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Active blunt end circle started a …

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Active blunt end circle started a business on 1st April 2017 with capital of 450000 6 lakh and 350000 according to partnership agreement: (1) profit earned in any year will be distributed as under: Up to 270000-equally Excess over 270000-one-half to active,one sixth to blunt and one third to circle (2)provide interest on capital and drawing @6%p.a. (3)circle is entitled to get a monthly salary of 4000 and Bullet is entitled to get a monthly salary of 6000 in addition to above circle and blunt are entitled to get a commission of 5% each on net of profit after taking into consideration the interest and all commissions Drawing of partners during the year were: Active withdrew regularly 5000 at the beginning of every month Blunt withdrew regularly 7000 at end of every month Circle withdrew 80000 during the year Profit for the year 593120 prepare partners current account
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Sia ? 2 years, 5 months ago

Books of Active, Blunt and Circle
Profit & loss Appropriation A/c
(for the year ended 31st March, 2018)

Dr.       Cr.
Particulars   Particulars
To Interest on Capital:     By Profit & Loss A/c
(Net Profit for the year)
5,93,120
Active 27,000   By Interest on Drawings:  
Blunt 36,000   Active {tex}60,000 \times \frac{6}{100} \times \frac{6.5}{12}{/tex} = 1,950  
Circle 21,000 84,000 Blunt {tex}84,000 \times \frac{6}{100} \times \frac{5.5}{12}{/tex} = 2,310  
To Salary:     Circle {tex}80,000 \times \frac{6}{100} \times \frac{6}{12}{/tex} = 2,400 6,660
Blunt 72,000      
Circle 48,000 1,20,000    
To Commission (Note 1)        
Blunt 17,990      
Circle 17,990 35,980    
To Profit Transferred to: (Note 2)        
Active's Current A/c 1,34,900      
Blunt's Current A/c 1,04,967      
Circle's Current A/c 1,19,933 3,59,800    
    5,99,780   5,99,780

PARTNER'S CURRENT ACCOUNTS 

Dr.             Cr.
Particulars Active Blunt Circle Particulars Active Blunt Circle
To Drawings 60,000 84,000 80,000 By Interest on Capital 27,000 36,000 21,000
To Interest on Drawings 1,950 2,310 2,400 By Salary   72,000 48,000
To Balance c/d 99,950 1,44,647 1,24,523 By Commission   17,990 17,990
        By Profit & Loss App. A/c 1,34,900 1,04,967 1,19,933
  1,61,900 2,30,957 2,06,923   1,61,900 2,30,957 2,06,923

Working Note:

  1. Balance of Profit = ₹5,93,120 + 6,660 - 84,000 - 1,20,000 = ₹3,95,780
    Commission to Blunt and Circle is 5% to each partner after charging such commission.
    Hence, the commission will be {tex}\frac{5}{110}{/tex} to each partner.
    Commission to Blunt = {tex}3,95,780 \times \frac{5}{110}{/tex} = ₹17,990
    Commission to Circle = {tex}3,95,780 \times \frac{5}{110}{/tex} = ₹17,990
  2. Divisible Profit: ₹3,95,780 - 17,990 - 17,990 = ₹3,59,800
      Active
    Blunt
    Circle
    Up to ₹2,70,000 Equally 90,000 90,000 90,000
    ₹3,59,800 - ₹2,70,000 = ₹89,800 in {tex}\frac{1}{2}: \frac{1}{6}: \frac{1}{3}{/tex}  44,900 14,967 29,933
      1,34,900 1,04,967 1,19,933

For calculation of interest on drawings, the period would be taken as six months, which is the average period assuming, that amount is withdrawn evenly in the middle of the month, throughout the year.

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