Ravi and Mohan where partner in a firm sharing profit in the ratio of ...
Calculation of Interest on Capital:
- Ravi's interest on capital = 10,00,000 x 12% = 1,20,000
- Mohan's interest on capital = 7,00,000 x 12% = 84,000
Calculation of Salary:
- Ravi's salary = 6,000 x 12 = 72,000
- Mohan's salary = 6,000
Calculation of Profit:
- Total profit = 5,04,000
Distribution of Profit:
- Profit to be distributed equally = 5,04,000 / 2 = 2,52,000
- Ravi's share of profit = 2,52,000 x 7 / 12 = 1,47,000
- Mohan's share of profit = 2,52,000 x 5 / 12 = 1,05,000
Adjustment Entries:
- To record Ravi's interest on capital:
- Debit Interest on Capital Account = 1,20,000
- Credit Ravi's Capital Account = 1,20,000
- To record Ravi's salary:
- Debit Profit and Loss Account = 72,000
- Credit Ravi's Salary Account = 72,000
- To record Mohan's interest on capital:
- Debit Interest on Capital Account = 84,000
- Credit Mohan's Capital Account = 84,000
- To record Mohan's salary:
- Debit Profit and Loss Account = 6,000
- Credit Mohan's Salary Account = 6,000
Final Distribution of Profit:
- Ravi's share of profit = 1,47,000 + 72,000 = 2,19,000
- Mohan's share of profit = 1,05,000 + 6,000 = 1,11,000
Hence, after adjusting for the interest on capital and salaries, Ravi's share of profit is Rs. 2,19,000 and Mohan's share of profit is Rs. 1,11,000.