Question

Abhay and Sujoy entered into partnership on 1st April, 2024 with capitals of \u20b9 80,00,000 and \u20b9 60,00,000 respectively. The partners decided to share profits in the ratio of their capital contribution. They withdrew \u20b9 6,00,000 and \u20b9 4,00,000 respectively during the year. The partners were charged interest on drawings @ 10% per annum as per the provisions of the partnership deed. Abhay\u2019s share of profit was guaranteed by Sujoy at a minimum of \u20b9 3,50,000 per annum. The profit of the firm for the year ended 31st March, 2024 amounted to \u20b9 6,50,000. Prepare Profit and Loss Appropriation Account of the firm for the year ended 31st March, 2024.

Hint:

Always check guarantee clauses after computing actual profit share and adjust only if actual share falls short of guaranteed amount.

Answer 1

Step 1: Interest on Drawings

Abhay: 10% of ₹6,00,000 = ₹60,000

Sujoy: 10% of ₹4,00,000 = ₹40,000

Step 2: Profit Available for Distribution

Net Profit = ₹6,50,000 + ₹60,000 + ₹40,000 = ₹7,50,000 (after charging drawings interest)

Step 3: Profit Sharing Ratio

Abhay : Sujoy = ₹80,00,000 : ₹60,00,000 = 4 : 3

Abhay's share = (4/7) × ₹7,50,000 = ₹4,28,571 (approx)

Sujoy's share = (3/7) × ₹7,50,000 = ₹3,21,429

Step 4: Check Guarantee Clause

Abhay's actual share (₹4,28,571) is more than the guaranteed amount (₹3,50,000), so no adjustment needed.

Profit and Loss Appropriation Account

Particulars	Amount (₹)	Particulars	Amount (₹)
To Abhay's Capital A/c	4,28,571	By Net Profit	6,50,000
To Sujoy's Capital A/c	3,21,429	By Interest on Drawings:	Abhay – 60,000
			Sujoy – 40,000
Total			7,50,000
Total		7,50,000

 

Final Answer: Abhay gets ₹4,28,571, Sujoy gets ₹3,21,429; no guarantee adjustment needed.