The Partnership agreement between Maneesh and Girish provides that:
(A) Profits will be shared equally
(B) Maneesh will be allowed a salary of Rs 400 pm
(C) Girish who manages the sales department will be allowed a commission of 10% of the net profits after deducting Maneesh's salary
(D) 7% p.a. interest will be allowed on Partner's fixed capital
(E) 5% p.a. interest will be charged on partner's annual drawings
(F) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs. 80,000 respectively. Their annual drawings were Rs. 16,000 and Rs 14,000 respectively. The net profit for the year ended March 31, 2018 amounted to Rs. 40,000
Calculate the profit allocated to each partner after all adjustments.
The Partnership agreement between Maneesh and Girish provides that:
(A) Profits will be shared equally
(B) Maneesh will be allowed a salary of Rs 400 pm
(C) Girish who manages the sales department will be allowed a commission of 10% of the net profits after deducting Maneesh's salary
(D) 7% p.a. interest will be allowed on Partner's fixed capital
(E) 5% p.a. interest will be charged on partner's annual drawings
(F) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs. 80,000 respectively. Their annual drawings were Rs. 16,000 and Rs 14,000 respectively. The net profit for the year ended March 31, 2018 amounted to Rs. 40,000
Calculate the profit allocated to each partner after all adjustments.
Solution
Correct answer: Rs 10,290 to each partner
Working
Interest on capital at 7%:
- Maneesh: 1,00,000 × 7% = Rs 7,000
- Girish: 80,000 × 7% = Rs 5,600
Interest on drawings at 5%, charged for the full year (the question calls these "annual drawings" and gives no dates):
- Maneesh: 16,000 × 5% = Rs 800
- Girish: 14,000 × 5% = Rs 700
Maneesh's salary: 400 × 12 = Rs 4,800
Girish's commission: 10% × (40,000 − 4,800) = Rs 3,520
Profit and Loss Appropriation A/c
| Particulars | Rs | Particulars | Rs |
|---|---|---|---|
| Maneesh's salary | 4,800 | Net profit | 40,000 |
| Girish's commission | 3,520 | Interest on drawings: Maneesh | 800 |
| Interest on capital: Maneesh | 7,000 | Interest on drawings: Girish | 700 |
| Interest on capital: Girish | 5,600 | ||
| Profit transferred to Maneesh (equal share) | 10,290 | ||
| Profit transferred to Girish (equal share) | 10,290 | ||
| Total | 41,500 | Total | 41,500 |
Remaining profit = 41,500 − 4,800 − 3,520 − 7,000 − 5,600 = Rs 20,580, which is shared equally, giving Rs 10,290 each.
If interest on drawings were charged for an average of 6 months, the share would be Rs 9,915 each, which is not among the options. So the full-year basis is what the question intends.
This is what NTA has marked right for reference.
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