DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : N. Sai Ram
Designation : Head of CCP
Institute : Govt. Poly. For women,
Kakinada
Semester : IV Semester
Subject : Accountancy—III
Sub-Code : CCP-402
Topic : Partnership
Duration : 50 minutes
Sub Topic : Profit and loss appropriation
account
Teaching Aids : PPT, animation

CCP402.37 1
Objective
On completion of this period you would be
able to:

 Prepare Profit And Loss Appropriation Account

 Calculation of interest on capital and drawings

CCP402.37 2
Recap

In the previous class we have already learned

 Method of calculation of Good Will
 Capitalisation Method
 Premium Method
 Hidden Good will Method

CCP402.37 3
Illustration 1

 A&B are partners with Capital of Rs.30,000 &

20,000
 profit for the year ended 31.3.2008 is Rs 27,100
 It is agreed to allow 5% Interest on Capital
 There is no agreement on profit sharing & salary

CCP402.37 4
 Contd..

 ‘A’ is active partner while ‘B’ is inactive

 ‘A’ claims Rs.400- as salary p.m & 60% of profits
 ‘B’ advanced loan of Rs. 10,000 and claims 10%
Interest on loan
 show distribution of profit

CCP402.37 5
Profit and Loss Appropriation
Particulars AMT Particulars AMT
(Rs.) (Rs.)
To interest on By Net profit 27,100
capital
A 30,000X5/100 1500
B 20,000X5/100 1000
To interest on loan 600
To capital A/c
A 12000
B 12000
Total 27,100 Total 27,100
CCP402.37 6
Note:- In the absence of an agreement
 No salary is allowed
 Profits are shared equally
 Interest of 6% is allowed on Loan provided by the
partner

CCP402.37 7
Illustration 2
 X and Y share profits as 3:2
 Their capitals are 30,000 & 50,000
 salary was drawn by x & y Rs.6,000 & Rs.3,000/-
respectively
 5% Interest is payable on capitals
 profit for the year was Rs. 31,000
 X & Y withdraw Rs. 2000 & 13,500 respectively
 Show P& L appropriation a/c & Capital a/c

CCP402.37 8
Profit and Loss Appropriation A/c
Dr Cr
Particulars AMT (Rs.) Particulars AMT (Rs.)
To interest By Net profit 31,000
on capital
X 1,500
Y 2,500
Salary to X 6,000
Salary to Y 3,000
To profit 10,800
X
Y 7,200
Total 31,000 Total 31,000
CCP402.37 9
 X’s Capital A/c
Dr Cr
Particulars AMT (Rs.) Particulars AMT (Rs.)
To drawings 2,000 By balance 30,000
b/d
By interest 1,500
on capital
By salary 6,000
By Profit 10,800
To balance c/d 4,600
Total 48,300 Total 48,,300
CCP402.37 10
 Y Capital A/c

Dr Cr
Particulars AMT (Rs.) Particulars AMT (Rs.)
To drawings 13,500 By balance 50,000
b/d
By interest 2,500
on capital
By salary 3,000
By Profit 7,200
To balance c/d 49,200
Total 62,700 Total 62,700

CCP402.37 11
Summary:

In this session we have learned about:

 Preparation of profit and loss appropriation A/c
 Calculation of interest on capital and drawings

CCP402.37 12
Assignment
 A, B and C are partners sharing profits and losses
equally. Their capitals as on 1.1.96 were Rs.10,000,
Rs,20,000 and Rs.30,000 respectively.
 Interest is allowed at 5% on capital but not on Drawings.
 Their Drawings amounted to Rs.1,800, Rs.2,400 and
Rs.2,000 respectively.
 A and B to receive monthly salary of Rs.200 each.
 P&L a/c showed a Net Profit of Rs.21,000 before the
adjustments were made.
 Show the Capital and Drawings accounts.
CCP402.37 13