Question

M/s. Zigzag LLC plans to expand its business in Oman and thinks that the Capital of the Partners A, B and C OMR 96,000; OMR 57,600 and OMR 48,000 respectively on 1.1.2019 are not enough for further development. Also the firm wishes to increase the profit of the Partners for the following financial years. For finding their current profit and losses and capital balances, the firm gives the some information which is available in their Partnership Deed. The clauses of that document reveals that the Profit and Losses to be shared Up to OMR 10,800 in the ratio of 4:3:2 and Above OMR 10,800 equally and Interest paid by the firm on its Capital @ 5.5 % p.a. the Interest on Drawings paid by the partners to the firm fixed @ 2.5 % p.a., Partner A is to be paid salary @ OMR 720 per month, Partners B and C are to get 10% commission each on the net profit and the Bonus is to be paid to Partners A and C @ OMR 600 each. The net profit of the firm for the year ended 31st December 2019 amounts to OMR 66,600 and Drawings of the partners are - A OMR 5,760: B OMR 3,840 and C OMR 2,400.

a. Prepare Profit and Loss Appropriation Account and (2.5 Marks)

b. Capital Accounts of the partners assuming – a. Capitals are fixed and b. Capitals are fluctuating. (2.5 Marks)

Answer 1

Solution is as follows: