On 1st April 2013, Brij and Nandan entered into partnership to construct toilets in government girls schools is the remote areas of Uttarakhand. They contributed capital of Rs 10,00,000 and Rs 15,00,000 respectively.
Their profit-sharing ratio was 2:3 and interest allowed on capital as provided in the Partnership Deed was 12% per annum. During the year ended 31st March, 2014, the firm erned a profit of Rs 2,00,000.
Prepare Porfit and Loss Appropriation Account of Brij and Nandan for the year ended 31st March, 2014.

Class 12 Accounts in Class 12 3 years ago

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+10 pts

Solution :
1. `{:("Working Notes:",Rs),("Interest on Brij's Capital" (Rs "10,00,000"xx12//100),"12,20,00"),("Interest on Nandan's Capital"("Rs15,00,000"xx12//100),"1,180,000"),("Total Interest", UNDERLINE underline OVERLINE "3.00,000"):}`
2. Totol Interest due to Brij and Nandan is Rs 3,00,000. However, total distributable profit is just Rs 2,00,000. So total profit of Rs 2,00,000 will be distributed between Brij and Nandan in the ratio of their due interest on CAPITALS, i.e., Rs 1,20,000: Rs 1,80,000 of `2:3` Thus,
Interest ALLOWED to Brij = Rs 2,00,00 `xx` 2/5 = Rs 80,000, and
Interest allowed to Nandan = Rs 2,00,000 `xx` 3/5 = Rs 1,20,000.