Vinod and Mohan are partners. Vinod 's Capital is Rs. 1,00,000 and Mohan 's Capital is Rs. 60,000. Interest on capital is payable @6% p.a. Mohan is entitled to a salary of Rs. 3,000 per month. Profit for the current year before interest and salary to Mohan is Rs. 80,000.Prepare Profit and Loss Appropriation Account.

Vinod and Mohan are partners. Vinod ‘s Capital is Rs. 1,00,000 and Mohan ‘s Capital is Rs. 60,000. Interest on capital is payable @6% p.a. Mohan is entitled to a salary of Rs. 3,000 per month. Profit for the current year before interest and salary to Mohan is Rs. 80,000.Prepare Profit and Loss Appropriation Account.

SOLUTION

Working Notes:

WN1
Calculation of Interest on Capital

Interest on Vinod’s loan = 1,00,000 × 6 / 100 × 6 / 12 = 6,000
Interest on Mohan’s loan = 60,000 × 6 / 100 × 6 / 12 = 3,600

WN 2
Calculation of Profit Share of each Partner

Divisible Profit = 80,000 – 9,600 – 36,000 = 34,400
Profit share of Vinod and Mohan = 34,400 × 1 / 2 = 17,200