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Since appropriations are more than available profit, profit will be credited to the respective capital accounts on the basis of earnings ratio. Transfer to reserve will be avoided as there is no net profit left.
Since appropriations are more than available profit, profit will be credited to the respective capital accounts on the basis of earnings ratio. Transfer to reserve will be avoided as there is no net profit left.
Kabir Zorawar Parul
Salary - 24,000 24,000
Commission - 1,00,000
Interest on
Capital - 26,000 16,000 10,000
Capital - 26,000 16,000 10,000
Total - 50,000 40,000 1,10,000
Earnings Ratio will be 50,000 : 40,000 : 1,10,000 = 5: 4 : 11
Total profit available for appropriation will be 1,55,500 + Interest on Drawings
Interest on Drawings = 60,000 * 5/100 * 6/12 = 1,500 each
Total profit available for appropriation will be 1,60,000 which will be distributed in the ratio 5 : 4 : 11
Profit credited to Kabir's Capital A/c will be 40,000, profit credited to Zorawar's Capital A/c will be 32,000 and profit credited to Parul's Capital A/c will be 88,000.
Regards
Regards