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Page 1
ACCOUNTANCY – XII
Cases for profits
Accounting treatment
? P & L appropriation a/c cr. Side
Journal entry
Profit & Loss A/c Dr.
To Profit & Loss Appropriation A/c’s
POINTS TO BE KEPT IN MIND FOR PROFITS
? This profit should be after deducting all items of p & l a/c and especially 1. Interest on partners loan
2. Managers commission
And if any of the above item is not deducted from the profits so first deduct the above two items and then transfer
the net profits to the P & L Appropriation a/c cr. Side.
? This profit should be before deducting all items of p & l appropriation a/c and especially 1. Partners salary
2. Partners commission
3. Interest on capital
And if any of the above item is deducted from the profits so first add the deducted items and then transfer the net
profits to the P & L Appropriation a/c cr. Side.
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,00,000 before all adjustments.
Solution
Net profit = Rs.5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,00,000 after deducting interest on capital and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000 + 70,000 = 5,70,000
Page 2
ACCOUNTANCY – XII
Cases for profits
Accounting treatment
? P & L appropriation a/c cr. Side
Journal entry
Profit & Loss A/c Dr.
To Profit & Loss Appropriation A/c’s
POINTS TO BE KEPT IN MIND FOR PROFITS
? This profit should be after deducting all items of p & l a/c and especially 1. Interest on partners loan
2. Managers commission
And if any of the above item is not deducted from the profits so first deduct the above two items and then transfer
the net profits to the P & L Appropriation a/c cr. Side.
? This profit should be before deducting all items of p & l appropriation a/c and especially 1. Partners salary
2. Partners commission
3. Interest on capital
And if any of the above item is deducted from the profits so first add the deducted items and then transfer the net
profits to the P & L Appropriation a/c cr. Side.
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,00,000 before all adjustments.
Solution
Net profit = Rs.5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,00,000 after deducting interest on capital and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000 + 70,000 = 5,70,000
ACCOUNTANCY – XII
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,70,000
To partners commission
A 57,000
B 20,000
77,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,51,800
B 1,01,200
2,53,000
5,80,000 5,80,000
Case 3
Profit earned during the year was Rs.5,00,000 after deducting B’s commission and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000+20,000 = 5,20,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,20,000
To partners commission
A 52,000
B 20,000
72,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,24,800
B 83,200
2,08,000
5,30,000 5,30,000
Case 4
Profit earned during the year was Rs.5,00,000 after deducting partners salary & interest on capital and before
making any other adjustments.
Solution
Net profit = Rs.5,00,000 + 1,80,000 + 70,000=7,50,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 7,50,000
To partners commission
A 75,000
B 20,000
95,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 2,49,000
B 1,66,000
4,15,000
7,60,000 7,60,000
Page 3
ACCOUNTANCY – XII
Cases for profits
Accounting treatment
? P & L appropriation a/c cr. Side
Journal entry
Profit & Loss A/c Dr.
To Profit & Loss Appropriation A/c’s
POINTS TO BE KEPT IN MIND FOR PROFITS
? This profit should be after deducting all items of p & l a/c and especially 1. Interest on partners loan
2. Managers commission
And if any of the above item is not deducted from the profits so first deduct the above two items and then transfer
the net profits to the P & L Appropriation a/c cr. Side.
? This profit should be before deducting all items of p & l appropriation a/c and especially 1. Partners salary
2. Partners commission
3. Interest on capital
And if any of the above item is deducted from the profits so first add the deducted items and then transfer the net
profits to the P & L Appropriation a/c cr. Side.
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,00,000 before all adjustments.
Solution
Net profit = Rs.5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,00,000 after deducting interest on capital and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000 + 70,000 = 5,70,000
ACCOUNTANCY – XII
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,70,000
To partners commission
A 57,000
B 20,000
77,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,51,800
B 1,01,200
2,53,000
5,80,000 5,80,000
Case 3
Profit earned during the year was Rs.5,00,000 after deducting B’s commission and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000+20,000 = 5,20,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,20,000
To partners commission
A 52,000
B 20,000
72,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,24,800
B 83,200
2,08,000
5,30,000 5,30,000
Case 4
Profit earned during the year was Rs.5,00,000 after deducting partners salary & interest on capital and before
making any other adjustments.
Solution
Net profit = Rs.5,00,000 + 1,80,000 + 70,000=7,50,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 7,50,000
To partners commission
A 75,000
B 20,000
95,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 2,49,000
B 1,66,000
4,15,000
7,60,000 7,60,000
ACCOUNTANCY – XII
Cases for INTEREST ON PARTNERS LAON A/C
? Accounting treatment
P & L appropriation A/C cr. Side (less from net profit)
Or
P & l a/c dr. side
Journal entry
INTEREST ON PARTNERS LAON A/c Dr.
To Partners loan A/c’s
(For interest on partner loan a/c)
P & l a/c dr.
To INTEREST ON PARTNERS LAON A/c
(for transferring the interest on partners loan a/c)
POINTS TO BE KEPT IN MIND FOR INTEREST ON PARTNERS LAON A/C
? Always shown one side i.e. P & l a/c dr. side or P & L appropriation A/C cr. Side (less from net profit )
? If interest on partners loan is given then provide interest as per it and if no interest rate is given then interest
on partners loan a/c will be @ 6% p.a.
? It is be treated as charge
Presentation of interest on partner’s loan
Profit was Rs.5,10,000
And A had advanced a loan of Rs.1,00,000 @ 10% p.a. ( interest = Rs.10,000)
P & L A/C
Particulars Rs. Particulars Rs.
To interest on loan 10,000 By Profit 5,10,000
To Net Profit 5,00,000
5,10,000 5,10,000
Or
P & L appropriation A/C
Particulars Rs. Particulars Rs.
By net Profit 5,10,000
interest on loan 10,000
5,00,000
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,10,000 before all adjustments. And A had advanced a loan of
Rs.1,00,000 @ 10% p.a.
Solution
Net profit = Rs.5,10,000 – 10,000 =5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary 1,80,000 By net Profit 5,10,000 5,00,000
Page 4
ACCOUNTANCY – XII
Cases for profits
Accounting treatment
? P & L appropriation a/c cr. Side
Journal entry
Profit & Loss A/c Dr.
To Profit & Loss Appropriation A/c’s
POINTS TO BE KEPT IN MIND FOR PROFITS
? This profit should be after deducting all items of p & l a/c and especially 1. Interest on partners loan
2. Managers commission
And if any of the above item is not deducted from the profits so first deduct the above two items and then transfer
the net profits to the P & L Appropriation a/c cr. Side.
? This profit should be before deducting all items of p & l appropriation a/c and especially 1. Partners salary
2. Partners commission
3. Interest on capital
And if any of the above item is deducted from the profits so first add the deducted items and then transfer the net
profits to the P & L Appropriation a/c cr. Side.
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,00,000 before all adjustments.
Solution
Net profit = Rs.5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,00,000 after deducting interest on capital and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000 + 70,000 = 5,70,000
ACCOUNTANCY – XII
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,70,000
To partners commission
A 57,000
B 20,000
77,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,51,800
B 1,01,200
2,53,000
5,80,000 5,80,000
Case 3
Profit earned during the year was Rs.5,00,000 after deducting B’s commission and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000+20,000 = 5,20,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,20,000
To partners commission
A 52,000
B 20,000
72,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,24,800
B 83,200
2,08,000
5,30,000 5,30,000
Case 4
Profit earned during the year was Rs.5,00,000 after deducting partners salary & interest on capital and before
making any other adjustments.
Solution
Net profit = Rs.5,00,000 + 1,80,000 + 70,000=7,50,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 7,50,000
To partners commission
A 75,000
B 20,000
95,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 2,49,000
B 1,66,000
4,15,000
7,60,000 7,60,000
ACCOUNTANCY – XII
Cases for INTEREST ON PARTNERS LAON A/C
? Accounting treatment
P & L appropriation A/C cr. Side (less from net profit)
Or
P & l a/c dr. side
Journal entry
INTEREST ON PARTNERS LAON A/c Dr.
To Partners loan A/c’s
(For interest on partner loan a/c)
P & l a/c dr.
To INTEREST ON PARTNERS LAON A/c
(for transferring the interest on partners loan a/c)
POINTS TO BE KEPT IN MIND FOR INTEREST ON PARTNERS LAON A/C
? Always shown one side i.e. P & l a/c dr. side or P & L appropriation A/C cr. Side (less from net profit )
? If interest on partners loan is given then provide interest as per it and if no interest rate is given then interest
on partners loan a/c will be @ 6% p.a.
? It is be treated as charge
Presentation of interest on partner’s loan
Profit was Rs.5,10,000
And A had advanced a loan of Rs.1,00,000 @ 10% p.a. ( interest = Rs.10,000)
P & L A/C
Particulars Rs. Particulars Rs.
To interest on loan 10,000 By Profit 5,10,000
To Net Profit 5,00,000
5,10,000 5,10,000
Or
P & L appropriation A/C
Particulars Rs. Particulars Rs.
By net Profit 5,10,000
interest on loan 10,000
5,00,000
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,10,000 before all adjustments. And A had advanced a loan of
Rs.1,00,000 @ 10% p.a.
Solution
Net profit = Rs.5,10,000 – 10,000 =5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary 1,80,000 By net Profit 5,10,000 5,00,000
ACCOUNTANCY – XII
A 1,20,000
B 60,000
interest on loan 10,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,06,000 before all adjustments. And A had advanced a loan of
Rs.1,00,000
Solution
Net profit = Rs.5,10,000 – 6,000 = 5,00,000
As rate of interest is not given it will be charged @ 6% p.a.
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By net Profit 5,06,000
interest on loan 6,000
5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 3
Profit earned during the year ended on 31
st
march 2011was Rs.5,03,000 before all adjustments. And A had
advanced a loan of Rs.1,00,000 on 1
st
October 2010.
Solution
Net profit = Rs.5,03,000 – 3,000 = 5,00,000
As rate of interest is not given it will be charged @ 6% p.a for 6 months
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By net Profit 5,03,000
interest on loan 3,000
5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Page 5
ACCOUNTANCY – XII
Cases for profits
Accounting treatment
? P & L appropriation a/c cr. Side
Journal entry
Profit & Loss A/c Dr.
To Profit & Loss Appropriation A/c’s
POINTS TO BE KEPT IN MIND FOR PROFITS
? This profit should be after deducting all items of p & l a/c and especially 1. Interest on partners loan
2. Managers commission
And if any of the above item is not deducted from the profits so first deduct the above two items and then transfer
the net profits to the P & L Appropriation a/c cr. Side.
? This profit should be before deducting all items of p & l appropriation a/c and especially 1. Partners salary
2. Partners commission
3. Interest on capital
And if any of the above item is deducted from the profits so first add the deducted items and then transfer the net
profits to the P & L Appropriation a/c cr. Side.
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,00,000 before all adjustments.
Solution
Net profit = Rs.5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,00,000 after deducting interest on capital and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000 + 70,000 = 5,70,000
ACCOUNTANCY – XII
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,70,000
To partners commission
A 57,000
B 20,000
77,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,51,800
B 1,01,200
2,53,000
5,80,000 5,80,000
Case 3
Profit earned during the year was Rs.5,00,000 after deducting B’s commission and before making any other
adjustments.
Solution
Net profit = Rs.5,00,000+20,000 = 5,20,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 5,20,000
To partners commission
A 52,000
B 20,000
72,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,24,800
B 83,200
2,08,000
5,30,000 5,30,000
Case 4
Profit earned during the year was Rs.5,00,000 after deducting partners salary & interest on capital and before
making any other adjustments.
Solution
Net profit = Rs.5,00,000 + 1,80,000 + 70,000=7,50,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By NP or P & L a/c (transferred from P&L a/c) 7,50,000
To partners commission
A 75,000
B 20,000
95,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 2,49,000
B 1,66,000
4,15,000
7,60,000 7,60,000
ACCOUNTANCY – XII
Cases for INTEREST ON PARTNERS LAON A/C
? Accounting treatment
P & L appropriation A/C cr. Side (less from net profit)
Or
P & l a/c dr. side
Journal entry
INTEREST ON PARTNERS LAON A/c Dr.
To Partners loan A/c’s
(For interest on partner loan a/c)
P & l a/c dr.
To INTEREST ON PARTNERS LAON A/c
(for transferring the interest on partners loan a/c)
POINTS TO BE KEPT IN MIND FOR INTEREST ON PARTNERS LAON A/C
? Always shown one side i.e. P & l a/c dr. side or P & L appropriation A/C cr. Side (less from net profit )
? If interest on partners loan is given then provide interest as per it and if no interest rate is given then interest
on partners loan a/c will be @ 6% p.a.
? It is be treated as charge
Presentation of interest on partner’s loan
Profit was Rs.5,10,000
And A had advanced a loan of Rs.1,00,000 @ 10% p.a. ( interest = Rs.10,000)
P & L A/C
Particulars Rs. Particulars Rs.
To interest on loan 10,000 By Profit 5,10,000
To Net Profit 5,00,000
5,10,000 5,10,000
Or
P & L appropriation A/C
Particulars Rs. Particulars Rs.
By net Profit 5,10,000
interest on loan 10,000
5,00,000
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
Case 1
Profit earned during the year was Rs.5,10,000 before all adjustments. And A had advanced a loan of
Rs.1,00,000 @ 10% p.a.
Solution
Net profit = Rs.5,10,000 – 10,000 =5,00,000
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary 1,80,000 By net Profit 5,10,000 5,00,000
ACCOUNTANCY – XII
A 1,20,000
B 60,000
interest on loan 10,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 2
Profit earned during the year was Rs.5,06,000 before all adjustments. And A had advanced a loan of
Rs.1,00,000
Solution
Net profit = Rs.5,10,000 – 6,000 = 5,00,000
As rate of interest is not given it will be charged @ 6% p.a.
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By net Profit 5,06,000
interest on loan 6,000
5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Case 3
Profit earned during the year ended on 31
st
march 2011was Rs.5,03,000 before all adjustments. And A had
advanced a loan of Rs.1,00,000 on 1
st
October 2010.
Solution
Net profit = Rs.5,03,000 – 3,000 = 5,00,000
As rate of interest is not given it will be charged @ 6% p.a for 6 months
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By net Profit 5,03,000
interest on loan 3,000
5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
ACCOUNTANCY – XII
Case 4
Profit earned during the year ended on 31
st
march 2011 was Rs.5,10,000 before all adjustments. And A had
advanced a loan of Rs.2,00,000 @ 10% p.a on 1
st
October 2010
Solution
Net profit = Rs.5,10,000 – 10,000 =5,00,000
Interest is calculated for 6months @ 10%p.a.
P&L Appropriation A/c
Particulars Rs. Particulars Rs.
To salary
A 1,20,000
B 60,000
1,80,000 By net Profit 5,10,000
interest on loan 10,000
5,00,000
To partners commission
A 50,000
B 20,000
70,000 By Interest on Drawings
A 5,000
B 5,000
10,000
To interest on capital a/c
A 50,000
B 20,000
70,000
To divisible profits
A 1,14,000
B 76,000
1,90,000
5,10,000 5,10,000
Cases for manager’s commission
Accounting treatment
P & L appropriation A/C cr. Side (less from net profit )
Or
P & l a/c dr. side
Formula = managers commission (before charging) = profit X rate
100
Formula = managers commission (before charging) = profit X rate
100 + rate
POINTS TO BE KEPT IN MIND FOR manager’s commission
? First charge interest on partners loan
? Then charge managers commission on net profit but after deducting interest on partner’s loan.
Journal entry
Entry for manager commission :—
Profit & Loss Appropriation A/c Dr.
To Manager’s Commission A/c
Common kahani
A and B are partners in Modern Tours and Travels with capitals of Rs.5,00,000 and Rs.2,00,000 are sharing
profits in the ratio 3 :2 had decided upon the following adjustments.
? Interest on capital @ 10% p.a.
? Salary to a Rs.10,000 per month
? Salary to b Rs.5,000 per month
? Commission to A was 10% on net profits
? Commission to B Rs.20,000
? Interest on drawings Rs.5,000 each
Prepare profit and loss appropriation a/c for the following cases and find profit earned during the year.
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FAQs on Others Cases (Part -1) - Partnership Fundamentals - Crash Course of Accountancy - Class 12 - Commerce
| 1. What are the fundamentals of partnership in commerce? |  |
Ans. The fundamentals of partnership in commerce include mutual agreement, shared profits and losses, joint ownership and management, unlimited liability, and a legal relationship between partners.
| 2. How is partnership different from other types of business structures? | |
Ans. Partnership differs from other business structures like sole proprietorship and corporation as it involves two or more individuals sharing the responsibility, profits, and losses of the business. Unlike a sole proprietorship, a partnership has multiple owners, and unlike a corporation, partners have unlimited liability.
| 3. What are the advantages of a partnership in commerce? | |
Ans. Some advantages of a partnership in commerce include shared decision-making, combined resources and expertise, increased capital investment, and the ability to share risks and responsibilities. Partnerships also often benefit from tax advantages and reduced administrative burdens.
| 4. Are there any disadvantages of forming a partnership in commerce? | |
Ans. Yes, there are some disadvantages of forming a partnership in commerce. These may include conflicts between partners, shared liability for debts and obligations, potential for disagreements over decision-making, and the possibility of the partnership dissolving if one partner decides to leave.
| 5. How can a partnership be dissolved in commerce? | |
Ans. A partnership in commerce can be dissolved through various means, such as mutual agreement between partners, expiration of a partnership term, completion of the partnership's objectives, bankruptcy of the partnership, or the death or withdrawal of a partner. Dissolution usually involves settling the partnership's debts and distributing remaining assets among the partners.
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