Problem # 1:
Haris and Usama started business in partnership on 1st January, 2019 without any agreement. Mr. Haris introduced capital Rs. 60,000 and Mr. Usama Rs. 40,000. On March 1st, 2019 Mr. Usama advanced Rs. 20,000 by way of loan to the firm. The profit for the year ended 31st, December 2019, was amounted to Rs, 18,000.
Required: Prepare Profit and Loss Appropriation Account at the end of 2019.
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Problem # 2:
Basit and Laiba are partners in a firm sharing profit in the ratio of 3:2. They had advanced to the firm a sum of Rs. 50,000 as a loan in their profit-sharing ratio on 1st, July 2019. The partnership deed is silent on interest on loan from partners. Profit for current year was Rs. 85,000.
Required: Prepare Profit and Loss Appropriation Account at the end of March 31st, 2020.
Amount of loan contributed by each of partners:
Basit = 50,000 * 3/5 = Rs. 30,000
Laiba = 50,000 * 2/5 = Rs. 20,000
Interest on loan for each of partners:
Basit = 30,000 * 6% * 9/12 = Rs. 1,350
Laiba = 20,000 * 6% * 9/12 = Rs. 900
Problem # 3:
Sohail and Maham are partners in a firm sharing profit in the ratio of 5:3. The partnership agreement provided that Sohail was to be paid salary of Rs. 1,500 per month and Maham was to get a commission of Rs. 12,000 per year. Interest on capital was to be allowed @ 4% p.a. and interest on drawings was to be charged @ 5% p.a. Interest on Sohail’s drawings was Rs. 1,800 and Maham’s drawings was Rs. 1,200. Capital of Sohail was Rs. 140,000 and Maham Rs. 100,000. The firm earned a profit Rs. 75,000 for the year ended December 31st, 2019.
Required: Prepare Profit and Loss Appropriation Account of the firm.
Practice Partnership MCQs
Problem # 4:
Huda and Anum are partners sharing profit and losses in the ratio of 3:2. On 1st April, 2019 their capitals were: Huda was 80,000 and Anum Rs. 40,000. Prepare Profit and Loss Appropriation Account and the Partner’s Capital Accounts at the end of April 30th, 2020, after considering the following items:
(a) Interest on Capital is to be allowed Rs. 5% per annum.
(b) Interest on the loan advance by Huda of Rs. 6,000 and Anum Rs. 4,500.
(c) Interest on partner’s drawings @ 6% p.a. Drawing: Huda Rs. 20,000 and Anum Rs. 15,000.
(d) Rs. 7,100 is to be transferred to Reserve Account.
The net profit for the end of year April 30th, 2020 was Rs. 46,500.
Problem # 5:
Ayesha and Zunaira are partners in a firm. Ayesha is entitled to a salary of Rs. 10,000 per month and commission of 10% of the net profit after partners’ salaries but before charging commission. Zunaira is entitled to a salary of Rs. 25,000 p.a. and commission of 10% of the net profit after charging Ayesha’s commission and partners’ salaries. Net profit before providing for partners’ salaries and commission for the year ended 31st, March, 2020 was Rs. 420,000.
Requirement: You are required to prepare profit and loss appropriation account.
Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.
Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.
Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.