Amit and Bimal are partners sharing profits and losses in the ratio of...
Amit and Bimal are partners sharing profits and losses in the ratio of...
Profit and Loss Appropriation for the year ended 31st December 2018
Partnership Ratio:
- Amit and Bimal share profits and losses in the ratio of 3:2.
Capital:
- Amit's capital = Rs. 50,000
- Bimal's capital = Rs. 30,000
Interest on Capital:
- Interest on capital is to be allowed at 5% per annum.
Salary:
- Vimal is entitled to a salary of Rs. 500 per month.
Profit for the year ended 31st December 2018:
- The profit of the firm for the year ended 31st December 2018 was Rs. 20,000.
Calculation of Interest on Capital:
- Amit's interest on capital = (Rs. 50,000 * 5%) = Rs. 2,500
- Bimal's interest on capital = (Rs. 30,000 * 5%) = Rs. 1,500
Calculation of Salary:
- Vimal's salary for the year = (Rs. 500 * 12) = Rs. 6,000
Distribution of Profit:
- Total profit = Rs. 20,000
- Interest on capital (Amit) = Rs. 2,500
- Interest on capital (Bimal) = Rs. 1,500
- Salary (Vimal) = Rs. 6,000
- Remaining profit = Rs. 10,000
Distribution of Remaining Profit:
- Amit's share = (3/5 * Rs. 10,000) = Rs. 6,000
- Bimal's share = (2/5 * Rs. 10,000) = Rs. 4,000
Profit and Loss Appropriation for the year ended 31st December 2018:
- Profit for the year = Rs. 20,000
- Less: Interest on capital (Amit) = Rs. 2,500
- Less: Interest on capital (Bimal) = Rs. 1,500
- Less: Salary (Vimal) = Rs. 6,000
- Remaining profit = Rs. 10,000
- Less: Amit's share = Rs. 6,000
- Less: Bimal's share = Rs. 4,000
- Total appropriation of profit = Rs. 0
Explanation:
- The partnership agreement provides for interest on capital and salary to be paid to the partners.
- The interest on capital is calculated at 5% per annum and is paid to the partners before the distribution of profit.
- Vimal is entitled to a salary of Rs. 500 per month, which is multiplied by 12 to calculate the total salary for the year.
- After deducting interest on capital and salary, the remaining profit is distributed among the partners according to their profit-sharing ratio.
- The profit and loss appropriation account shows the distribution of profit and the final appropriation of profit for the year.
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