To prepare the Profit and Loss Appropriation Account, we need to follow the following steps:

**Step 1:** Calculate the total profit earned during the year.

Total profit = Rs. 42,000

**Step 2:** Calculate the interest on capital for Hari and Giri.

Interest on Hari’s capital = 5% of Rs. 60,000 = Rs. 3,000

Interest on Giri’s capital = 5% of Rs. 30,000 = Rs. 1,500

**Step 3: **Calculate the interest on Giri’s loan account.

Interest on Giri’s loan = 5% of Rs. 20,000 = Rs. 1,000

**Step 4: **Calculate the interest on drawings for Hari and Giri.

Interest on Hari’s drawings = 6% of Rs. 10,000 = Rs. 600

Interest on Giri’s drawings = 6% of Rs. 6,000 = Rs. 360

**Step 5:** Calculate the net profit after adjusting for interest and salary.

Net profit = Total profit – (Interest on capital for Hari + Interest on capital for Giri + Interest on Giri’s loan + Interest on Hari’s drawings + Interest on Giri’s drawings + Salary for Hari)

Net profit = 42,000 – (3,000 + 1,500 + 1,000 + 600 + 360 + 3,000)

Net profit = Rs. 32,540

**Step 6:** Allocate the net profit between Hari and Giri in the agreed ratio of 2:1.

Hari’s share = 2/3 of net profit = (2/3) x Rs. 32,540 = Rs. 21,693.33

Giri’s share = 1/3 of net profit = (1/3) x Rs. 32,540 = Rs. 10,846.67

**Step 7:** Prepare the Profit & Loss Appropriation Account.

Profit and Loss Appropriation Account for the year ended December 31, 1989

## Particulars | Amount (Rs.)

Total profit | 42,000

Interest on Hari’s capital | 3,000

Interest on Giri’s capital | 1,500

Interest on Giri’s loan | 1,000

Interest on Hari’s drawings | 600

Interest on Giri’s drawings | 360

Salary for Hari | 3,000

Net profit | 32,540

Allocation of net profit: |

- Hari’s share (2/3) | 21,693.33
- Giri’s share (1/3) | 10,846.67

Total | 68,540

**Note:** The Profit and Loss Appropriation Account is a nominal account that is prepared to distribute the profit among the partners as per their agreed profit-sharing ratio.