Akbar and Bali are partners in a firm sharing profits and losses equally. On 1st April, 2023 the balance of their Capital Accounts were : Akbar -…
CA Foundation · Accounting · RTP · January 2025
Akbar and Bali are partners in a firm sharing profits and losses equally. On 1st April, 2023 the balance of their Capital Accounts were : Akbar - 50,000 and Bali - 40,000. On that date the balances of their Current Accounts were: Akbar - 10,000 (credit) and Bali - 3,000 (debit). Interest @5% p.a. is to be allowed on the balance of Capital Accounts as on 1.4.2023. Bali is to get annual salary of 3,000 which had not been withdrawn. Drawings of Akbar and Bali during the year were - 1,000 and - 2,000 respectively. The profit for the year ended 31st March, 2024 before charging interest on capital but after charging Bali salary was - 70,000. It is decided to transfer10% of divisible profit to a Reserve Account. Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2024 and show Capital and Current Accounts of the Partners for the year.
Suggested Answer and Working Notes:
Profit and Loss Appropriation Account for the year ended 31st March, 2024 Particulars ₹ ₹ To Salary - Bali 3,000 By Net profit 73,000 To Interest on Capitals: Akbar 2,500 Bali 2,000 4,500 To Reserve (10% of65,500) 6,550 To Partners’ current accounts: Akbar 29,475 Bali 29,475 58,950 73,000 73,000 Partners’ Capital Account Date Akbar Bali Date Akbar Bali 31.03.24 To Balance c/d 50,000 40,000 01.04.23 By Balance b/d 50,000 40,000 50,000 40,000 50,000 40,000 Partners’ Current Account Date Akbar Bali Date Akbar Bali 01.04.23 To Balance b/d - 3,000 01.04.23 By Balance b/d 10,000 31.03.24 To Drawings A/c 1,000 2,000 31.03.24 By Interest on Capital 2,500 2,000 31.03.24 To Balance c/d 40,975 29,475 31.03.24 By Salary 3,000 31.03.24 By Profit and Loss App A/c 29,475 29,475 41,975 34,475 41,975 34,475 Note: Profit before charging interest on Capital and Salary to Bali = 70,000+3,000 = 73,000
Topics: Introduction to Partnership Accounts
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