Arun and Arora were partners in a firm sharing profits in the ratio of 5:3. Their fixed capitals on 1-4-2010 were: Arun Rs 60,000 and Arora Rs 80,000. They agreed to allow interest on capital @ 12% p.a. And to charge on drawings @ 15% p.a. The profit of the firm for the year ended 31-3 2011 before all above adjustments were Rs 12,600. The drawings made by Arun were Rs 2,000 and by Arora Rs 4,000 during the year. Prepare Profit and Loss Appropriation Account of Arun and Arora. Show your calculations clearly. The interest on capital will be allowed even if the firm incurs loss.

Profit and Loss Appropriation Account:

 Particulars Amount (Rs) Particulars Amount(Rs) Interest on Capital Arun Arora 7200 9600 Net Profit Interest on Drawings Arun:        150 Arora:       300 Loss transferred to partners current a/c Arun:             Rs 2344 Arora:            Rs 1406 12,600     450       3750 16800 16800

Working note:
Interest on capital
Arun : (60000*12/100)= 7200
Arora: (80000*12/100) = 9600

Interest on drawings:
Arun: (2000*15/100)*6/12= 150
Arora: (4000*15%)*6/12= 300

Loss transferred to partners current a/c
Arun (3750*5/8) Rs 2344
Arora(3750*3/8) Rs 1406