question_answer

After completing MBBS, Chahat suggested to her classmate Kamakshi to form a partnership to run a hospital in the locality inhabited by low income group. After a long thought, she agreed to her proposal. Since, they did not have sufficient resources for implementing the proposal, they persuaded a rich friend Raunak who contributed the required capital. All of them formed a partnership on the following terms:

(i) Chahat, Kamakshi and Raunak will contribute Rs. 1,50,000; Rs. 2,50,000 and Rs. 5 00 000 respectively.

(ii) Interest on capital @ 6% p.a. will be allowed.

The profits of the firm for the year ended 31st March, 2017 were Rs. 4,50,000. Prepare profit and loss appropriation account of the firm for the year ending 31st March, 2016. Identify the values which according to you motivated them to form the Partnership.

Answer:

Dr                                                         Profit and Loss Appropriation Account                                   Cr

Particulars		Amt (Rs.)	Particulars	Amt (Rs.)
To Interest on Capital A/cs			By Net Profit as per Profit and Loss A/c	4,50,000
Chahat	9,000
Kamakshi	15,000
Raunak	30,000	54,000
To Profit Transferred to
Chahat's Capital A/c	1,32,000
Kamakshi's Capital A/c	1,32,000
Raunak's Capital A/c	1,32,000	3,96,000
		4,50,000		4,50,000

Working Note Calculation of Interest on Capital Chahat \[=1,50,000\times \frac{6}{100}=Rs.\,9,000\] Kamakshi \[=2,50,000\times \frac{6}{100}=Rs.\,15,000\] Raunak \[=5,00,000\times \frac{6}{100}=Rs.\,30,000\] Values which motivated Chahat, Kamakshi and Raunak to form partnership are: (i) Sensitivity towards people belonging to low income groups. (ii) Team effort-working as a team for a good cause.