a and b are the partner a is capital is 100000 and b is capital 60000 interest on capital is payable 6% per annum b is not getting sale of 3000 per month net profit for the year is 80000 prepare profit and loss appropriation account
The profit and loss appropriation account are important for firms/partnership firms as it shows the allocation of profit among the partners or partner’s capital. This is not a Profit and loss account but is to be seen as an extension of it as it is prepared after preparing the P/L account.
So, its debit items include:
Loss from p/l account (if any)
Transfer of profits to reserves
Interest on capital
Salary paid to partners
Commission to partners
The credit side includes:
Profit from P/L account.
Drawing by partners and interest on it.
Money withdrawn from reserves.
The performance of your P/L appropriation account would be:
You can make corrections/adjustments for any other information as per the below details.
Particulars
Amount
Date
Particulars
Amount
To Interest On Capital A/c:
By Profit And Loss A/c (Profit transferred from P&L A/c)
80,000
A’s Capital
6,000
B’s Capital
3,600
To B’s salary a/c
36,000
To Profit transferred
34,400
(Transfer to accounts of partners in their respective ratio, as decided)
The performance of your P/L appropriation account would be:
You can make corrections/adjustments for any other information as per the below details.