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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.
Accounting for partnerships | FA2 Maintaining Financial Records | Foundations in Accountancy | Students | ACCA | ACCA Global
The profit sharing ratio is defined here. the profit sharing ratio is used to calculate on residual profits. Simple.
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