7 Wi 8 Es AVatv NFK 0 LF QHa

Profit & Loss Appropriation Account
1 Mark Question
1. The firm XYZ earned a profit of Rs. 2,75,000 during the year ending on 31st
March, 2009. 10% of this profit was to be transferred to general reserve. Pass
necessary journal entry for the same. (Delhi 2010c)
4 Mark Questions
2. Singh and Gupta decided to start a partnership firm to manufacture low cost
jute bags as plastic bags were creating many environmental problems. They
contributed capitals of Rs. 1,00,000 and Rs. 50,000 on 1st April, 2012 for this.
Singh expressed his willingness to admit Shakti as a partner without capital, who
is specially abled but a very creative and intelligent friend of his. Gupta agreed to
this. The terms of partnership were as follows
(i) Singh, Gupta and Shakti will share profits in the ratio of 2 : 2 : 1.
(ii) Interest on capital will be provided @ 6% per annum.
Due to shortage of capital, Singh contributed Rs. 25,000 on 30th September, 2012
and Gupta contributed Rs. 10,000 on 1st January, 2013 as additional capital. The
profit of the firm for the year ended 31st March, 2013 was Rs. 1,68,900.
(i) Prepare profit and loss appropriation account for the year ending 31st March,
2013.
(ii) Identify any two values which the firm wants to communicate to the society.
(All India 2014)
3. Lalan and Balan were partners in a firm sharing profits in the ratio of 3: 2. Their
fixed capitals on 1st April, 2010 were Lalan Rs. 1, 00,000 and Balan Rs. 2,00,000.
They agreed to allow interest on capital @ 12% per annum and charge on
drawings @ 15% per annum. The firm earned a profit, before all above
adjustments, of Rs. 30,000 for the year ended 31st March, 2011.
The drawings of Lalan and Balan during the year were Rs. 3,000 and Rs. 5,000
respectively. Showing your calculation clearly, prepare profit and loss
appropriation account of Lalan and Balan. The interest on capital will be allowed
even if the firm incurs loss. (All India 2012)
4. A and B entered into partnership on 1st April, 2009 without any partnership
deed. They introduced capital of Rs. 5,00,000 and Rs. 3,00,000 respectively. On
31st October, 2009, A advanced Rs. 2,00,000 by way of loan to the firm without
any agreement as to interest.
The profit and loss accounts for the year ended 31st March, 2010 showed a profit
of Rs. 4,30,000, but the partners could not agree upon the amount of interest on
loan to be charged and the basis of division of profits.
Pass a journal entry for the distribution of the profit between the partners and
prepare the capital accounts of both the partners and loan account of ‘A’. (All
India 2011)
5. G, H and R were partners in a firm sharing profits in the ratio of 7: 4: 9. Their
fixed capitals were G Rs. 2,00,000, H Rs. 75,000 and R Rs. 3,50,000. Their
partnership deed provided for the following
(i) Interest on capital @ 9% per annum.

(ii) Salary of Rs. 6,000 per month to H.
(iii) Interest on drawings @ 6% per annum.
During the year ended 31st December, 2009 the firm earned a profit of
Rs. 1,70,000. Interest on G’s drawings was Rs. 750, on H’s drawings Rs. 450 and
on R’s drawings Rs. 1,250.
Prepare profit and loss appropriation account for the year ended 31st December,
2009. (Delhi 2010C)
Working Mote
(i) As capitals are fixed, therefore interest, salary and share of profits will be
transferred to partners’ current accounts.
(ii) When interest on drawings is given, then there is no need to calculate it.
(iii) Interest on capital
6. L, M and N were partners in firm sharing profits in the ratio of 3 : 4 : 5. Their
fixed capitals were L Rs.4,00,000, M Rs. 5,00,000 and N Rs. 6,00,000 respectively.
The partnership deed provided for the following
(i) Interest on capital @ 6% per annum.

(ii) Salary of Rs. 30,000 per annum to N.
(iii) Interest on partner’s drawings will be charged @ 12% per annum.
During the year ended 31st March, 2008 the firm earned a profit of Rs. 2,70,000. L
withdrew Rs. 10,000 on 1st April, 2008, M withdrew Rs. 12,000 on 31st September,
2008 and N withdrew Rs. 15,000 on 31st December, 2008.
Prepare profit and loss appropriation account for the year ended 31st March, 2009
7. A, B and C were partners in a firm having capitals of Rs. 60,000, Rs. 60,000
and? 80,000 respectively. Their current account balances were A Rs.10,000, B Rs.
5,000 and C Rs. 2,000 (Dr).
According to the partnership deed, the partners were entitled to interest on

capital @ 5% per annum C being the working partner was also entitled to a salary
of Rs 6,000 per annum. The profits were to be divided as follows
(i) The first Rs. 20,000 in proportion to their capitals.

(ii) Next Rs. 30,000 in the ratio of 5: 3: 2.
(iii) Remaining profits to be shared equally.
The firm made a profit of Rs. 1,56,000 before charging any of the above items.
Prepare the profit and loss appropriation account and pass necessary journal
entry for appropriation of profit. (All India 2009; Foreign 2009; Delhi
2009,2008)
8. A and B were partners in a firm sharing profits and losses in the ratio of their
capitals which were Rs. 5,00,000 and Rs. 4,00,000 respectively. The partnership
agreement provided a salary of Rs. 20,000 per annum to B and 10% per annum
interest on partner’s capitals.
The profit of the firm for the year ended 31st March, 2008 was Rs. 1,46,000.
Prepare profit and loss appropriation account of A and B for the year ended 31st
March, 2008. (Delhi 2009c)
9. Sharma and Verma were partners in a firm sharing profits in the ratio of 4: 1.
Their capitals on 1st April, 2006 were Sharma Rs. 5,00,000 and Verma
Rs. 1,00,000. The partnership deed provided that Sharma will get a commission
of 10% on the net profit after allowing a salary of Rs. 5,000 per month to Verma.
The profits of the firm for the year ended 31st March, 2007 was Rs. 2,80,000.
Prepare profit and loss appropriation account of Sharma and Verma for the year
ended 31st March, 2007.

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7 Wi 8 Es AVatv NFK 0 LF QHa

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Profit & Loss Appropriation Account

(i) Interest on capital @ 9% per annum.

(i) Interest on capital @ 6% per annum.

According to the partnership deed, the partners were entitled to interest on

(i) The first Rs. 20,000 in proportion to their capitals.

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