Answer to Question #225622 in Economics for Muhammad Amar

Question

Smith and Clarke are partners in a business sharing profits and losses in the ratio of 2:1. On 1st January 

2020, their capitals were; Smith $ 17200; Clarke $ 12000. The partnership deed provided that interest at 

6 per cent p.a. was to be credited to partner’s capital from profits prior to division and Clarke was to be 

allowed a salary of $ 75 per month. On 31st December, 2020, profit after charging interest on capitals

but before charging Clarke’s salary amounted to $ 13250. During the year they had withdrawn $ 500 

each for private expenses. Out of this, they agree that $ 570 shall be set aside to the provision for 

contingencies.

Instructions: Give Profit and Loss Account of partners.

Answer 1

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