Answer :
To prepare the Profit and Loss Appropriation Account, we'll follow these steps:
Calculate interest on capital for both partners.
Determine the net distributable profit after deducting interest on capital.
Calculate X's commission based on the net distributable profit.
Calculate Y's commission based on the profit after deducting all commissions.
Prepare the Profit and Loss Appropriation Account.
Let's calculate:
Interest on capital:
X's interest = (2,00,000 * 5%) = 10,000
Y's interest = (1,50,000 * 5%) = 7,500
Net distributable profit:
Net profit before interest and commission = 46,650
Net distributable profit = Net profit - (X's interest + Y's interest)
= 46,650 - (10,000 + 7,500)
= 46,650 - 17,500
= 29,150
X's commission:
X's commission = 10% of net distributable profit
= 10% of 29,150
= 2,915
Y's commission:
Y's commission = 10% of (Net profit - X's commission)
= 10% of (46,650 - 2,915)
= 10% of 43,735
= 4,373.50
Now, let's prepare the Profit and Loss Appropriation Account:
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Profit and Loss Appropriation Account
For the year ended 31st March 2020
Particulars Amount (₹)
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Net profit before commission 46,650
Interest on capital:
X's Interest 10,000
Y's Interest 7,500
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Net distributable profit 29,150
Less: X's commission 2,915
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Profit available for distribution 26,235
Less: Y's commission 4,373.50
-------------------------------------
Balance carried to Balance Sheet 21,861.50
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This account shows the distribution of profits among partners after considering interest on capital and commissions.