question_answer

Following is the balance sheet of Chiku. Piku and Riku as on 1st April, 2016. Balance Sheet As at 1st April, 2016

Liabilities		Amt (Rs.)	Assets	Amt (Rs.)
Reserve and Surplus		39,000	Land and Building	50,000
Contingency Reserve		10,000	Plant and Machinery	40,000
Creditors		11,000	Furniture and Fixtures	20,000
Capital A/cs			Stock	30,000
Chiku	60,000		Debtors	40,000
Piku	50,000		Bank	20,000
Riku	40,000	1,50,000	Profit and Loss	10,000
		2,10,000		2,10,000

The partnership deed provides for the following: (i) Profits and losses are to be shared in the ratio of 2 : 2 : 1 respectively. (ii) Partners are entitled to interest on capital, which will be allocated in the ratio of their capital investments. (iii) Partners are also entitled to salaries, which will be allocated in the ratio of time they devoted to firm's business. For the year ended 31st March, 2017, the firm earned a profit of Rs. 75,000. Yon are required to prepare the profit and loss appropriation account for the year ended 31st March, 2017, after taking into account the following information: (i) The contingency in respect of which the reserve was built-up would not materialize hence, is to be written back. (ii) Chiku devotes three-fourth time; Piku half time and Riku one-fourth time. (iii) The debit balance of profit and loss account is to be adjusted against current year?s income. (iv) The following amounts will be distributed to the partners: Rs. 18,000 as interest on capital. Rs. 36,000 as partners' salaries. Rs. 30,000 as share of profits. The deficiency, if any, is to be adjusted from reserve.

Answer:

                                                Profit and Loss Appropriation Account Dr                                             for the year ended 31st March, 2017                                                         Cr

Particulars		Amt (Rs.)	Particulars	Amt (Rs.)
To Profit and Loss A/c		10,000	By Net Profit as per Profit and Loss A/c	75,000
To Interest on Capital A/c			By Contingency Reserve	10,000
C	7,200		By Reserve (Balancing figure)	9,000
R	6,000
P	4,800	18,000
To Salaries
C	18,000
R	12,000
P	6,000	36,000
To Profit Transferred to
C's Capital A/c	12,000
R's Capital A/c	12,000
P'S Capital A/c	6,000	30,000
		94,000		94,000