The preparation of the Profit and Loss Appropriation Account for the year ended February 28, 2022, is as follows:
<h3>What is the Profit and Loss Appropriation Account?</h3>
A profit and loss appropriation account is a special account prepared for the distribution of the partnership's profit and loss for the period.
For Sunray Traders Partnership, the profit and loss appropriation account is detailed below.
<h3>Profit and Loss Appropriation Account</h3>
For the year ended February 28, 2022
Sunny Raymond Total
Net Profit for the year R900,000
Interest on capital R84,000 R24,000 (R108,000)
Annual Salaries R307,500 R246,000 (R553,500)
Share of profits R119,250 R119,250 (R238,500)
<h3>Question Completion:</h3>
(c) The partners are entitled to the following monthly salaries from 01 March 2021 to 30 November 2021:
Sunny R25 000 Raymond R20 000
Note: The salaries of the partners were increased by 10% with effect from 01 December 2021.
d) The balance of the profit and loss must be shared equally between Sunny and Raymond.
Prepare the Profit and Loss Appropriation Account for the year ended February 28m 2022.
<h3>Data and Calculations:</h3>
DEBIT CREDIT
Capital: Sunny R1 000 000
Capital: Raymond 600 000
Current a/c: Sunny (01 March 2021) 40 000
Current a/c: Raymond (01 March 2021) 60 000
Drawings: Sunny R300 000
Drawings: Raymond 400 000
Net profit = R900 000
Sunny's Salaries = R307,500 (R25,000 x 9 + R25,000 x 1.1 x 3)
Raymond Salaries = R246,000 (R20,000 x 9 + R20,000 x 1.1 x 3)
<h3>Capital Accounts Balances:</h3>
Sunny Raymond Total
Capital accounts R1 000 000 R600 000 R1 600 000
Drawings accounts 300 000 400 000 700 000
Net Capital accounts R700 000 R200 000 R900 000
Interest on capital R 84 000 R24 000 R108 000
Thus, the profit and loss of Sunray Traders Partnership are shared equally as agreed.
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