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The Appropriation Account shows the distribution of profits

David has contributed $30,000 and Goliath $20,000 towards the capital of their partnership. They have mutually agreed that profits and losses are shared in the ratio of 3/5 for David and 2/5 for Goliath. Interest on capitals is to be 5% per annum. Goliath is entitled to a salary of $1,200. They are to be charged 5% interest on drawings. (For calculations on interest on capital and interest on drawings, refer back to “Partnership agreement”). The net profit before the above additions and deductions is $12,500.

 

Trading and profit and loss account for the year ended ...........

$ $ $
Net profit 12,500
Add Interest on drawings:
David 51
Goliath 19

70

12,570
Less Salary: Goliath 1,200
Interest on capital:
David 1,500
Goliath 1,000

2,500

3,700

8,870
Balance of profits shared:
David 3/5 5,322
Goliath 2/5 3,548

8,870

 

How the net profit of $12,500 is shared:

David Goliath Total
$ $ $
Balance of profits shared 5,322 3.548 8,870
Interest on capital 1,500 1,000 2,500
Salary - 1.200 1,200



6,822 5,748 12,570
Interest on drawings 51 19 70



6,771 5,729 12,500



Last Updated (Saturday, 11 September 2010 15:46)