Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of Rs. 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2016 and March 31, 2017 were Rs. 40,000 and Rs. 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.

Answer

For the year 2016, Profits transferred to Amann’s Capital, Rs.16,000; Babita’s Capital Rs.14,000; Suresh’s capital Rs.10,000 and for the year 2017, Profit transferred to Amann’s Capital Rs.24,000, Babita’s Capital Rs.24,000, Suresh’s capital, Rs.12,000