Q. ILLUSTRATION 17.
A and B are partners sharing profit and losses in the ratio of 2 : 1. A is a non - working partner and has contributed Rs.12,00,000 as his capital. B is a working partner. The partnership deed provides for interest on capital @10% p.a. and salary of Rs. 7,500 per month to the working partner. The net profit for the year ended 31st March, 2016 before providing for interest on capital and salary amounted to Rs.70, 000. You are required to show the distribution of profit.
Dear Student,
A is to get an interest of 1,20,000
B is to get a salary of 90,000
Total Amount Payable = 2,10,000 (1,20,000 + 90,000)
Profits Available for Distribution = 70,000
Total Amount Payable > Profits Available for Distribution
Since, nothing is mentioned, therefore interest on capital and salary will be treated as 'appropriation of profits'.
A will get 40,000
B will get 30,000
A is to get an interest of 1,20,000
B is to get a salary of 90,000
Total Amount Payable = 2,10,000 (1,20,000 + 90,000)
Profits Available for Distribution = 70,000
Total Amount Payable > Profits Available for Distribution
Since, nothing is mentioned, therefore interest on capital and salary will be treated as 'appropriation of profits'.
A will get 40,000
B will get 30,000