A and B are partners sharing profit in the ratio 3 : 2 with capital of...
Profit and Loss Appropriation Account:
Net Profit before Manager Commission and Rent: 39000
Less: Manager Commission (5% of Net Profit): 1950
Rent Paid to A: 24000
Salary Paid to B: 2500
Total Appropriation: 28450
Net Profit after Appropriation: 10550
Partner's Capital Account:
A:
Opening Capital: 50000
Add: Interest on Capital (6% of 50000): 3000
Share of Net Profit: 6330 (10550 x 3/5)
Less: Manager Commission (5% of Net Profit): 158
Closing Capital: 56672 (50000 + 3000 + 6330 - 158)
B:
Opening Capital: 30000
Add: Interest on Capital (6% of 30000): 1800
Salary Paid: 2500
Share of Net Profit: 4218 (10550 x 2/5)
Closing Capital: 38518 (30000 + 1800 + 2500 + 4218)
Explanation:
The given information can be used to prepare the Profit and Loss Appropriation Account and the Partner's Capital Account for the year. The Profit and Loss Appropriation Account shows the distribution of the net profit for the year after deducting the manager commission, rent paid to A, and salary paid to B. The remaining amount is the net profit available for distribution among the partners.
The Partner's Capital Account shows the opening capital of each partner, their share of interest on capital, salary paid to B, share of net profit, and the closing capital for the year. A's share of net profit is calculated as 3/5th of the total net profit, while B's share is calculated as 2/5th. A provision of 5% of net profit is made for manager commission, which is deducted from each partner's share of net profit.
A rent of 24000 is paid to A, which is also deducted from A's share of net profit. A and B's opening capital is added to their respective shares of interest on capital, salary paid, and share of net profit, and the total amount is their closing capital for the year.
Overall, the Profit and Loss Appropriation Account and the Partner's Capital Account provide a clear picture of the financial performance of the partnership for the year, and help the partners make informed decisions about the future of the business.
A and B are partners sharing profit in the ratio 3 : 2 with capital of...