86 :- A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They admit C, their manager, as a partner with effect from 1st April 2024, for 1/4th share of profits.
C, while a Manager, was in receipt of a salary of Rs 27,000 p.a. and a commission of 10% of net profit after charging such salary and commission.
In terms of the Partnership deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the manager, will be borne by A, Profit for the year ended 31st March, 2025 amounted to Rs 2,25,000.
Prepare profit and loss appropriation account for the year ended 31st March, 2025
Solution:-
WORKING NOTES :-
Calculation of C’s share as a manager
C’s salary as a manager 27,000
C’s commission as a manager 18,000
(2,25,000 – 27,000) x 10/110
C’s share as a manager 45,000
Remaining profit would be distributed among A and B in their profit sharing ratio 3:2
Remaining profit = 2,25,000 – 45,000 = Rs 1,80,000
A’s share = 1,80,000 x 3/5 = Rs 1,08,000
B’s share = 1,80,000 x 2/5 = Rs 72,000
Calculation of C’s share as a partner
Profit for the year = Rs 2,25,000
C’s share in profit = 2,25,000 x 1/4
= Rs 56,250
Deficiency in C’s share of profit borne by A
(56,250 – 45,000) = Rs 11,250
A’s share in profit after adjusting C’s deficiency
Rs 1,08,000 – 11,250 = Rs 96,750