NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2- Accounting for Partnership: Basic Concept

With the expansion of businesses, people require more capital and human resources to manage the business. Hence it is a common practice to move from a sole proprietorship to a partnership for business expansion. Partnerships involve two or more people coming together to undertake business and share profits. Chapter 2 of Class 12 Accountancy provides an overview of the basic concepts involved in partnership accounting. Chapter 2 will explain the nature of partnerships, discuss the Indian Partnerships Act of 1932, and prepare partners’ capital accounts under fixed and fluctuating capital. Students can get in-depth information about all these important concepts in the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2. 

It is suggested that students read the NCERT Solutions, which can assist them in understanding all of the important concepts covered in the chapter. Getting access to such dependable and trustworthy solutions can be difficult for students. NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 was developed by Extramarks to address this issue and guarantee that students comprehend and learn the chapter’s material. With years of experience in accounting, industry experts prepare these solutions so that students can refer to them with assurance. If students wish to be well versed in the concepts of the partnership, they can refer to the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 provided by Extramarks.

The Extramarks website offers several study resources in addition to the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2. There include NCERT books, CBSE study manuals, practice exams, exam questions from previous years and more.

Key Topics Covered in NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2

Extramarks Chapter 2 of NCERT Solutions for Class 12 Accountancy Partnership Accounts aids in thoroughly understanding the chapter’s fundamental concepts. Using this resource, students can quickly review all the important ideas covered in class, which will help them perform well on their tests.

Following are some key topics covered in NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2:

  • Nature of Partnership
  • Partnership Deed
  • Provisions of the Partnership Act
  • Special Aspects of Partnership Account
  • Maintenance of Capital Accounts of Partners
  • Distribution of Profits Among Partners
  • Guarantee of Partners Capital Account
  • Past Adjustments
  • Final Accounts

Students should thoroughly understand the concepts listed in Chapter 2 of Class 12 Macroeconomics, which explains the basic concepts of partnership accounting. It will ensure a strong base of knowledge which will help them to solve further chapters easily and efficiently. Suppose students wish to prepare well for this chapter. In that case, they can refer to the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 provided by Extramarks which will improve their knowledge of the chapter and aid their exam preparations.

Let us now look at the in-depth information on each of the above-listed subtopics in the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2:

Nature of Partnership

When two or more people collaborate to start a business and split its gains and losses, this is referred to as a partnership. According to Section 4 of the Indian Partnership Act of 1932, a partnership is “the relationship between people who have agreed to share the profits of a business carried on by all or any of them acting for all.”

Individual partners of people who have formed a partnership are referred to as “partners,” and the group as “firm.” The firm’s name refers to the name under which the business is conducted. A partnership firm has no independent legal entity other than the partners who form it.

The features of the partnership, as mentioned in the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2, are below:

  1. Two or More Persons: The partnership firm should have a minimum of two members to begin functioning. The maximum number of partners can be prescribed by the Companies Act 2013. Section 464 of the act allows the central government to set the maximum limit of partners for the firms, but they can be no more than 100.
  2. Agreement: A partnership firm comes into existence via an agreement between the prospective partners, which can be an oral agreement or a written agreement. The agreement is preferred in a written form to avoid disputes in the future. Nonetheless, a verbal agreement is still considered valid.
  3. Business: The partnership agreement should result in business activity; two or more people jointly holding property or assets is not considered a partnership. But if they own property together for running an enterprise and turning a profit, it will be viewed as a partnership.
  4. Mutual Agency: In a partnership firm, business is carried out by all partners or by one acting for all the partners. It implies that all partners have the right to participate in the business’s affairs, and each partner carrying business affairs is the principal and agent for all the other partners. They can be bound by the other partners’ actions and also bound by other partners by their decisions. 
  5. Sharing of Profits: The partners decide to share profits and losses arising from business transactions. It can be stated in the agreement how the partner wishes to go about this division, but if people are joining hands for charity, then that cannot be considered a partnership. 
  6. Liability of Partners: Each partner is jointly liable for the dues of the partnership. Under the partnership framework, all partners have an unlimited liability towards third parties. In the event of the loss of partners, the firm can also use the partner’s assets to repay debt.

Partnership Deed

The partnership deed is a written agreement duly signed by all the partners and registered under the Partnership Act of 1932. The partnership deed provides a framework of the terms and conditions between the partners once the business begins. The main aim of the deed is to clearly state the role of each partner and ensure smooth operations for the company.

The partnership deed contains all the aspects that might affect the relationship between partners. They include the objective of the business, the contribution of capital by each partner, the ratio of profits and losses distribution by the partners and the entitlement of partners to interest on capital, interest on the loan, etc.

The following are the contents of the partnership deed:

  1. The names and addresses of the firm and its main business;
  2. Names and Addresses of all partners;
  3. Amount of capital to be given by each partner;
  4. The accounting period of the firm;
  5. The date of commencement of partnership;
  6. Rules regarding the operation of the Bank Accounts;
  7. The profit and loss sharing ratio;
  8. The rate of interest on capital, loan, drawings, etc.;
  9. Mode of auditor’s appointment, if any;
  10. Salaries, commission, etc., if payable to any partner;
  11. The rights, duties and liabilities of each partner;
  12. Treatment of loss arising out of the insolvency of one or more of the partners;
  13. The settlement of accounts on the dissolution of the firm;
  14. Method of settlement of disputes among the partners;
  15. Rules to be followed in case of admission, retirement, or death of a partner; and
  16. Any other matter relating to the conduct of business.

Rules for the Partnership in the Absence of a Partnership Deed

  1. Sharing of profits: In the absence of a deed, the partners share the profits from businesses equally.
  2. Salary/Commission to partners: The partners are not entitled to receive any salary or commission for their participation in the business without a partnership deed.
  3. Interest on capital: No interest on capital is provided to the partners without a partnership deed.
  4. Interest on drawings: No interest is charged on drawings that partners make from the firm.
  5. Interest on loans: Loans the partners provide are entitled to a 6% interest rate in case of no partnership deed.
  6. Right to participate in the business: regardless of the partnership deed, every partner has the right to participate in the functioning of the company.
  7. Admission of partners: A new partner cannot join the partnership firm without the consent of all the partners.
  8. Right to inspect the books of the firm: The partners hold the right to inspect the books of the firm and take extracts from the same.

Special Aspects of Partnership Account

A partnership form of business organisation is quite identical to a sole proprietorship type of business, but several differences must be considered while preparing accounts for partnership firms.

The following are the unique aspects of partnership accounts that constitute these exceptions:

  1. Maintenance of Partners Capital Accounts: In a partnership business, capital accounts are kept using one of 2 techniques; fixed capital method and fluctuating capital approach. While the fluctuating capital technique only maintains the capital account, the fixed capital method maintains both the capital and current accounts.
  2. Distribution of Profit and Loss among the partners: As the distribution of profits and losses are to be made among several individuals, a profit and loss appropriation account are constructed.
  3. Adjustment for Wrong Appropriation of Profit: Any correction or adjustment that needs to be made for events of the previous years can be made easily in the partnership accounts.
  4. Reconstitution of the Partnership Firm: Reconstitution refers to modifications made to the partnership agreement or partnership deed that result in developing new agreement terms between the partners. Reconstitution can be done in the light of the admission of a new partner, retirement/death of a partner or insolvency of a partner.
  5. Dissolution of the Partnership Firm: Dissolution refers to the winding of the partnership business that results in the termination of all the partnership agreements. 

The first three exceptions are discussed in detail in the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2, while the rest are discussed in further chapters.

Maintenance of Capital Accounts of Partners

All transactions associated with the partners are recorded in the partner’s capital accounts. The capital accounts can include transactions such as the capital brought in by the partner, the drawings made, interest on capital, profit share, partners’ salary, the commission given to the partners, interest on drawings and the like.

There are two methods by which the transactions are recorded in the capital account;

  1. Fixed Capital Method
  2. Fluctuating Capital Method

A detailed explanation of the two accounts is mentioned below:

  • Fixed Capital Method:

The Fixed Capital Method requires the business to keep track of two separate accounts for the numerous transactions that affect the partners’ capital. These are the Capital account and the Current account.

The capital account is concerned with the basic transactions involving the partners’ capital. In contrast, the current account is concerned with all other capital-related activities such as interest on drawings, interest on capital, salary to employees, and salary to employees aside from initial investment, additional capital, and withdrawal of capital.

  • Fluctuating Capital Method:

Only one account, the capital account, is recorded and maintained for each partner under the fluctuating capital method. The partners’ capital accounts reflect all adjustments, such as interest on capital, the share of profit and loss, interest on drawings, drawings, commission to partners or salary, etc. As a result, the capital account balance fluctuates from time to time. In the absence of any guidance, this procedure must be used to define the capital account.

Distribution of Profits Among Partners

The partners divide the company’s gains and losses according to a predetermined ratio. If the partnership agreement is silent, the profits and losses of the company must be split equally among all the partners.

However, various adjustments must be made in the event of a partnership, such as interest on capital, interest on capital drawings, salary to partners, and commission to partners. It is typical to construct a Profit and Loss Appropriation Account for the firm and determine the final figure of profit and loss to be split among the partners in their profit-sharing ratio for this purpose.

The profit and Loss Appropriation Account is essentially an extension of the firm’s Profit and Loss Account. It demonstrates how the partners appropriate or divide the profits. It begins with the net profit/loss calculated by the Profit and Loss Account.

A proforma of the profit and loss appropriation account is below:

Particulars  Amount (Rs) Particulars  Amount (Rs)
Profit and Loss (if there is loss)

Interest on Capital

Salary to Partner

Commission to Partner

Partners’ Capital/Current Accounts

(distribution of profit)

xxx

xxx

xxx

xxx

xxx

Profit and Loss (if there is profit)

Interest on Drawings

Partners’ Capital/Current Accounts

(distribution of loss)

xxx

xxx

xxx

Guarantee of Partners Capital Account

A guarantee is described as a surety of a specific amount of profits by one or more partners. In some situations by the enterprise, the burden of guarantee is carried by the party providing such a guarantee. In other words, the partner who receives such a guarantee must give a minimum predetermined sum. The company or a partner will take care of the deficit if the total share of profits is less than the agreed-upon amount. The enterprise will give the partner the actual gains if the actual percentage of gains exceeds the minimum guarantee amount.

A partner may occasionally be admitted to the company with a guaranteed minimum sum in exchange for his share of the earnings. Such assurance may be offered to the new partner by all of the old partners in a specified ratio or by any of the old partners individually. When a new partner’s share of profit is less than the guaranteed amount, the old partners will pay the minimum guaranteed amount to him.

Past Adjustments 

After the final accounts have been created and the profits have been divided among the partners, occasionally, a few omissions or errors in recording transactions or preparing summary statements are detected. The omission might relate to interest on capital, interest on drawings, interest on a loan taken out by partners, interest on a partner’s salary or commission, or outstanding expenses. Additionally, any modifications to the terms of the partnership agreement or the accounting method would have a retrospective impact. All of these actions of omission and conduct require changes to mitigate their consequences.

The firm can make the necessary adjustments immediately in the capital accounts of the concerned partners instead of changing the old accounts or using the Profit and Loss Adjustment Account.

NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2: Exercise and Solutions

NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 is a thorough reference covering all central themes from the standpoint of the test and was created by Extramarks subject matter experts. To ace any tests or examinations and pass with flying colours, students can study with NCERT solutions, which include a variety of questions, including MCQs, short answer questions and long answer questions among others.

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The NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 will help students better comprehend the subject’s essential concepts. It will also aid in their understanding of the succeeding chapters.

Key Features of NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2

The Extramarks-provided NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 facilitates understanding of the chapter’s basic ideas. Students may quickly review all the key concepts discussed in class by using this resource to help them revise, which will ultimately help them achieve high scores on their exams. 

The essential features of Extramarks NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 include the following:

  • The structure of the NCERT solutions offers a thorough and uncomplicated overview of the basic concepts of partnership accounting.
  • The Extramarks NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 provides in-depth responses to chapter questions that enable students to answer end-text queries and example test questions to help students become well-rounded in their chosen topics.
  • The notes are written by extremely knowledgeable and experienced academics who closely adhere to the most recent NCERT textbooks to provide students with authentic and reliable study material.
  • Extramarks regularly updates its NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 following the CBSE Board. Because the NCERT answers most of the questions on CBSE board exam papers, students might benefit from these useful notes in the future.

 

Q.1 Define Partnership Deed.
Ans
Partnership deed refers to a document which contains the terms of partnership as agreed among the partners.
Q.2 Why it is considered desirable to make the partnership agreement in writing?
Ans
The agreement becomes the basis of relationship between the partners, it is not necessary that such agreement is in written form. An oral agreement is equally valid, but in order to avoid disputes, it is preferred that the partners have a written agreement.

 Q.3 List the items which may be debited or credited in capital accounts of the partners when:

1. Capitals are fixed.
2. Capitals are fluctuating.
Ans
Capitals are fixed:
1. Permanent drawings
2. Permanent capital introduced

Capitals are fluctuating:
1. Drawings
2. Salaries or commission
3. Interest on capital

Q.4 Why is profit and loss adjustment account prepared?
Ans
Profit and loss adjustment account is prepared because before the division of net profits, it is subject to certain adjustments which are not charged and hence cannot be shown in profit and loss account so to show these an additional account is prepared known as profit and loss adjustment (or appropriation) account in which net profit/net loss and all adjustments are shown.

Q.5 Give two circumstances under which the fixed capitals of partners may change.
Ans
Fixed capitals of partners may change under

  • Withdrawal of capital
  • Investing fresh capital

Q.6 If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?
Ans
If a fixed amount is withdrawn on the first day of every quarter, the interest is calculated on the total money withdrawn during the year, for a period of seven and half months.

Q.7 In the absence of partnership deed, specify the rules relating to the following:

1. Sharing of profits and losses.
2. Interest on partner’s capital.
3, Interest on partner’s drawings.
4. Interest on partner’s loan.
5. Salary to a partner.
Ans
1. Sharing of profits and losses: Profit and losses are to be shared equally among the partners.
2. Interest on partner’s capital: No interest on capital is to be allowed to the partners.
Interest on partner’s drawings: No interest is to be charged on the drawings.
Interest on partner’s loan: Interest at the rate of 6% p.a. is to be allowed on the loans advanced by partners to the firm.Salary to a partner: A partner is not entitled to any salary.

Q.8 What is meant by partnership? Explain its chief characteristics? Explain.
Ans
Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. So when two or more persons join hands to set up a business and share its profits and losses they are said to be in partnership.

Characteristics of Partnership:

1. Number of Persons: There should be at least two persons for business. The maximum number is 100.
2. Agreement: Partnership is the result of an agreement. It can be oral or in writing.
3. Lawful business: Business of the partnership should be lawful, i.e., it should not do black marketing, smuggling or hoarding.
4. Profit motive: The object should be to earn profit because it cannot be formed for service motive.
5. Profit sharing: Partners should share the profits of the business in an agreed ratio.
6. Liability of partners: The liability of the partners is unlimited. This implies that their private assets can also be used for paying off the firm’s debts.Mutual Agency:
7. Partners are both an agent and principal, i.e., parties are bound by the act of other partners and other partners are bound by the act of parties.

Q.9 Discuss the main provisions of the Indian Partnership Act 1932 that are relevant to partnership accounts if there is no partnership deed.
Ans
When the Partnership Deed is silent on a certain point the relations of partners are determined by the rules given in section 12 to 17 of the Indian Partnership Act, 1932.

Rules in the Absence of Partnership Deed:

Profit sharing ratio: Profit and losses are to be shared equally among the partners.

Interest on capital: No Interest on capital is to be allowed to the partners.

Interest on drawings: No interest is to be charged on the drawings.

Interest on loan: Interest at the rate of 6% p.a. is to be allowed on the loans advances by partners to the firm.

Remuneration to partners: No partner is entitled to any salary, remuneration or commission.

Admission of a partner: No new partner will be admitted without the mutual consent of all the existing partners.

Others: Partner has to pay to the firm any profit from any transaction of the firm or by use of property of the firm. Partners has to pay to the firm any profit earned from any business of the same nature of the firm and competing with that of the firm.

Q.10 Explain why it is considered better to make a partnership agreement in writing.
Ans
A written agreement signed by all partners is called ‘Partnership Deed’. It is a very important legal document with regard to rights, duties and obligations. It helps in solving various matters in case of disputes among partners in future. It can be oral as well as in writing. It can be changed from time to time with the consent of all the partners. It is also known as ‘Articles of Partnership’.

It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan etc. Hence the document is helpful solving any future dispute.

Q.11 Illustrate how interest on drawings will be calculated under various situations.
Ans
The following rules shall be followed while calculating interest on drawings:

  • Interest on drawings shall be charged from partners only when partnership deed authorises the firm to do so.
  • Generally, interest on drawings is to be calculated as per the date of withdrawal made by partners. In case no specific date of withdrawal of drawings is mentioned, then it is assumed that the drawings were made on an even scale throughout the year. In such case the interest will be changed at the given rate for six months on the whole amount of drawings.
  • When drawings are made by the partners in the beginning of each month on regular basis and the amount of drawings is the same, i.e., fixed interest on the whole amount of drawings will be charged for 6 ½ months.
  • When drawings are made by the partners on regular basis at the end of the month and the amount of drawings is same, the interest on the whole amount of drawings will be charged for 5 ½ months.
  • When fixed amount is withdrawn at the middle of the month then it calculated for 6 months.
  • If fixed amount is withdrawn at the beginning, middle and end of each quarter, then interest will be calculated for 7 ½ months, 4 ½ months and 6 months respectively.
  • When drawings are made at different dates (at irregular intervals) either at the beginning or at the end of the month interest on drawings as per given rate is calculated by product method, so for each withdrawal, the money withdrawn is multiplied by the period for which it remained withdrawn the product is totaled and interest for one month is calculated.

Interest on Drawing = Total of Product X Rate of Interest 100 x 1 12 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@750C@

  • When rate of interest is given without the words p.a. (per annum), it implies interest is to be calculated without any reference of time.

Q.12 Tripathi and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals were ₹ 60,000 and ₹40,000 as on January 01, 2015. During the year they earned a profit of ₹30,000. According to the partnership deed both the partners are entitled to ₹1,000 per month as salary and 5% interest on their capital. They are also be charged an interest of 5% on their drawings, irrespective of the period, which is ₹12,000 for Tripathi ₹8,000 for Chauhan. Prepare Partner’s Accounts when capitals are fixed.
Ans
Profit and Loss Appropriation A/c

Particulars Particulars
To profit t/fd to current account By P & L A/c 30,000
Tripathi 18,000
Chauhan 12,000
30,000 30,000

Partners’ Current Accounts

Particulars T C Particulars T C
To drawings 12,000 8,000 By Int. on capital 3,000 2,000
To Int. on drawings 600 400 By Salary 12,000 12,000
To Bal. c/d 20,400 17,600 By P&L App. 18,000 12,000
33,000 26,000 33,000 26,000

Q.13 Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital, were ₹90,000 and ₹60,000. The profit during the year were ₹45,000. According to partnership deed, both partners are allowed salary, ₹700 per month to Anubha and ₹500 per month to Kajal. Interest allowed on capital @5% p.a. The drawings during the year were ₹8,500 for Anubha and ₹ 6,500 for Kajal. Interest is to be charged @5% p.a. on drawings. Prepare partners capital accounts assuming that the capital account are fluctuating.
Ans
Partners’ Capital Accounts

Particulars Anubha Kajal Particulars Anubha Kajal
To drawings 8,500 6,500 By Bal. b/d 90,000 60,000
To Int. on drawings 425 325 By Salary 8,400 6,000
To Bal. c/d 1,23,975 77,175 By P&L App. 18,000 12,000
1,32,900 84,000 1,32,900 84,000

Q.14 Rakhi and Sihkha are partners in a firm, with capitals of ₹2,00,000 and ₹3,00,000 respectively. The profit of the firm, for the year ended 2016-17 is ₹23,200. As per the partnership agreement, they share the profit in their capital ratio, after allowing a salary of ₹5,000 per month to Shikha and interest on partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew ₹7,000 and Shikha ₹10,000 for their personal use. As Per partnership deed salary and Interest on Capital Appropriation treated as charge on Profit. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.
Ans
Profit and Loss Appropriation A/c

Particulars Particulars
To Salary By P & L A/c 43,000
Shikha 60,000 By loss t/fd
To Int. on capital Rakhi 34,720
Rakhi 20,000 Shikha 52,080
Shikha 30,000
1,10,000 1,10,000

Partners’ Capital Accounts

Particulars Rakhi ₹ Shikha ₹ Particulars Rakhi ₹ Shikha ₹
To drawings 7,000 10,000 By Bal. b/d 2,00,000 3,00,000
To P & L App. 34,720 52,080 By Salary 60,000
To Bal. c/d 1,78,280 3,27,920 By Int. on capitals 20,000 30,000
2,20,000 3,90,000 2,20,000 3,90,000

Q.15 Lokesh and Azad are partners sharing profits in the ratio 3:2 with capitals of ₹50,000 and ₹30,000, respectively. Interest on capital is agreed to be paid @6% p.a. Azad is allowed a salary of ₹2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to ₹12,500. A provision of 5% of profits is to be made in respect of manager’s commission. Prepare Partner’s Capital Accounts and Profit and Loss Appropriation Account.
Ans
Profit and Loss Appropriation A/c

Particulars Particulars
To Salary By P & L A/c 15,000
Azad 2,500
To Int. on capital
Lokesh 3,000
Azad 1,800
To prov. Manager’s com. 750
To profit t/fd to capitals
Lokesh 4,170
Azad 2,780
15,000 15,000

Partners’ Capital Accounts

Particulars Lokesh Azad Particulars Lokesh Azad
By Bal. b/d 50,000 30,000
By Salary 2,500
To Bal. c/d 57,170 37,080 By Int. on capitals 3,000 1,800
By P & L App. 4,170 2,780
57,170 37,080 57,170 37,080

Q.16 Ram, Raj and George are partners sharing profits in the ratio 5:3:2. According to the partnership agreement George is to get a minimum amount of ₹10,000 as his share of profits every year. The net profit for the year 2013 amounted to ₹40,000. Prepare the profit and loss appropriation account.
Ans
Profit and Loss Appropriation A/c

for the year ended…..

Particulars Particulars
To profit t/fd to By P & L A/c 40,000
Ram
(₹20,000 –₹1,250) 18,750
Raj
(₹12,000 – ₹750) 11,250
George
(₹8,000 + ₹1,250 +₹750) 10,000
40,000 40,000

George’s deficiency of ₹2,000 will be borne by Ram and Raj in the ratio 5:3.

Q.17 Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed an amount of ₹10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2016 and March 31, 2017 were ₹40,000 and ₹60,000, respectively. Prepare the profit and loss appropriation account for the two years.

Ans
Profit and Loss Appropriation A/c

for the year ended 31st December 2016

Particulars Particulars
To profit t/fd to By P & L A/c 40,000
Amann
(₹16,000) 16,000
Babita
(₹16,000 – ₹2,000) 14,000
Suresh
(₹8,000 + ₹2,000) 10,000
40,000 40,000

Profit and Loss Appropriation A/c

for the year ended 31st December 2017

Particulars Particulars
To profit t/fd to By P & L A/c 60,000
Amann 24,000
Babita 24,000
Suresh 12,000
60,000 60,000

Q.18 Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of ₹1,50,000. Prepare the Profit and Loss Appropriation account and Partner’s Current Account by taking into consideration the following information:

(i) Partners capital on April 1, 2016:
Simmi ₹30,000; Sonu ₹60,000;

(ii) Current accounts balances on April 1, 2016;
Simmi ₹30,000 (Cr.); Sonu, ₹15,000 (Cr.);

(iii) Partners drawings during the year amounted to
Simmi ₹20,000; Sonu ₹15,000;

(iv) Interest on capital was allowed @5% p.a.;

(v) Interest on drawings was to be charged @6% p.a. at an average of six months.

(vi) Partners salaries: Simmi ₹12,000 and Sonu ₹9,000. –
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Salary By P & L A/c 1,50,000
Simmi 12,000 By Int. on
Sonu 9,000 drawings
To Int. on capital Simmi 600
Simmi 1,500 Sonu 450
Sonu 3,000
To profit t/fd to current accounts
Simmi 94,162
Sonu 31,388
1,51,050 1,51,050

Partners’ Current Accounts

Particulars Simmi Sonu Particulars Simmi Sonu
To drawings 20,000 15,000 By Bal. b/d 30,000 15,000
To Int. on draw. 600 450 By Salary 12,000 9,000
To Bal. c/d 1,17,062 42,938 By Int. on capitals 1,500 3,000
By P & L App. 94,162 31,388
1,37,662 58,388 1,37,662 58,388

Q.19 Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were ₹80,000 and ₹60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹2,000 and ₹3,000 respectively.

The profits for year ended March 31, 2017 before making above appropriations was ₹1,00,300. The drawings of Ramesh and Suresh were ₹40,000 and ₹50,000, respectively. Interest on drawings amounted to ₹2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and Partner’s capital accounts, assuming that then capitals are fluctuating.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Salary By P & L A/c 1,00,300
Ramesh 24,000 By Int. on
Suresh 36,000 drawings
To Int. on capital Ramesh 2,000
Ramesh 9,600 Suresh 2,500
Suresh 7,200
To profit t/fd to capital accounts
Ramesh 16,000
Suresh 12,000
1,04,800 1,04,800

Partners’ Current Accounts

Particulars Ramesh Suresh Particulars Ramesh Suresh
To drawings 40,000 50,000 By Bank 80,000 60,000
To Int. on draw. 2,000 2,500 By Salary 24,000 36,000
To Bal. c/d 87,600 62,700 By Int. on capitals 9,600 7,200
By P & L App. 16,000 12,000
1,29,600 1,15,200 1,29,600 1,15,200

Q.20 Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

Profits would be shared by Sukesh and Vanita in the ratio of 3:2.

5% interest is to be allowed on capital.

Vanita should be paid a monthly salary of ₹600.

The following balances are extracted from the books of the firm, on March 31, 2017.

Sukesh ₹ Vanita ₹
Capital Accounts 40,000 40,000
Current Accounts (Cr.)7,200 (Cr.) 2,800
Drawings 10,850 8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary was ₹9,500. Prepare the profit and loss appropriation account and the partner’s current accounts.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Salary By P & L A/c 16,700
Vanita 7,200 (₹9,500 + ₹7,200)
To Int. on capital
Sukesh 2,000
Vanita 2,000
To profit t/fd to capital accounts
Sukesh 3,300
Vanita 2,200
16,700 16,700

Partners’ Current Accounts

Particulars Sukesh Vanita Particulars Sukesh Vanita
To drawings 10,850 8,150 By Bal. b/d 7,200 2,800
To Bal. c/d 1,650 6,050 By Salary 7,200
By Int. on cap. 2,000 2,000
By P & L App. 3,300 2,200
12,500 14,200 12,500 14,200

Q.21 Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’s share in profit has been guaranteed by Amit and Sumit to be a minimum sum of ₹8,000. Profits for the year ended March 31, 2017 was ₹36,000. Divide profit among the partners by Preparing Profit and Loss Appropriation Account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To profit t/fd to By P & L A/c 36,000
Amit
(₹18,000 – ₹1,200) 16,800
Sumit
(₹12,000 – ₹800) 11,200
Samiksha
(₹6,000 + ₹2,000) 8,000
36,000 36,000

Q.22 Pinki, Deepti and Kaku are partners sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than ₹ 5,000. Deficiency if any would be borne by Pinki and Deepti equally. Profits for the year amounted to ₹ 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.
Ans
Profit and Loss Appropriation A/c

for the year ended……………

Particulars Particulars
To profit t/fd to By P & L A/c 40,000
Pinki
(₹20,000 – ₹500) 19,500
Deepti
(₹16,000 – ₹500) 15,500
Kaku
(₹4,000 + ₹1,000) 5,000
40,000 40,000

Q.23 Abhay, Siddharth and Kusum are partners in a firm, sharing profit in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of ₹10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are ₹40,000 and ₹60,000 respectively. Prepare Profit and Loss Appropriation account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2016

Particulars Particulars
To profit t/fd to By P & L A/c 40,000
Abhay
(₹20,000) 20,000
Sidharth
(₹12,000 – ₹2,000) 10,000
Kusum
(₹8,000 + ₹2,000) 10,000
40,000 40,000

Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To profit t/fd to By P & L A/c 60,000
Abhay
(₹30,000) 30,000
Sidharth
(₹18,000) 18,000
Kusum
(₹12,000) 12,000
60,000 60,000

Q.24 Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than ₹5,000. The profits for the year ending March 31, 2017 amounts to ₹35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show distribution of profit among partner.
Ans
Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. P & L App. A/c Dr. 35,000
31 To Radha’s Capital A/c 17,500
To Mary’s Capital A/c 14,000
To Fatima ’s Capital A/c 3,500
(Being profits divided among partners in the ratio of 5:4:1)
Radha ’s Capital A/c Dr. 900
Mary’s Capital A/c Dr. 600
To Fatima ’s Capital A/c 1,500
(Being deficiency contributed by Radha and Mary in the ratio of 3:2)

Q.25 X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3:2:1 respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of ₹8,000. The net profit for the year ended March 31, 2017 was ₹30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To profit t/fd to By P & L A/c 30,000
X
(₹15,000 – ₹1,800) 13,200
Y
(₹10,000 – ₹1,200) 8,800
Z
(₹5,000 + ₹3,000) 8,000
30,000 30,000

Q.26 Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of ₹60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are

(i) ₹2,50,000; (ii) ₹3,60,000.
Ans
Case (i)

Profit and Loss Appropriation A/c
for the year ended 31st Dec. 2015

Particulars Particulars
To profit t/fd to By P & L A/c 2,50,000
Arun
(₹1,00,000 – ₹10,000) 90,000
Bobby
(₹1,00,000) 1,00,000
Chintu
(₹50,000 + ₹10,000) 60,000
2,50,000 2,50,000

Case (ii)
Profit and Loss Appropriation A/c
for the year ended 31st Dec. 2015

Particulars Particulars
To profit t/fd to By P & L A/c 3,60,000
Arun
(₹1,44,000) 1,44,000
Bobby
(₹1,44,000) 1,44,000
Chintu
(₹72,000) 72,000
3,60,000 3,60,000

Q.27 Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2:2:1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than ₹20,000. The net profit for the year ended March 31, 2017 amounted to ₹70,000. Prepare Profit and Loss Appropriation Account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To profit t/fd to By P & L A/c 70,000
Ashok
(₹28,000 – ₹3,000) 25,000
Brijesh
(₹28,000– ₹3,000) 25,000
Cheena
(₹14,000 +₹6,000) 20,000
70,000 70,000

Q.28 Ram, Mohan and Sohan are partners with capitals of ₹5,00,000, ₹2,50,000 and ₹2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as follows:

Ram 1/2, Mohan 1/3 and Sohan 1/6. But Ram and Mohan have guaranteed that Sohan’s share in the profit shall not be less than ₹25,000, in any year. The net profit for the year ended March 31, 2017 is ₹2,00,000, before charging interest on capital.

You are required to show distribution of profit by preparing profit and loss appropriation account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Int. on capitals By P & L A/c 2,00,000
Ram 50,000
Mohan 25,000
Sohan 20,000
To profit t/fd to
Ram
(₹52,500 – ₹4,500) 48,000
Mohan
(₹35,000– ₹3,000) 32,000
Sohan
(₹17,500 +₹7,500) 25,000
2,00,000 2,00,000

₹1,05,000 (₹2,00,000 – ₹95,000) will be divided among partners in the ratio of 3:2:1.

Q.29 Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3:2:1, subject to the following:

Sona’s share in the profits guaranteed to be not less than ₹15,000 in any year.

Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is ₹25,000). The net profit for the year ended March 31, 2017 is ₹75,000. The gross fee earned by Babita for the firm was ₹16,000.

You are required to prepare Profit and Loss Appropriation account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To profit t/fd to By P & L A/c 75,000
Ashok By Babita’s
(₹42,000 – ₹600) 41,400 Capital A/c 9,000
Brijesh (₹ 25000 – ₹ 16000)
(₹28,000– ₹400) 27,600
Cheena
(₹14,000 +₹1,000) 15,000
84,000 84,000

Q.30 The net profit of X, Y and Z for the year ended March 31, 2016 was ₹60,000 and the same was distributed among them in their agreed ratio of 3:1:1. It was subsequently discovered that the under mentioned transactions were not recorded in the books:

  1. Interest on Capital @ 5% p.a.
  2. Interest on drawings amounting to X ₹700, Y ₹500 and Z ₹300.
  3. Partner’s salary: X ₹1,000, Y ₹1,500 p.a.

The capital accounts of partners were fixed as: X ₹1,00,000, Y ₹80,000 and Z ₹60,000. Record the adjustment entry.
Ans
Table Showing Adjustment

Particulars X Y Z
Amount wrongly credited (A) 36,000 12,000 12,000
Amount to be credited
Interest on capital @ 5% 5,000 4,000 3,000
Interest on drawings (700) (500) (300)
Salary 1,000 1,500
Profit share (3:1:1) 28,200 9,400 9,400
Total (B) 33,500 14,400 12,100
Difference (2,500) 2,400 100
Debit Credit Credit

Profits to be distributed = ₹60,000 – ₹12,000 + ₹1,500 – ₹2,500 = ₹47,000

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2016
Mar. X’s Current A/c Dr. 2,500
31 To Y’s Current A/c 2,400
To Z’s Current A/c 100
(Being profit adjusted among all partners)

Q.31 The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2:2:1 have existed for some years. Ali wants that he should get equal share in the profits with Harry and porter and he further wishes that the change in the profit sharing ratio should come into effect retrospectively for the last three years. Harry and porter have agreement on this account.

The profits for the last three years were:

Date
2014-15 22,000
2015-16 24,000
2016-17 29,000

Show adjustment of profits by means of a single adjustment journal entry.
Ans
Total profits of last three years = ₹22,000 + ₹24,000 + ₹29,000 = ₹75,000.

Particulars Harry Porter Ali
Amount wrongly credited (A) 30,000 30,000 15,000
(₹75,000 in 2:2:1)
Amount to be credited
Distribution as per new ratio
(₹75,000 in 1:1:1) (B) 25,000 25,000 25,000
Difference (B – A) (5,000) (5,000) 10,000
Debit Debit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Harry’s Capital A/c Dr. 5,000
31 Porter’s Capital A/c Dr. 5,000
To Ali’s Capital A/c 10,000
(Being profit adjusted among all partners)

Q.32 Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3:2. Following is the balance sheet of the firm as on March 31, 2017.

Balance Sheet as at March 31, 2017
Liabilities Assets
Mannu’s Capital 30,000 Drawings:

Mannu 4,000

Shristhi 2,000

6,000
Shristhi’s Capital 10,000 40,000 Other Assets 34,000
40,000 40,000

Profit for the year ended March 31, 2017 was ₹5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was omitted. Adjust interest on drawing on an average basis for 6 months. Give the adjustment entry.
Ans
Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mannu Shrishti
Closing capital 30,000 10,000
Less: Profits already credited (3,000) (2,000)
27,000 8,000

Adjustment of Profits:

Particulars Mannu Shrishti
Amount wrongly credited (A) 3,000 2,000
Amount to be credited
Interest on capital @ 5% 1,350 400
Interest on drawings @6% (120) (60)
Profit share (3:1:1) 2,058 1,372
Total (B) 3,288 1,712
Difference (B – A) 288 (288)
Credit Debit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Shrishti’s Capital A/c Dr. 288
31 To Mannu’s Capital A/c 288
(Being profit adjusted among all partners)

Q.33 On March 31, 2017 the balance in the capital accounts of Eluin. Monu and Ahmed after making adjustments for profits, drawings, etc. were ₹80,000, ₹60,000 and ₹40,000 respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted.

The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin ₹20,000; Monu ₹15,000 and Ahmed ₹9,000. Interest on drawings chargeable to partners were Eluin ₹500, Monu ₹360 and Ahmed ₹200. The net profit during the year amounted to ₹1,20,000.

The profit sharing ratio was 3:2:1.

Record necessary adjustment entries.
Ans
Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Eluin Monu Ahmed
Closing capital 80,000 60,000 40,000
Add: Drawings 20,000 15,000 9,000
Less: Profits (60,000) (40,000) (20,000)
(₹1,20,000 in 3:2:1)
40,000 35,000 29,000

Table Showing Adjustment

Particulars Eluin Monu Ahmed
Amount wrongly credited (A) 60,000 40,000 20,000
Amount to be credited
Interest on capital @ 5% 2,000 1,750 1,450
Interest on drawings (500) (360) (200)
Profit share (3:2:1) 57,930 38,620 19,310
Total (B) 59,430 40,010 20,560
Difference (B – A) (570) 10 560
Debit Credit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Eluin’s Capital A/c Dr. 570
31 To Monu’s Capital A/c 10
To Ahmed’s Capital A/c 560
(Being profit adjusted among all partners)

Q.34 Mohan, Vijay and Anil are partners the balance on their capital accounts being ₹30,000, ₹25,000 and ₹20,000 respectively. In arriving at these figures the profits for the year ended March 31, 2017 amounting to Rupees ₹24,000 had been credited to partners in the proportion in which they shared profits. During the year their drawings for Mohan, Vijay and Anil were ₹5,000, ₹4,000 and ₹3,000 respectively. Subsequently, the following omissions were noticed:

  1. Interest on Capital, at the rate of 10% p.a. was not charged.
  2. Interest on Drawings: Mohan ₹250, Vijay ₹200, Anil ₹ 150 was not recorded in the books.

Record necessary corrections through journal entries.
Ans
Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mohan Vijay Anil
Closing capital 30,000 25,000 20,000
Add: Drawings 5,000 4,000 3,000
Less: Profits (8,000) (8,000) (8,000)
(₹24,000 in 1:1:1)
27,000 21,000 15,000
Int. on capital @ 10% 2,700 2,100 1,500

Table Showing Adjustment

Particulars Mohan Vijay Anil
Amount wrongly credited (A) 8,000 8,000 8,000
Amount to be credited
Interest on capital @ 10% 2,700 2,100 1,500
Interest on drawings (250) (200) (150)
Profit share (1:1:1) 6,100 6,100 6,100
Total (B) 8,550 8,000 7,450
Difference (B – A) 550 (550)
Credit Debit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
2017
Mar. Anil’s Capital A/c Dr. 550
31 To Mohan’s Capital A/c 550
(Being profit adjusted among all partners)

Q.35 Dinker, and Ravinder were partners sharing profits and losses in the ratio of 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2017.

Account Name Debit (₹) Credit (₹)
Capital:
Dinker 2,35,000
Ravinder 1,63,000
Drawings:
Dinker 6,000
Ravinder 5,000
Opening Stock 35,100
Purchases & Sales 2,85,000 3,75,000
Carriage inward 2,200
Returns 3,000 2,200
Stationery 1,200
Wages 12,500
Bills Receivables & Bills payables 45,000 32,000
Discount 900 400
Salaries 12,000
Rent & Taxes 18,000
Insurance Premium 2,400
Postage 300
Sundry expenses 1,100
Commission 3,200
Debtors and Creditors 95,000 40,000
Building 1,20,000
Plant & Machinery 80,000
Investments 1,00,000
Furniture & Fixture 26,000
Bad Debts 2,000
Bad debts provision 4,600
Loan 35,000
Legal Expenses 200
Audit fee 1,800
Cash in hand 13,500
Cash at Bank 23,000
8,91,200 8,91,200

Prepare final accounts for the year ended December 31, 2017 with following adjustment:

  1. Stock on December 31, 2017 was ₹42,500.
  2. A provision is to be made for bad debts at 5% on debtors.
  3. Rent outstanding was ₹1,600.
  4. Wages outstanding were ₹1,200.
  5. Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.
  6. Dinker and Ravinder are entitled to a salary of ₹2,000 per annum.
  7. Ravinder is entitled to a commission ₹1,500.
  8. Depreciation is to be charged on building @ 4%, Plant and machinery 6% and Furniture and Fixture @ 5%.
  9. Outstanding interest on loan amounted to ₹350.

Ans
Trading A/c

For the year ending 31st December, 2017

Particulars Particulars
To opening stock 35,100 By sales
To purchases 3,75,800
2,85,000 Less: ret. 3,000 3,72,800
Less: returns 2,200 2,82,800 By closing stock 42,500
To carriage inwards 2,200
To wages 12,500
Add. Out. 1,200 13,700
To gross profit 81,500
4,15,300 4,15,300

Profit and Loss A/c

for the year ending 31st December, 2017

Particulars Particulars
To salaries 12,000 By gross profit 81,500
To disc. allowed 900 By prov. for b/d 4,600
To stationery 1,200 By disc. recd. 400
To postage 300 By commission 3,200
To sundry expenses 1,100
To rent and taxes
18,000
Add: Out. 1,600 19,600
To provision for B/Ds
4,750
Add: Bad debts 2,000 6,750
To insurance 2,400
To depreciation on
Building 4,800
Plant & mach. 4,800
Fix. & fitting 1,300 10,900
To o/s int. on loan 350
To audit fees 1,800
To legal expenses 200
To P & L Appropriation 32,200
89,700 89,700

Profit and Loss Appropriation A/c

for the year ended 31st December 2017

Particulars Particulars
To interest on cap. By P & L A/c 32,200
Dinker 9,400 By Int. on drawing
Ravinder 6,520 15,920 Dinker 180
To salaries Ravinder 150 330
Dinker 2,000
Ravinder 2,000 4,000
To comm. (Ravinder) 1,500
To pro. t/f to capitals
Dinker 7,407
Ravinder 3,703 11,110
32,530 32,530

Partners’ Capital Accounts

Particulars Dinker Ravinder Particulars Dinker Ravinder
To Drawings 6,000 5,000 By Bal. b/d 2,35,000 1,63,000
To Int. on draw. 180 150 By Salary 2,000 2,000
To Bal. c/d 2,47,627 1,71,573 By Int. on capitals 9,400 6,520
By P & L App. 7,407 3,703
By Commission 1,500
2,53,807 1,76,723 2,53,807 1,76,723

Balance Sheet

as on 31.12.2017

Liabilities Assets
Capital Cash in hand 13,500
Dinker 2,47,627 Cash at bank 23,000
Ravinder 1,71,573 4,19,200 Closing stock 42,500
Loan 35,000 Bills receivable 45,000
Out. Interest 350 35,350 Debtors 95,000
Creditors 40,000 (-) Prov. 4,750 90,250
Bills payable 32,000 Investments 1,00,000
Rent outstanding 1,600 Furniture and fix. 24,700
Wages outstanding 1,200 Plant and mach. 75,200
Building 1,15,200
5,29,350 5,29,350

Q.36 Kajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following balances were extracted from the books of account for the year ended March 31, 2015.

Account Name Debit (₹) Credit (₹)
Capital:
Kajol 1,15,000
Sunny 91,000
Current accounts (01/04/2005)
Kajol 4,500
Sunny 3,200
Drawings:
Kajol 6,000
Sunny 3,000
Opening Stock 22,700
Purchases & Sales 1,65,000
Freight inward 1,200
Returns 2,000
Printing & Stationery 900
Wages 5,500
Bills Receivables & Bills payables 25,000
Discount 400
Salaries 6,000
Rent 7,200
Insurance Premium 2,000
Travelling Exp. 700
Sundry expenses 1,100
Commission 1,600
Debtors and Creditors 74,000 78,000
Building 85,000
Plant & Machinery 70,000
Motor car 60,000
Furniture & Fixture 15,000
Bad Debts 1,500
Provision for doubtful debts 2,200
Loan 25,000
Legal Expenses 300
Audit fee 900
Cash in hand 7,500
Cash at Bank 12,000
5,78,100 5,78,100

Prepare final accounts for the year ended March, 31 2015 with following adjustments:

1. Stock on March 31, 2015 was ₹37,500.
2. Bad debts ₹3,000; Provision for bad debts is to be made at 5% on debtors.
3. Rent prepaid were ₹1,200.
4. Wages outstanding were ₹2,200.
5. Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be charged @ 5% per annum.
6. Kajol is entitled to a salary of ₹1,500 per annum.
7. Prepaid insurance was ₹500.Depreciation was charged on building @ 4%; Plant and machinery @ 5%; motor car @ 10% and furniture and fixture @ 5%.
8. Goods worth ₹7,000 were destroyed by fire on January 20, 2015. The Insurance Company agreed to pay ₹5,000 in full settlement of the claim.
Ans
Trading A/c

for the year ending 31st March, 2015

Particulars Particulars
To opening stock 22,700 By sales
To purchases 2,35,800
1,65,000 Less: ret. 2,000 2,33,800
Less: returns 3,200 By closing stock 37,500
Less: loss fire 7,000 1,54,800
To carriage inwards 1,200
To wages 5,500
Add. Out. 2,200 7,700
To gross profit 84,900
2,71,300 2,71,300

Profit and Loss A/c

for the year ending 31st March, 2015

Particulars Particulars
To salaries 6,000 By gross profit 84,900
To disc. allowed 400 By disc. recd. 800
To printing & stationery 900 By commission 1,600
To travelling exp. 700 By insurance co. 5,000
To sundry expenses 1,100
To rent 7,200
Less: prepaid 1,200 6,000
To bad debts 1,500
Add: Bad debts 3,000 4,500
To prov. for b/d 3,550
Less: existing 2,200 1,350
To insurance 2,000
Less: prepaid 500 1,500
To depreciation on
Building 3,400
Plant & mach. 3,500
Motor car 6,000
Fur. & fix 750 13,650
To goods lost by fire 7,000
To audit fees 900
To legal expenses 300
To P & L Appropriation 48,000
92,300 92,300

Profit and Loss Appropriation A/c

for the year ended 31st March 2015

Particulars Particulars
To interest on cap. By P & L A/c 48,000
Kajol 6,900 By Int. on draw.
Sunny 5,460 12,360 Kajol 150
To salaries Sunny 75 225
Kajol 1,500
To pro. t/f to current
Kajol 20,619
Sunny 13,746 34,365
48,225 48,225

Partners’ Current Accounts

Particulars Kajol Sunny Particulars Kajol Sunny
To Bal. b/d 3,200 By Bal. b/d 4,500
To drawings 6,000 3,000 By Salary 1,500
To Int. on draw. 150 75 By Int. on capitals 6,900 5,460
To Bal. c/d 27,369 12,931 By P & L App. 20,619 13,746
33,519 19,206 33,519 19,206

Balance Sheet

as on 31.03.2015

Liabilities Assets
Capital Cash in hand 7,500
Kajol 1,15,000 Cash at bank 12,000
Sunny 91,000 2,06,000 Closing stock 37,500
Current Bills receivable 25,000
Kajol 27,369 Debtors 74,000
Sunny 12,931 40,300 (-) Fur. B/D3,000
Loan 25,000 (-) Pro. 3,550 67,450
Creditors 78,000 Furniture and fix. 14,250
Bills payable 21,000 Motor car 54,000
Wages outstanding 2,200 Plant and mach. 66,500
Building 81,600
Prepaid rent 1,200
Prepaid insurance 500
Insurance claim 5,000
3,72,500 3,72,500

Q.37 How will you deal with a change in profit sharing ratio among existing partners? Take imaginary figures to illustrate your answer?
Ans
Change in the profit sharing ratio among the existing partners means it is reconstitution of the firm without admission of a new partners or retirement or death of a partner. A change in the profit-sharing ratio in a partnership means, one (or more) partners acquires share of profit in the business from another partners.

Therefore the aggregate amount of gain by one (or more) partners is equal to the aggregate amount of sacrifice made by the other partners.

If share of profit of one or more partners increase then share of profit of one or more partners decreases.

For Example, Sam and Rey are partners in a firm sharing profits in the ratio of 3:2. They have decided to share profits equally in future. It means Sam sacrifices and Rey gains. The sacrifice or gain is calculated as follows:

Sacrificing/ Gaining share = Old share – New Share

Sam = 3 5 1 2 = 6-5 10 = 1 10 (sacrifice made) Rey = 2 5 1 2 = 4-5 10 = ( 1 10 ) (Being nagative, it’s a gain) MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8D9F@

It is clear from the above that Sam is forgoing (sacrificing) 1/10th of his share of profit in favour of Rey. Rey being the gaining partner should compensate Sam, the sacrificing partner by paying goodwill, i.e., by paying an amount equal to 1/10th of the value of goodwill.

Q.38 Harshad and Dhiman are in partnership since April 01, 2016. No partnership agreement was made. They contributed ₹4,00,000 and ₹1,00,000 respectively as capital. In addition, Harshad advanced an amount of ₹1,00,000 to the firm on October 01, 2016. Due to long illness, Harshad could not participate in business activities from August 1 to September 30, 2016. The profits for the year ended March 31, 2017 amounted to ₹1,80,000.

Dispute has arisen between Harshad and Dhiman.

Harshad Claims:
1. He should be given interest @10% per annum on capital and loan;
2. Profit should be distributed in proportion of capital;

Dhiman Claims:
1. Profits should be distributed equally;
2. He should be allowed ₹2,000 per month as remuneration for the period he managed the business. In the absence of Harshad;
3. Interest on capital and loan should be allowed @6% p.a.

You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.
Ans
In the absence of any agreement among partners, provisions of Partnership Act, 1932 will apply.

Decision on Harshad’s claim:

  1. Interest on capital will not be allowed to partners.
  2. Profits should be distributed equally among the partners.

Decision on Dhiman’s claim:

  1. Profits should be distributed equally among the partners.
  2. Salary will not be allowed to partners.
  3. Interest on capital will not be allowed to partners.

Profit and Loss Appropriation A/c

Particulars Particulars
To interest on loan By P & L A/c 1,80,000
Harshad 3,000
To Profit t/fd to
Harshad 88,500
Dhiman 88,500
1,80,000 1,80,000

Interest on loan = ₹1,00,000 x 6 100 x 6 12 = ₹3,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@6FF1@

Q.39 Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of ₹5,00,000 and ₹3,00,000 respectively on October 01, 2016. Aakriti advanced ₹20,000 by way of loan to the firm without any agreement as to interest. Profit and loss account for the year ended March 31, 2017 showed profit of ₹43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them by preparing profit and loss Appropriation Account. Also give reason in support of your answer.

Ans
Profit and Loss Appropriation A/c

Particulars Particulars
To interest on loan By P & L A/c 43,000
Aakriti 600
To Profit t/fd to
Harshad 21,200
Dhiman 21,200
43,000 43,000

Interest on loan = ₹20,000 × 6 100 × 6 12 = ₹600 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@6D31@

Q.40 The partnership agreement between Maneesh and Girish provides that:
1. Profits will be shared equally;
2. Maneesh will be allowed a salary of ₹400 p.m;
3. Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
4. 7% p.a. interest will be allowed on partner’s fixed capital;
5. 5% p.a. interest will be charged on partner’s annual drawings;
6. The fixed capitals of Maneesh and Girish are ₹1,00,000 and ₹80,000, respectively. Their annual drawings were ₹16,000 and ₹14,000 respectively. The net profit for the year ending March 31, 2015 amounted to ₹40,000;

Prepare firm’s Profit and Loss Appropriation Account.
Ans
Profit and Loss Appropriation A/c

Particulars Particulars
To Salary By P & L A/c 40,000
Maneesh 4,800 By Int. on
To Int. on capital drawings
Maneesh 7,000 Maneesh 800
Girish 5,600 Girish 700
To Girish’s com. 3,520
To profit t/fd to current accounts
Maneesh 10,290
Girish 10,290
41,500 41,500

Interest on drawings: Maneesh = ₹16,000 × 5 100 = ₹800 Girish = ₹14,000 × 5 100 = ₹700 Commission of Girish = 10% of (₹40,000- ₹4,800) MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A18F@

Q.41 Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of ₹20,00,000, ₹18,00,000 and ₹16,00,000, respectively. The profit for the year ended March 2017 amounted to ₹1,35,000 and the partner’s drawings had been Rahul ₹50,000, Rohit ₹50,000 and Karan ₹40,000. The profits are distributed among partner’s in the ratio of 3:2:1. Calculate the interest on capital @5% p.a.
Ans

Calculation of interest on capital: Rahul = 20,00,000 x 5 100 = ₹1,00,000 Rohit = 18,00,000 x 5 100 = ₹90,000 karan = 16,00,000 x 5 100 = ₹80,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGdbGaaeyyaiaabYgacaqGJbGaaeyDaiaabYgacaqGHbGaaeiDaiaabMgacaqGVbGaaeOBaiaabccacaqGVbGaaeOzaiaabccacaqGPbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGJbGaaeyyaiaabchacaqGPbGaaeiDaiaabggacaqGSbGaaeOoaiaabccaaeaacaqGsbGaaeyyaiaabIgacaqG1bGaaeiBaiaabccacaqGGaGaaeypaiaabccacaqGYaGaaeimaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeynaaqaaiaabgdacaqGWaGaaeimaaaacaqG9aGaaeiiaiaabcgacaqGGaGaaeymaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdaaeaacaqGsbGaae4BaiaabIgacaqGPbGaaeiDaiaabccacaqGGaGaaeypaiaabccacaqGXaGaaeioaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeynaaqaaiaabgdacaqGWaGaaeimaaaacaqG9aGaaeiiaiaabcgacaqGGaGaaeyoaiaabcdacaqGSaGaaeimaiaabcdacaqGWaaabaGaae4AaiaabggacaqGYbGaaeyyaiaab6gacaqGGaGaaeypaiaabccacaqGXaGaaeOnaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeynaaqaaiaabgdacaqGWaGaaeimaaaacaqG9aGaaeiiaiaabcgacaqGGaGaaeioaiaabcdacaqGSaGaaeimaiaabcdacaqGWaaaaaa@A8F8@

Q.42 Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of ₹2,50,000 and Rs. 1,50,000 respectively. On October 01, 2016 they decided that their capitals should be ₹2,00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @10% p.a. Calculate interest on capital as on March 31, 2017.
Ans

Calculation of interest on capital: Sunflower = (₹2,50,000 × 10 100 × 6 12 ) + (₹2,00,000 × 10 100 × 6 12 ) = (₹12,500) + (₹10,000) = ₹22,500 Pink = (₹1,50,000 × 10 100 × 6 12 ) + (₹2,00,000 × 10 100 × 6 12 ) = (₹7,500) + (₹10,000) = ₹17,500 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@0C58@

Q.43 On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹4,00,000 and ₹3,00,000 and ₹2,00,000, respectively. Subsequently it was discovered that the interest on capital @10% p.a. had been omitted. The profit for the year amounted to ₹1,50,000 and the partner’s drawings had been Mountain ₹20,000, Hill ₹15,000 and Rock ₹10,000.
Calculate interest on capital.
Ans
Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Mountain Hill Rock
Closing capital 4,00,000 3,00,000 2,00,000
Add: Drawings 20,000 15,000 10,000
Less: Profits (50,000) (50,000) (50,000)
3,70,000 2,65,000 1,60,000

Calculation of interest on capital: Mountain = ₹3,70,000 × 10 100 = ₹37,000 Hill = ₹2,65,000 × 10 100 = ₹26,500 Rock = ₹1,60,000 × 10 100 = ₹16,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B40C@

Q.44 Following is the extract of the Balance Sheet of Neelkant and Mahdev as on March 31, 2017:

Balance Sheet as at March 31, 2017
Liabilities Assets
Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000
Mahadev’s Capital 10,00,000
Neelkant’s Current A/c 1,00,000
Mahadev’s Current A/c 1,00,000
P & L Appropriation

(March 2017)

8,00,000
30,00,000 30,00,000

During the year Mahadev’s drawings were ₹30,000. Profits during 2016-2017 is ₹10,00,000.

Calculate interest on capital @ 5% p.a. for the year ending March 31, 2017.
Ans

Calculation of interest on Capital: Neelkant = ₹10,00,000 × 5 100 = ₹50,000 Mahadev = ₹10,00,000 × 5 100 = ₹50,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLnhiov2DGi1BTfMBaeXafv3ySLgzGmvETj2BSbqefm0B1jxALjhiov2Daebbfv3ySLgzGueE0jxyaibaieYlf9irVeeu0dXdh9vqqj=hEeeu0xXdbba9frFj0=OqFfea0dXdd9vqaq=JfrVkFHe9pgea0dXdar=Jb9hs0dXdbPYxe9vr0=vr0=vqpWqaaeaabiGaciaacaqabeaadaqaaqaaaOabaeqabaGaae4qaiaabggacaqGSbGaae4yaiaabwhacaqGSbGaaeyyaiaabshacaqGPbGaae4Baiaab6gacaqGGaGaae4BaiaabAgacaqGGaGaaeyAaiaab6gacaqG0bGaaeyzaiaabkhacaqGLbGaae4CaiaabshacaqGGaGaae4Baiaab6gacaqGGaGaae4qaiaabggacaqGWbGaaeyAaiaabshacaqGHbGaaeiBaiaabQdaaeaacaqGobGaaeyzaiaabwgacaqGSbGaae4AaiaabggacaqGUbGaaeiDaiaabccacaqG9aGaaeiiaiaabcgacaqGXaGaaeimaiaabYcacaqGWaGaaeimaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEaiaabccadaWcaaqaaiaabwdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiiaiaab2dacaqGGaGaaeiyaiaabwdacaqGWaGaaeilaiaabcdacaqGWaGaaeimaaqaaiaab2eacaqGHbGaaeiAaiaabggacaqGKbGaaeyzaiaabAhacaqGGaGaaeypaiaabccacaqGGbGaaeymaiaabcdacaqGSaGaaeimaiaabcdacaqGSaGaaeimaiaabcdacaqGWaGaaeiiaiaabIhacaqGGaWaaSaaaeaacaqG1aaabaGaaeymaiaabcdacaqGWaaaaiaabccacaqG9aGaaeiiaiaabcgacaqG1aGaaeimaiaabYcacaqGWaGaaeimaiaabcdaaaaa@9182@

Q.45 Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2017.

Date
May 01, 2017 12,000
July 31, 2017 6,000
September 30, 2017 9,000
November 30, 2017 12,000
January 01, 2018 8,000
March 31, 2018 7,000

Interest on drawings is charged @ 9% p.a.

Calculate interest on drawings.
Ans

Date Amount (₹) Period (months) Product (₹)
May 01, 2017 12,000 11 1,32,000
July 31, 2017 6,000 8 48,000
Sept. 30, 2017 9,000 6 54,000
Nov. 30, 2017 12,000 4 48,000
Jan 01, 2018 8,000 3 24,000
Mar. 31, 2018 7,000 0
3,06,000

Interest on Rishi’s drawings: = Sum of the products × rate × 1 12 =₹3,06,000 × 9 100 × 1 12 = ₹2,295 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8CE6@

Q.46 The capital accounts of Moli and Golu showed balances of ₹40,000 and ₹20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @12% p.a. Golu advanced a loan of ₹10,000 to the firm on August 01, 2016.

During the year, Moli withdrew ₹1,000 per month at the beginning of every month whereas Golu withdrew ₹1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was ₹20,950. Calculate interest on drawings show distribution of profits and prepare partner’s capital accounts.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To Int. on capital By P & L A/c 20,950
Moli 4,000 By Int. on
Golu 2,000 drawings
To Int. on loan Moli 780
Golu 400 Golu 660
To profit t/fd to capital accounts
Moli 9,594
Golu 6,396
22,390 22,390

Partners’ Capital Accounts

Particulars Moli ₹ Golu ₹ Particulars Moli ₹ Golu ₹
To drawings 12,000 12,000 By Bal. b/d 40,000 20,000
To Int. on draw. 780 660 By Int. on
To Bal. c/d 40,814 15,736 capitals 4,000 2,000
By P & L App. 9,594 6,396
53,594 28,396 53,594 28,396

Interest on Golu’s loan: = ₹10,000 × 6 100 × 8 12 Interest on drawings: = Total drawings × rate × average period × 12 Moli = ₹12,000 × 12 100 × 6 1 2 12 = ₹780 Golu = ₹12,000 × 12 100 × 5 1 2 12 = ₹660 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@D269@

Q.47 Rakesh, and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of ₹40,000 and ₹30,000, respectively. They withdrew from the firm the following amounts for their personal use:

Rakesh Month
May 31, 2016 600
June 30, 2016 500
August 31, 2016 1,000
November 1, 2016 400
December 31, 2016 1,500
January 31, 2017 300
March 01, 2017 700
Rohan At the beginning of each month 400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts are closed on March 31, 2017 every year.
Ans

Date Amount (₹) Period (months) Product (₹)
May 31, 2016 600 10 6,000
June 30, 2016 500 9 4,500
Aug. 31, 2016 1,000 7 7,000
Nov. 01, 2016 400 5 2,000
Dec. 31, 2016 1,500 3 4,500
Jan 31, 2017 300 2 600
March 01, 2017 700 1 700
25,300

Interest on drawings: = Sum of the products × rate × 1 12 Interest on Rakesh’s drawings: = ₹25,300 × 6 100 × 1 12 = ₹126.50 Interest on Rohan’s drawings: = ₹4,800 × 6 100 × 6 1 2 12 = ₹156 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@D19E@

Q.48 Himanshu withdrew ₹2,500 at the end Month of each month. The partnership deed provides for charging the interest on drawings @ 12% p.a. Calculate interest on Himanshu’s drawings for the year ending 31st March, 2017.
Ans

Interest on drawings: = total drawings × rate × Averageperiod 12 Interest on Himanshu’s drawings: = ₹30,000 × 12 100 × 5.5 12 = ₹1650 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@AD09@

Q.49 Bharam is a partner in a firm. He withdrew ₹3,000 at the starting of each month for 12 months. The books of the firm close on March 31 every year. Calculate interest on drawings if the rate of interest is 10% p.a.
Ans

Interest on drawings: = total drawings × rate × Averageperiod 12 Interest on Bharam’s drawings: = ₹36,000 × 10 100 × 6.5 12 = ₹1950 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGKbGaaeOCaiaabggacaqG3bGaaeyAaiaab6gacaqGNbGaae4CaiaabQdaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaab2dacaqGGaGaaeiDaiaab+gacaqG0bGaaeyyaiaabYgacaqGGaGaaeizaiaabkhacaqGHbGaae4DaiaabMgacaqGUbGaae4zaiaabohacaqGGaGaaeiEaiaabccacaqGYbGaaeyyaiaabshacaqGLbGaaeiiaiaabIhacaqGGaWaaSaaaeaacaqGbbGaaeODaiaabwgacaqGYbGaaeyyaiaabEgacaqGLbGaaGjbVlaabchacaqGLbGaaeOCaiaabMgacaqGVbGaaeizaaqaaiaabgdacaqGYaaaaaqaaiaabMeacaqGUbGaaeiDaiaabwgacaqGYbGaaeyzaiaabohacaqG0bGaaeiiaiaab+gacaqGUbGaaeiiaiaabkeacaqGObGaaeyyaiaabkhacaqGHbGaaeyBaiaabEcacaqGZbGaaeiiaiaabsgacaqGYbGaaeyyaiaabEhacaqGPbGaaeOBaiaabEgacaqGZbGaaeOoaaqaaiaabccacaqGGaGaaeiiaiaabccacaqGGaGaaeypaiaabccacaqGZaGaaeOnaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaaeymaiaabcdaaeaacaqGXaGaaeimaiaabcdaaaGaaeiEamaalaaabaGaaeOnaiaab6cacaqG1aaabaGaaeymaiaabkdaaaGaaeypaiaabccacaqGGbGaaeiiaiaabgdacaqG5aGaaeynaiaabcdaaaaa@AB19@

Q.50 Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were ₹2,50,000 and ₹1,50,000, respectively. They share profits equally. On July 01, 2017 they decided that their capitals should be ₹1,00,000 each. The necessary adjustments in the capitals were made by introducing or withdrawing cash by the partner’s. Interest on capital is allowed @ 8% p.a.
Compute interest on capital for both the partners for the year ending on March 31, 2018.
Ans

Calculation of interest on capital: Raj = (₹2,50,000 × 8 100 × 3 12 ) + (₹1,00,000 × 8 100 × 9 12 ) = (₹5,000) + (₹6,000) = ₹11,000 Neeraj = (₹1,50,000 × 8 100 × 3 12 ) + (₹1,00,000 × 8 100 × 9 12 ) = (₹3,000) + (₹6,000) = ₹9,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@FEFB@

Q.51 Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during 2017 were ₹24,000 and ₹16,000, respectively.

Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly, throughout the year.
Ans

Interest on drawings: Amit = ₹24,000 × 10 100 × 6 12 = ₹1,200 Bhola = ₹16,000 × 10 100 × 6 12 == ₹800 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@8A9B@

Q.52 Harish is a partner in a firm. He withdrew the following amounts during the year 2017:

Date
February 01 4,000
May 01 12,000
June 30 4,000
October 31 12,000
December 31 4,000

Interest on drawings is to be charged @ 7½ % p.a.

Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.
Ans

Date Amount (₹) Period (months) Product (₹)
Feb 01, 2017 4,000 11 44,000
May 01, 2017 10,000 8 80,000
June 30, 2017 4,000 6 24,000
Oct. 31, 2017 12,000 2 24,000
Dec. 31, 2017 4,000 0
1,72,000

Interest on drawings: = Sum of the products × rate × 1 12 Interest on Harish’s drawings: = ₹1,72,000 × 7.5 100 × 1 12 = ₹1,075 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=xb9adbaqaaeaacaGaaiaabeqaamaaeaqbaaGceaqabeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGKbGaaeOCaiaabggacaqG3bGaaeyAaiaab6gacaqGNbGaae4CaiaabQdaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaab2dacaqGGaGaae4uaiaabwhacaqGTbGaaeiiaiaab+gacaqGMbGaaeiiaiaabshacaqGObGaaeyzaiaabccacaqGWbGaaeOCaiaab+gacaqGKbGaaeyDaiaabogacaqG0bGaae4CaiaabccacaqG4bGaaeiiaiaabkhacaqGHbGaaeiDaiaabwgacaqGGaGaaeiEaiaabccadaWcaaqaaiaabgdaaeaacaqGXaGaaeOmaaaaaeaacaqGjbGaaeOBaiaabshacaqGLbGaaeOCaiaabwgacaqGZbGaaeiDaiaabccacaqGVbGaaeOBaiaabccacaqGibGaaeyyaiaabkhacaqGPbGaae4CaiaabIgacaqGNaGaae4CaiaabccacaqGKbGaaeOCaiaabggacaqG3bGaaeyAaiaab6gacaqGNbGaae4CaiaabQdaaeaacaqGGaGaaeiiaiaabccacaqGGaGaaeiiaiaab2dacaqGGaGaaeymaiaabYcacaqG3aGaaeOmaiaabYcacaqGWaGaaeimaiaabcdacaqGGaGaaeiEamaalaaabaGaae4naiaab6cacaqG1aaabaGaaeymaiaabcdacaqGWaaaaiaabIhadaWcaaqaaiaabgdaaeaacaqGXaGaaeOmaaaacaqG9aGaaeiiaiaabcgacaqGGaGaaeymaiaabYcacaqGWaGaae4naiaabwdaaeaaaaaa@A3D9@

Q.53 Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are ₹2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn:

1. In the beginning of every month.
2. In the middle of every month and
3. At the end of every month.
Ans

Interest on Menon’s drawings: Beginning = ₹24,000 × 10 100 × 6.5 12 = ₹1,300 Middle = ₹24,000 × 10 100 × 6 12 == ₹1,200 End = ₹24,000 × 10 100 × 5.5 12 = ₹1,100 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B33A@

Q.54 On March 31, 2017 after the close of books of accounts the capital accounts of Ram, Shyam and Mohan showed balance of ₹24,000, ₹18,000 and ₹12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017 amounted to ₹36,000 and the partner’s drawings had been Ram ₹3,600; Shyam ₹4,500 and Mohan ₹2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1.

Calculate interest on capital.
Ans
Interest on capital is computed on opening capital.

Calculation of opening capital:

Particulars Ram Shyam Mohan
Closing capital 24,000 18,000 12,000
Add: Drawings 3,600 4,500 2,700
Less: Profits (18,000) (12,000) (6,000)
(3:2:1)
9,600 10,500 8,700

Calculation of interest on capital: Ram = ₹9,600 × 5 100 = ₹480 Shyam = ₹10,500 × 5 100 = ₹525 Mohan = ₹8,700 × 5 100 = ₹435 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@991C@

Q.55 Azad and Benny are equal partners. Their capitals are ₹40,000 and ₹80,000, respectively. After the accounts for the year have been prepared it is discovered that interest at 5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. It is decided to make an adjustment entry at the beginning of the next year. Record the necessary journal entry.
Ans

Calculation of interest on capital: Azad = ₹40,000 × 5 100 = ₹2,000 Benny = ₹80,000 × 5 100 = ₹4,000 Total interest on capital = ₹6,000 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@A5B1@

Table for Adjustment:

Particulars Azad Benny
Amount wrongly credited (A) 3,000 3,000
Amount to be credited
Interest on capital @ 5% (B) 2,000 4,000
Difference (B – A) (1,000) 1,000
Debit Credit

Journal Entries

Date Particulars LF Dr. (₹) Cr. (₹)
Azad’s Capital A/c Dr. 1,000
To Benny’s Capital A/c 1,000
(Being profit adjusted among all partners)

Q.56 Anju, Manju and Mamta are partners whose fixed capitals were ₹10,000, ₹8,000 and ₹6,000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during three years remained as follows:

Year Anju Manju Mamta
2014 4 3 5
2015 3 2 1
2016 1 1 1

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan 2015.
Ans

Calculation of interest on capital: Anju = ₹10,000 × 5 100 = ₹500 Manju = ₹8,000 × 5 100 = ₹400 Mamta = ₹6,000 × 5 100 = ₹300 Total interest on capital = ₹1,200 MathType@MTEF@5@5@+=feaaguart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbwvMCKfMBHbqeduuDJXwAKbYu51MyVXgaruWqVvNCPvMCG4uz3bqefqvATv2CG4uz3bIuV1wyUbqeeuuDJXwAKbsr4rNCHbGeaGqipv0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=xfr=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@B696@

Table Showing Adjustment:

Particulars Anju Manju Mamta
Amount wrongly credited by way of profits
2013 (₹1,200 in 4:3:5) 400 300 500
2014 (₹1,200 in 3:2:1) 600 400 200
2015 (₹1,200 in 1:1:1) 400 400 400
Total amount credited (A) 1,400 1,100 1,100
Amount to be credited
Int. on capital for 3 years (B) 1,500 1,200 900
Difference (B – A) 100 100 (200)
Credit Credit Debit

Journal Entries:

Date Particulars LF Dr. (₹) Cr. (₹)
Mamta’s Capital A/c Dr. 200
To Anuj’s Capital A/c 100
To Manju’s Capital A/c 100
(Being entry for interest on capital not made, now provided)

Q.57 Arvind and Anand are partners sharing Profits and Losses in the ratio 3:1 Balances in their Capital Account on April 1, 2019 were Arvind Rs.4,40,000 and Anand Rs.2,60,000 as per their agreement partners were entitled to interest on Capital @5% p.a. and Interest on Drawing to was to be charged @ 6% p.a. Arvind was allowed an annual Salary of Rs.35,000/ for the additional responsibilities taken up by him. Partners Drawings for the year were Arvind Rs.40,000 and Anand Rs. 28,000. Profit and Loss for the year ending March 31, 2020 Showed a net loss of Rs,32,400. Prepare Profit and Loss Appropriation Account.
Ans
Profit and Loss Appropriation A/c

for the year ended 31st March 2017

Particulars Particulars
To P& L – Loss 32,400 By Int. on
drawings
Arvind 1,200
Anand 840
By loss t/fd to capital accounts
Arvind 22,770
Anand 7,590
32,400 32,400

No salary and interest on capital will be allowed in case of loss.

Interest on drawings:

Arvind = 40,000 × 6/100 × 6/12 = Rs. 1,200
Anand = 28,000 × 6/100 × 6/12 = Rs. 840

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FAQs (Frequently Asked Questions)

1. What is the importance of having a partnership deed?

 The importance of having a partnership deed is as follows:

  1. All of the partners’ rights, obligations, and liabilities are controlled and monitored by it.
  2. It eliminates disagreements between the partners.
  3. The partnership deed reduces misunderstandings about the partners’ profit and loss distribution ratio.
  4. The responsibilities of each partner are clearly stated.
  5. The partnership agreement also specifies the remuneration or salary of the partners and working partners. However, all partners who have contributed money to the company are paid interest.

To study in detail regarding the partnership deed, students can refer to the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2.

2. Is studying from the NCERT Solutions Class 12 Accountancy Partnership Accounts Chapter 2 beneficial for exam preparation?

The NCERT Solutions for Chapter 2 of Class 12 Accountancy provide the students with a quick overview of the main concepts present in the chapter. Made by industry experts in an easy-to-understand language, these solutions are an excellent study resource for learning more about the chapter, revision, and preparing and practising for the examinations. As they are updated regularly with the latest CBSE syllabus, students can rely on them for their studies. With the help of these solutions and other study resources such as NCERT Books, CBSE sample papers, CBSE question papers of the previous years, etc., to get good grades in their examinations.