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What if net profit is less than appropriation
what if net profit is less than appropriation like interest on capital , salary/commission to partner
Replies (8)
Elaborate in details
Sales is lower than expenses
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 ??
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.
I meant, interest on capital is debited.
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
i.e a = 80k
b = 60k+20k
ratio of appropriation is 1:1 so the profit is distributed in the ratio of 1:1
if You can attach a screenshot. Interest on capital is calculated at the rate of interest irrespective of whose capital it is.
The profit sharing ratio is defined here. the profit sharing ratio is used to calculate on residual profits. Simple.
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