Ram, Mohan and Sohan were partners. Their capital on 1st January, 2016 were Rs 40,000, Rs 60,000 and Rs 1,00,000 respectively. Before division of profit, Ram is entitled for salary of Rs 12,000 and Mohan Rs 18,000 per annum. Interest is allowed on capital @ 10% per annum. Out of net divisible profits, first Rs 40,000 will be divided in their capital ratio and the balance of profits is to be divided equally. The profit of the firm for the year ending on 31st December, 2016 amounted to Rs 1,20,000 before making all the above adjustments. Prepare Profit and Loss Appropriation Account and Partners’ Capital Account on 31st December, 2016 and pass a Journal Entry for distribution of profit.
