00:00Hello guys, hope you are doing well. This is Sonia Setia, your accounts and eco-tutor.
00:06In the previous video, we saw that which methods we can follow for a partner's capital account
00:15so that we can prepare a partner's capital account.
00:18In the previous video, we saw that we have two types of methods.
00:23One is fixed capital account method and the other is fluctuating capital account method.
00:29We saw the formats of both capital and current accounts.
00:34If you are new to this video, I will suggest you to watch the previous video's format.
00:42Then come to this video.
00:45Because I have given an illustration in this video.
00:48So in this video, we will see how to make a profit and loss appropriation account with actual numbers.
00:58How to make a partner's capital account and how to make a current account.
01:04So let's start with the example.
01:07So are we good to go?
01:09Yeah, I guess we are good to go.
01:13So let's start.
01:15So X and Y are partners sharing profits and losses in the ratio of 7 is to 3.
01:23X and Y are two partners in the partnership firm who share their profits and losses in the ratio of 7 is to 3.
01:32So their capital accounts as at 1st April 2020.
01:38So that X is the opening balance of capital.
01:51Because you can see the date 1st April.
01:54So it is starting.
01:56So this is the opening balance of capital.
01:58X is 5 lakhs and Y is 4 lakhs.
02:01Partners are allowed interest on capital at the rate of 5% per annum.
02:06So interest on capital will be provided by the partnership firm.
02:12What is the rate they have given?
02:145% per annum.
02:16So we will calculate 5% interest on their capital and where will we give?
02:22Profit and loss appropriation.
02:24Drawings of the partners during the year ended on 31st March 2021.
02:31But what are the drawings of X?
02:3472,000
02:36And drawings of Y?
02:3850,000
02:39Profit for the year before giving interest on capital.
02:44Profit before giving interest on capital and salary to Y at the rate of 5,000 per month.
02:55So we have to give salary to Y.
02:57X is not getting salary here.
03:00So who is getting salary?
03:02Y
03:04Y is getting salary at the rate of 5,000 per month.
03:07We will calculate it by multiplying it with the number of months i.e. 12.
03:15So he gave profit of 8 lakhs.
03:1810% of the net profit is to be set aside as general reserve.
03:25So he said that we have to transfer 10% of the net profit to the general reserve.
03:33What did he say next?
03:35Prepare profit and loss appropriation account.
03:37So what have we been told to make in this?
03:40At number 1, he said that we have to make a profit and loss appropriation account.
03:46For the year ended on 31st March 2021.
03:49At the end of the year, profit and loss appropriation account, capital account and current account are made.
03:55What else did he say?
03:56You are going to make a capital account.
03:58You are also going to make a current account of the partners.
04:01All these formats we have seen in the previous video in detail.
04:07In which we understood how and what we have to put.
04:12Every account, profit and loss appropriation.
04:15We saw in detail what we are going to put in it.
04:18We also saw in the capital account what transactions we are going to put.
04:23We also saw the current account.
04:26So we have this illustration.
04:28So we are starting with the profit and loss appropriation account.
04:32So in profit and loss appropriation, what is the first step?
04:38You transfer the net profit in the credit side.
04:46Why do you have to transfer on the credit side?
04:48Why not in the debit side?
04:50Because who makes this account?
04:54The credit side makes the partnership form.
04:56So what is the credit side?
04:58It is an income side of the firm.
05:01Or you can say it is a positive side.
05:06Or you can say it is a favorable side.
05:12And what is the debit side of profit and loss appropriation?
05:16Here the firm is going to show its expenses.
05:20The firm is going to show its expenses on the partnership form.
05:26We are going to show that on the debit side.
05:29So this is an expense side.
05:32Or you can say it is a negative side.
05:34Or you can say it is an unfavorable side.
05:37So we are starting with the transfer of profit and loss.
05:44The net profit balance that it has given, we will put it on the credit side.
05:50By profit and loss account.
05:52You can write in the bracket.
05:54Net profit transferred from profit and loss account.
05:58Because where did this profit come from?
06:00We have brought this profit from the profit and loss account.
06:03Which is transferred from the profit and loss appropriation account.
06:07You are given 8 lakhs in the question.
06:11We have transferred 8 lakhs.
06:13Now we will see the interest on capital.
06:16We saw that what is the capital of X?
06:195 lakhs.
06:22And what was the capital of Y?
06:244 lakhs.
06:26You can go upside and you can check.
06:30What is the capital?
06:325 lakhs of X and 4 lakhs of Y.
06:36We are going to calculate the interest on this.
06:39The rate of interest given is 5% per annum.
06:43So what will be the 5% of 5 lakhs?
06:47We will calculate it here.
06:495% of 5 lakhs.
06:51And 5% of 4 lakhs.
06:54So 5 files are 25,000.
06:58And you will cut 0 from 0.
07:015 rolls are 20.
07:03So this would be 20,000.
07:05And this would be 25,000.
07:07Right.
07:08So you can check.
07:10We have written the same.
07:12The interest.
07:13True interest on capital.
07:15Because here the current account is also being made.
07:18Means the firm is following the fixed capital account method.
07:23In which we make two accounts.
07:25One capital account and one current account.
07:27Because above it told us that the capital account will also be made and the current account will also be made.
07:32This means what is the firm following?
07:36Fixed capital account method.
07:38In which we will make both accounts.
07:40And we saw that we have to keep the capital fixed.
07:44Except two cases.
07:46Which if additional capital comes.
07:48Or drawing key will be against capital.
07:51So we can show those things in the capital account.
07:54Otherwise, where are we going to show everything else?
07:58We are going to show the current account.
08:01What are you going to give in profit and loss appropriation?
08:04If you have to give interest to the partner, you are going to give that.
08:07If you have to give commission, you are going to give that.
08:11If it has been said.
08:13In general, if you have to transfer the reserve, then you are going to do that.
08:16Right.
08:17True interest on capital.
08:19We have written.
08:20How much will go to the current account?
08:2225,000.
08:23We have calculated.
08:24And how much will go to the current account?
08:2620,000.
08:27This also we have calculated.
08:29Right.
08:30Total is 25,000.
08:3320,000.
08:3440,000.
08:355000.
08:36Right.
08:37And why did you ask to give salary above?
08:39Just go and check.
08:41How much salary do you have to give?
08:435000.
08:44Right.
08:45You are going to give a salary of 5000.
08:48That is per month.
08:49If you are given yearly.
08:51So you can copy.
08:52Paste the same figure.
08:54In the profit and loss appropriation account.
08:56But.
08:57If.
08:58The salary is given.
08:59Per month.
09:00Then you have to calculate it.
09:02As a yearly salary.
09:03Right.
09:04So just.
09:05Do not do anything.
09:06It is very simple.
09:075000 into 12.
09:08Right.
09:09You can write in the bracket also here.
09:105000 into 12.
09:11Because we have to write the entire year's salary here.
09:12So why salary?
09:13This will also go to the current account.
09:14We will transfer.
09:15That would be.
09:1660,000.
09:17Right.
09:19Just go upside.
09:20And check this.
09:21Right.
09:22General.
09:23Reserve.
09:24Go.
09:258 lakhs.
09:2610 percent.
09:27How much will it be?
09:288 lakhs.
09:2910 percent.
09:30Right.
09:31So.
09:32If.
09:33If.
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09:46If.
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