest on Capital - B | 3600 |
| Salary to B | 36000 |
| Remaining Profit | 34400 |
| Total | 80000 |

Explanation of the Account

1. Interest on Capital - A: This represents the interest payable to partner A on his capital. It is calculated at a rate of 6% on his capital amount of 100000.

2. Interest on Capital - B: This represents the interest payable to partner B on his capital. It is calculated at a rate of 6% on his capital amount of 60000.

3. Salary to B: This represents the salary payable to partner B. As per the given information, B is entitled to a salary of 3000 per month, which amounts to 36000 for the entire year.

4. Remaining Profit: This represents the remaining profit after deducting the interest on capital and salary to B from the total profit. In this case, the remaining profit is 34400.

5. Total: This represents the total profit available for distribution among the partners, which is 80000.

Conclusion

The Profit and Loss Appropriation Account shows the distribution of profit among the partners of a partnership firm. In this case, partner A and B's interest on capital and B's salary are accounted for before distributing the remaining profit. This account helps in determining the share of each partner in the profit and ensures transparency in profit distribution.