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What if net profit is less than appropriation

Atharv Sankliya (1306 Points)

23 October 2021

what if net profit is less than appropriation like interest on capital , salary/commission to partner

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8 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 24 October 2021

Elaborate in details

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 24 October 2021

Sales is lower than expenses

Atharv Sankliya (1306 Points)
Replied 24 October 2021

Suppose if net profit is 100000 rs and interest on capital to partner A is 80000 rs and B is 60000 and salary to B is 20000 p.a so what its treatment ??

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 24 October 2021

I never worked on partnerships, but I guess you got a loss

net Profit minus all interest on capital = loss and this is debited to appropriation accounts.

Nothing to get surprised about if you get a loss.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 24 October 2021

I meant, interest on capital is debited.

Atharv Sankliya (1306 Points)
Replied 24 October 2021

But in t.s grewal book they are distributed the net profit of 1 lac in the ratio of interest on capital and other appropriation

i.e a = 80k
b = 60k+20k
ratio of appropriation is 1:1 so the profit is distributed in the ratio of 1:1