Question of Profit & Loss Appropriation A/c.

Solve: A and B are partners in a firm.A and B entitled to get salary of Rs 10000 per month each.A is to get commission of 10% on net profits before charging commission.B is entitled to get 10% commission on net profits after charging such commission.Commission paid to A amounted to Rs 247500.Prepare P&L appropriation a/c and calculate commission payable to B

asked Dec 30, 2015 in Partnership-Fundamentals by Bhanu (5 points) 4,780 views

1 Answer

+1 vote

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answered Dec 30, 2015 by jbsclasses (3,971 points)
Sir,

Commission is calculated after deducting salary from Profits.

On that basis Profit figure on cr side must be  27,15,000 (24,75,000+2,40,000)

Please clear

     Please note that in the question it is stated that "A is to get commission of 10% on net profits before charging commission.B is entitled to get 10% commission on net profits after charging such commission.".  Here the words Net Profits are very important.  Net Profit means profits which we get in the Profit & Loss A/c.  Though the question is silent about the salary, but it is unimportant because it is clearly stating that commission is to be a certain percentage of net profits.  Perhaps in the context of this question, you asked another question where I meantioned (answer given below) that one important input is missing that commission is to be some% of profits.  

     'Actually in this question another important input is missing that is commission is to some % of profits.  In the given circumstances it seems more appropriate to charge commission after charging salary.  This is so because the question specifically says that commission should be given either before or after charging commission.  It is not talking about partners' salary.  Hence it can safely be assumed that commission is to given after charging salaries from profits.'.

    Whenever you have a doubt, please ask that in the same thread, it helps other readers to understand the sequence properly.

 

Actually Sir,I am very satisfied with Your answer 2475000 Net Profits for the reason Only "Net Profits words" mean Profit as per Profit & Loss a/c. I had added comment only to clarify to make it compatible with my another question, reference of which you have given in your answer
Dear Bhanu, it is always good to discuss because discussion helps us understand things better.
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