Amitabh and Babul are partners sharing profits in the ratio of 3:2, with capitals of ₹50,000 and ₹30,000 respectively. Interest on capital is agreed @ 6% p.a. Babul is to be allowed an annual salary of ₹2,500. Manager is to be allowed commission ₹5,000. Amitabh has also given a Loan on April 01, 2019 of ₹50,000 to the firm without any agreement. During the year 2019-20, the profits earned is ₹22,250. Profit and Loss Appropriation account shows balance of the Profit and Loss A/c (Net profit before Babul's salary) amounted to-

₹14,250

The correct answer is option 2- ₹14,250.

Net profit = 22,250

Manager's commission of 5,000 is a charge against profit so it deducted from net profit.
Remaining profit after commission = 22,250 - 5,000
                                                   = 17,250

Amitabh is provided interest @ 6% p.a. as there is no agreement and it is also charge against profit
Interest on loan = 50,000 x 6/100
                        = 3,000

Net profit after interest on loan = 17,250 - 3,000
                                              = 14,250

₹14,250 is transferred to profit and loss appropriation account. So, Profit and Loss Appropriation account shows balance of the Profit and Loss A/c (Net profit before Babul's salary) amounted to 14,250.