1. Advanced Financial Accounting FIN-611
Mian Ahmad Farhan
Lecture-17
Branch Accounting

2. Expenses Function Cost of goods sold Administrative expenses
Selling expenses
Financial expenses
Income tax expense

3. Profit Distribution
Interest on capital
Partners salaries
Profit sharing ratio

4. Question Net profit Rs. 70,000 Capital Introduced A Rs. 1,00,000
B Rs. 2,00,000
Interest on 10%
Additional salary of Rs. 2,000 PM paid to MR. A
Current Account
Opening Balance A Rs. 10,000
Opening Balance B Rs. 15,000

5. A B Total Net Profit ---- 70,000 Interest on capital 10,000 20,000
(30,000)
Partner salary
24,000
(24,000)
16,000
(16,000)
Profit sharing
A 16,000 x3/5
B 16,000 x 2/5
9,600
6,400
43,600
24,600
---
Appear row wise

6. Partner’s Capital Account
Fluctuating capital
Fixed capital

7. Fluctuating Capital Drawings Balance c/f A B Opening capital b/f
Profit
30,000
123,600
211,400
110,000
43,600
215,000
26,400
153,600
241,400

8. Fixed Capital
Balance c/f A B
Opening capital b/f
100,000
200,000

9. Current Account Drawings Balance c/f A B Opening capital b/f Profit
30,000
23,600
11,400
10,000
43,600
15,000
26,400
53,600
41,400

10. Owner’s Capital (Balance Sheet)
Current A/c 23,600
123,600 B
Capital 200,000
Current A/c 11,400
211,400
335,000

11. Question Tariq and Saeed have been in partnership for one year sharing
profits and losses in the ratio of Tariq 3/5 & Saeed 2/5. They are
entitled to 5% per annum interest on capitals, Tariq having
Rs.2,000 capital and Saeed Rs.6,000. Saeed is to have a salary of
Rs.500. they charge interest on drawings, Tariq being charged
Rs.50 and Saeed Rs.100. The net profit, before any distributions to
the partners, amounted to Rs.5,000 for the year ended 31
December 2007.

12. Solution Total (Rs) Net Profit 5,000 Add Interest on drawings Tariq 50
Saeed
150
5,150
Less Salary saeed
Interest on capital 400
900
Balance of profit ,250
Profit sharing
Tariq 4,250 x3/5 =2,550
Saeed 4,250 x 2/5 = 1,700
4,250

13. Solution Tariq Saeed Balance of profit Interest on capital Salary
Less Interest on drawings
Tariq
Saeed
2,250
100
---
2,650 50
2,600
1,700
300
500
2,500
2,400

14. Capital Account
Balance c/f
Tariq
Saeed
Bank
2,000
6,000

15. Current Account Drawings Balance c/f Tariq Saeed Interest on capital
Salary
Profit
2,000
600
400
100
500
2,550
300
---
1,700
2,650
2,500