Question 16 :- X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of Rs 8,00,000 and Rs 6,00,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of Rs 60,000 which has not been withdrawn. Profit for the year ended 31st March 2025 before interest on capital but after charging Y’s salary was Rs 2,40,000. A provision of 5% of the net profit is to be made in respect of commission to the manager.
Prepare profit and loss appropriation account showing allocation of profits.
Solution :-
WORKING NOTES :-
(i) Calculation of net profit (in Rs)
Profit after charging Y’s salary 2,40,000
Add : Y’s salary 60,000
Less : Manager’s commission (3,00,000 x 5/100) 15,000
NET PROFIT 2,85,000