Partnership

Amit, Babu and Charu set up a partnership firm on April 1, 2022. They contributed ₹50,000, ₹40,000 and ₹30,000, respectively as their capitals and agreed to share profits and losses in the ratio of 2 : 2 : 1. Amit is to be paid a salary of ₹1,000 per month and Babu, a commission of ₹5,000. It is also provided that interest to be allowed on capital at 6% p.a. The drawings for the year were Amit ₹6,000, Babu ₹4,000 and Charu ₹2,000. Interest on drawings of ₹300 was charged on Amit's drawings, ₹200 on Babu's drawings and ₹100, on Charu's drawings. The net profit as per Profit and Loss Account for the year ending March 31, 2023 was ₹55,000 before charging manager's commission. Manager was allowed commission @ 10% on net profit after charging such commission.

From the above information answer.

Net Profit transferred from Profit and Loss Account to Profit and Loss Appropriation A/c is:

₹50,000

The correct answer is Option (2) → ₹50,000.

Net profit as per Profit and Loss Account for the year ending March 31, 2023 = ₹55,000

Manager commission = 55,000 x 10/(100+10)
                                = 55,000 x 10/110
                                = 5,000

Net profit after manager commission = 55,000 - 5,000
                                                      = 50,000

This 50,000 profit is transferred to the credit side of profit and loss appropriation account.