Double Entry Book Keeping Ts Grewal Vol. i 2019 Solutions for Class 12 Commerce Accountancy Chapter 2 Accounting For Partnership Firms Fundamentals are provided here with simple step-by-step explanations. These solutions for Accounting For Partnership Firms Fundamentals are extremely popular among class 12 Commerce students for Accountancy Accounting For Partnership Firms Fundamentals Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Double Entry Book Keeping Ts Grewal Vol. i 2019 Book of class 12 Commerce Accountancy Chapter 2 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Double Entry Book Keeping Ts Grewal Vol. i 2019 Solutions. All Double Entry Book Keeping Ts Grewal Vol. i 2019 Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.
Page No 2.80:
Question 1:
In the absence of Partnership Deed, what are the rules relation to :
(a) Salaries of partners,
(b) Interest on partners’ capitals
(c) Interest on partners’ loan
(d) Division of profit, and
(e) Interest on partners’ drawings
Answer:
Items (Points) | Provision in the Absence of Partnership Deed | |
(a) | Salaries of Partners | No Salary will be allowed to Partners. |
(b) | Interest on Partners’ Capitals | No interest will be allowed to Partners on Capital |
(c) | Interest on Partners’ Loan | 6% p.a. Interest will be allowed on the amount given by partners in the form of Loans and Advances to firm. |
(d) | Division of Profit | Profits will be shared equally, it is irrespective the amount of capital contributed by partners |
(e) | Interest on Partners’ Drawings | No Interest will be charged on the Drawings of Partners |
Page No 2.80:
Question 2:
Following differences have arisen among P, Q and R. State who is correct in each case:
(a) P used â¹ 20,000 belonging to the firm and made a profit of â¹ 5,000. Q and R want the amount to be given to the firm?
(b) Q used â¹ 5,000 belonging to the firm and suffered a loss of â¹ 1000. He wants the firm to bear the loss?
(c) P and Q want to purchase goods from A Ltd., R does not agree?
(d) Q and R want to admit C as partner, P does not agree?
Answer:
(a) P is bound to pay Rs 20,000 together with profit of Rs 5,000 to the firm because this amount belongs to the firm.
Explanation: As per Principal and Agent relationship, P is principal as well as agent to the firm and to Q and R. As per this rule, any profit earned by an agent (P) by using the firm’s property is attributable to the firm.
(b) Q is liable to pay Rs 5,000 to the firm. As per the Partnership Act, 1932, every partner of a partnership firm is liable to the firm for any loss caused by his/her willful negligence.
Explanation: Here Q is solely responsible for the loss of Rs 1,000 because he used the property of the firm and also represented himself as a principal rather than an agent to the other partners and to the firm.
(c) P and Q may buy goods from A Ltd.
Explanation: As per Partnership Act, 1932, a partner has a right to buy and sell goods without consulting the other partners unless a Public Notice has been given by the partnership firm to restrict the partners to buy and sell.
(d) C will not be admitted because one of the partners P has not agreed to admit C.
Explanation: As per Partnership Act, a new partner cannot be admitted into a firm unless all the existing partners agree on the same decision. In other words, a new partner can be admitted in a partnership firm with the consent of all the existing partners.
Page No 2.81:
Question 3:
A, B and C are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the commencement of the firm, they have faced the following problems :
(a) A wants that interest on capital should be allowed to the partners but B and C do not agree.
(b) B wants that the partners should be allowed to draw salary but A and C do not agree.
(c) C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.
(d) A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.
State how you will settle these disputes if the partners approach you for purpose.
Answer:
|
Disputes |
Possible Judgements |
(a) |
A wants that interest on capital should be allowed to the partners but B and C do not agree. |
As per Partnership Act, no interest on Capital will be allowed. Reason: There is no partnership agreement among A, B and C regarding interest on capital. |
(b) |
B wants that the partners should be allowed to draw salary but A and C do not agree. |
No salary will be allowed to any partner. Reason: There is no partnership agreement. |
(c) |
C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree. |
Interest on partner’s loan (C’s loan) will be allowed at 6% p.a. Reason: As per Partnership Act, in the absence of partnership agreement, interest on partners loan is allowed at 6% p.a. |
(d) |
A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree. |
Profit will be shared equally and not in the capital ratio. Reason: There is no partnership agreement. |
Page No 2.81:
Question 4:
Jaspal and Rosy were partners with capital contribution of â¹ 10,00,000 and â¹ 5,00,000 respectively. They do not have a Partnership Deed. Jaspal wants that profits of the firm should be shared in their capital ratio. Rosy convinced jaspal that profits should be shared equally. Explain how Rosy would have convinced Jaspal for sharing the profit equally.
Answer:
In the absence of partnership deed, the provisions of Indian Partnership Act of 1932 applies. According to the act, if there is no agreement regarding the ratio in which profits are to be shared, then profits (or losses) are to be shared equally among all the partners. Therefore, in this situation Jaspal’s view of distribution of profits in capital ratio is not acceptable and Rosy must have convinced her stating the provisions contained in the Partnership Act, 1932.
Page No 2.81:
Question 5:
Harshad and Dhiman are in partnership since 1st April, 2018. No partnership agreement was made. They contributed â¹ 4,00,000 and â¹ 1,00,000 respectively as capital. In addition, Harshad advanced an amount of â¹ 1,00,000 to the firm on 1st October, 2018. Due to long illness, Harshad could not participate in business activities from 1st August, 2018 to 30th September, 2018. Profit for the year ended 31st March, 2019 was â¹ 1,80,000. Dispute has arisen between Harshad and Dhiman.
Harshad Claims :
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in the ratio of capital;
Dhiman Claims :
(i) Profit should be distributed equally;
(ii) He should be allowed â¹ 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad;
(iii) 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.
Answer:
DISTRIBUTION OF PROFITS
Harshad Claims:
Decisions
(i) If there is no agreement on interest on partner’s capital, according to Indian partnership act 1932, no interest will be allowed to partners.
(ii) If there is no agreement on the matter of profit sharing, according to partnership act 1932, profit shall be distributed equally.
Dhiman Claims:
Decisions
(i) Dhiman claim is justified, according partnership act 1932 if there is no agreement on the matter of profit distribution, profit shall be distributed equally.
(ii) No salary will be allowed to any partner because there is no agreement on matter of remuneration.
(iii) Dhiman’s claim is not justified on the matter of interest on capital but justified on the matter of interest on loan. If there is no agreement on interest on partner’s loan, Interest shall be provided at 6% p.a.
Profit and Loss Adjustment Account
|
|||||
Dr. | for the year ended 31st March, 2019 |
Cr. |
|||
Particulars
|
Amount
(â¹) |
Particulars
|
Amount
(â¹) |
||
Interest on Partner’s Loan | Profit and Loss A/c |
1,80,000
|
|||
Harshad 1,00,000 × (6/100) × (6/12)
|
3,000
|
||||
Profit and Loss Appropriation A/c |
1,77,000
|
||||
1,80,000
|
1,80,000
|
||||
Profit and Loss Appropriation Account
|
|||||
Dr. | for the year ended 31st March, 2019 |
Cr.
|
|||
Particulars
|
Amount
(â¹) |
Particulars
|
Amount
(â¹) |
||
Profit transferred to | Profit and Loss Adjustment A/c |
1,77,000
|
|||
Harshad’s Capital
|
88,500
|
||||
Dhiman’s Capital
|
88,500
|
||||
1,77,000
|
1,77,000
|
||||
Page No 2.81:
Question 6:
A and B are partners from 1st April, 2018, without a Partnership Deed and they introduced capitals of â¹ 35,000 and â¹ 20,000 respectively. On 1st October, 2018, A advanced loan of â¹ 8,000 to the firm without any agreement as to interest. The profit and Loss Account for the year ended 31st March, 2019 shows a profit of â¹ 15,000 but the partners cannot agree on payment of interest and on the basis of division of profits.
You are required to divide the profits between them giving reasons for your method.
Answer:
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on A’s Loan |
240 |
Profit (before Interest) |
15,000 |
|
Profit transferred to: |
|
|
|
|
A’s Capital A/c |
7,380 |
|
|
|
B’s Capital A/c |
7,380 |
14,760 |
|
|
|
15,000 |
|
15,000 |
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Loan
As per the Partnership Act, if there is no partnership agreement regarding rate of interest on loan, it is provided at 6% p.a.
Amount of Loan = Rs 8,000
Time Period (from October 01 to March 31) = 6 months
WN 2 Calculation of Profit Share of each Partner
In the absence of partnership deed, profits of a firm are distributed equally among all the partners.
Profit after Interest on A’s loan = 15,000 − 240 = Rs 14,760
Page No 2.81:
Question 7:
A and B are partners in a firm sharing profits in the ratio of 3 : 2. They had advanced to the firm a sum of â¹ 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.
Answer:
Amount advanced by the Partners = Rs 30,000
Profit sharing ratio = 3 : 2
Time Period (from October 01, 2017 to March 31, 2018) = 6 months
Interest rate = 6% p.a.
Calculation of Interest on Advances
Note: In the absence of a partnership agreement regarding rate of interest on loans and advances, interest is provided at 6% p.a.
Page No 2.82:
Question 8:
X and Y are partners sharing profits and losses in the ratio of 2 : 3 with capitals â¹ 2,00,000 and â¹ 3,00,000 respectively. On 1st October, 2018, X and Y gave loans of â¹ 80,000 and â¹ 40,000 respectively to the firm. Show distribution of profits/losses for the year ended 31st March, 2019 in each of the following alternative cases:
Case 1 : If the profits before interest for the year amounted to â¹ 21,000.
Case 2 : If the profits before interest for the year amounted to â¹ 3,000.
Case 3 : If the profits before interest for the year amounted to â¹ 5,000.
Case 4 : If the loss before interest for the year amounted to â¹ 1,400.
Answer:
Calculation of Interest on Loan
Case 1- If Profits before any interest for the year amounted to â¹ 21,000
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on X’s Loan |
2,400 |
Profit (before interest) |
21,000 |
|
Interest on Y’s Loan |
1,200 |
|
|
|
Profit transferred to |
|
|
|
|
X’s Capital A/c (17,400 × 2/5) |
6,960 |
|
|
|
Y’s Capital A/c (17,400 × 3/5) |
10,440 |
17,400 |
|
|
|
21,000 |
|
21,000 |
|
|
|
|
|
Case 2- If Profits before any interest for the year amounted to â¹ 3,000
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on X’s Loan |
2,400 |
Profit (before interest) |
3,000 |
|
Interest on Y’s Loan |
1,200 |
Loss transferred to- |
|
|
|
|
X’s Capital A/c (600 × 2/5) |
240 |
|
|
|
Y’s Capital A/c (600 × (3/5) |
360 |
600 |
|
|
|
|
|
|
3,600 |
|
3,600 |
|
|
|
|
|
Case 3- If Profits before any interest for the year amounted to â¹ 5,000
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on X’s Loan |
2,400 |
Profit (before interest) |
5,000 |
|
Interest on Y’s Loan |
1,200 |
|
|
|
Profit transferred to: |
|
|
|
|
X’s Capital A/c (1400 × 2/5) |
560 |
|
|
|
Y’s Capital A/c (1400 × 3/5) |
840 |
1,400 |
|
|
|
5,000 |
|
5,000 |
|
|
|
|
|
Case 4- If Loss before any interest for the year amounted to â¹ 1,400
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Loss (before interest) |
1,400 |
Loss transferred to- |
|
|
Interest on X’s Loan |
2,400 |
X’s Capital A/c (5,000 × 2/5) |
2,000 |
|
Interest on Y’s Loan |
1,200 |
Y’s Capital A/c (5,000 × 3/5) |
3,000 |
5,000 |
|
|
|
|
|
|
5,000 |
|
5,000 |
|
|
|
|
|
Page No 2.82:
Question 9:
Bat and Ball are partners sharing the profits in the ratio of 2 : 3 with capitals of â¹ 1,20,000 and â¹ 60,000 respectively. On 1st October, 2018, Bat and Ball gave loans of â¹ 2,40,000 and â¹ 1,20,000 respectively to the firm. Bat had allowed the firm to use his property for business for a monthly rent of â¹ 5,000. The loss for the year ended 31st March, 2019 before rent and interest amounted to â¹ 9,000. Show distribution of profit/loss.
Answer:
Profit and Loss Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Loss (before interest) |
9,000 |
|
|
|
Rent (5,00012) | 60,000 | Loss transferred to: | ||
Interest on Bat’s loan |
7,200 |
Bat’s Capital A/c |
31,920 |
|
Interest on Ball’s loan |
3,600 |
Ball’s Capital A/c |
47,880 |
79,800 |
|
79,800 |
|
79,800 |
|
|
|
|
|
Working Notes:
WN 1 Interest on Partner’s Loan
WN 2 Distribution of Loss to the Partners
Loss after Interest on Partners’ Loan = 9,000 + 60,000 + 7,200 + 3,600 = â¹ 19,800
Page No 2.82:
Question 10:
A and B are partners. A's Capital is â¹ 1,00,000 and B's Capital is â¹ 60,000. Interest on capital is payable @ 6% p.a. B is entitled to a salary of â¹ 3,000 per month. Profit for the current year before interest and salary to B is â¹ 80,000.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
80,000 |
||
A |
6,000 |
|
|
|
|
B |
3,600 |
9,600 |
|
|
|
Salary to B (Rs 3,000 × 12) |
36,000 |
|
|
||
Profit transferred to: |
|
|
|
||
A’s Capital A/c |
17,200 |
|
|
|
|
B’s Capital A/c |
17,200 |
34,400 |
|
|
|
|
80,000 |
|
80,000 |
||
|
|
|
|
Working Notes:
WN1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Page No 2.82:
Question 11:
X, Y and Z are partners in a firm sharing profits in 2 : 2 : 1 ratio. The fixed capitals of the partners were : X â¹5,00,000; Y â¹ 5,00,000 and Z â¹ 2,50,000 respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. Z is to be allowed a salary of â¹ 2,000 per month. The profit of the firm for the year ended 31st March, 2018 after debiting Z's salary was â¹ 4,00,000.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
Interest on Capital: |
|
Profit and Loss A/c |
4,00,000 |
||
X |
50,000 |
|
|
|
|
Y |
50,000 |
|
|
|
|
Z |
25,000 |
1,25000 |
|
|
|
Profit transferred to: |
|
|
|
||
X’s Capital A/c |
1,10,000 |
|
|
|
|
Y’s Capital A/c |
1,10,000 |
|
|
|
|
Z’s Capital A/c |
55,000 |
2,75,000 |
|
|
|
|
4,00,000 |
|
4,00,000 |
||
|
|
|
|
Working Notes:
WN 1 Salary to Z has not been debited to Profit and Loss Appropriation Account. This is because Profit of Rs 4,00,000 is given after adjusting the Z’s salary.
WN 2 Calculation of Interest on Capital
WN 3 Calculation of Profit Share of each Partner
Page No 2.82:
Question 12:
X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of â¹ 8,00,000 and â¹ 6,00,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of â¹ 60,000 which has not been withdrawn. Profit for the year ended 31st March, 2019 before interest on capital but after charging Y's salary amounted to â¹ 2,40,000.
A provision of 5% of the profit is to be made in respect commission to the manager. Prepare an account showing the allocation profits.
Answer:
Profit and Loss Adjustment Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
Manager’s Commission (3,00,000×5%) |
15,000 |
Profit and Loss A/c |
2,40,000 |
|
|
Y’s Salary |
60,000 |
Profit transferred to Profit and Loss |
|
|
|
Appropriation A/c |
2,85,000 |
|
|
|
3,00,000 |
|
3,00,000 |
|
|
|
|
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Salary to Y |
60,000 |
Profit and Loss Adjustment A/c |
2,85,000 |
|
Interest on Capital: |
|
(After manager’s commission) |
|
|
X |
40,000 |
|
|
|
Y |
30,000 |
70,000 |
|
|
Profit transferred to: |
|
|
|
|
X’s Capital A/c |
93,000 |
|
|
|
Y’s Capital A/c |
62,000 |
1,55,000 |
|
|
|
2,85,000 |
|
2,85,000 |
|
|
|
|
|
Working Notes:
WN 1 Calculation of Manager’s Commission
Profit for making Managers’ Commission = 2,40,000 + 60,000 (Y’s Salary) = â¹3,00,000
WN 2 Calculation of Interest on Capital
WN 3 Calculation of Profit Share of each Partner
Profit available for distribution = 2,85,000 − 60,000 − 70,000 = â¹1,55,000
Page No 2.82:
Question 13:
Prem and Manoj are partners in a firm sharing profits in the ratio of 3 : 2. The Partnership Deed provided that Prem was to be paid salary of â¹ 2,500 per month and Manoj was to ger a commission of â¹ 10,000 per year. Interest on capital was to be allowed @ 5% p.a. and interest on drawings was to be charged @ 6% p.a. Interest on Prem's drawings was â¹ 1,250 and on Manoj's drawings was â¹ 425. Interest on Capitals of the partners were â¹ 10,000 and â¹ 7,500 respectively. The firm earned a profit of â¹ 90,575 for the year ended 31st March, 2018.
Prepare Profit and Loss Appropriation Account of the firm.
Answer:
Profit and Loss Appropriation Account |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
Salary to Prem (Rs 2,500 × 12) |
30,000 |
Profit and Loss A/c (Net Profit) |
90,575 |
||
Commission to Manoj |
10,000 |
Interest on Drawings A/c: |
|
||
Interest on Capital: |
|
Prem |
1,250 |
|
|
Prem |
10,000 |
|
Manoj |
425 |
1,675 |
Manoj |
7,500 |
17,500 |
|
|
|
Profit transferred to: |
|
|
|
||
Prem’s Current A/c |
20,850 |
|
|
|
|
Manoj’s Current A/c |
13,900 |
34,750 |
|
|
|
|
92,250 |
|
92,250 |
||
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Profit available for distribution = 90,575 + 1,675 − 30,000 − 10,000 − 17,500
= Rs 34,750
Profit sharing ratio = 3 : 2
Page No 2.83:
Question 14:
Reema and Seema are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly salary of Rs 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were Rs 5,00,000 each and drawings during the year were Rs 60,000 each.
The firm incurred a loss of Rs 1,00,000 during the year ended 31st March, 2018.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.
Answer:
Profit and Loss Appropriation Account
for the year ended March 31, 2018
|
||||||
Dr. |
|
Cr.
|
||||
Particulars
|
Amount
Rs
|
Particulars
|
Amount
Rs
|
|||
Profit and Loss A/c |
1,00,000
|
Interest on Drawings A/c: | ||||
|
Reema |
3,000
|
|
|||
|
|
Seema
|
3,000
|
6,000
|
||
|
|
Loss transferred to |
|
|||
|
|
Reema |
47,000
|
|
||
|
|
Seema |
47,000
|
94,000
|
||
1,00,000
|
1,00,000
|
|||||
Note: Since the firm has incurred loss, no interest on capital and salary will be allowed to the partners. However, interest on drawings will be charged from each of them @ 10% p.a. on the amounts withdrawn by them for an average period of six months.
Page No 2.83:
Question 15:
Bhanu and Partab are partners sharings profits equally. Their fixed capitals as on 1st April, 2018 are â¹ 8,00,000 and â¹ 10,00,000 respectively. Their drawings during the year were â¹ 50,000 and â¹ 1,00,000 respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a. and interest on drawings is to be charged @ 15% p.a. Net Profit for the year ended 31st March, 2019 was â¹ 1,20,000.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||||
Interest on Capital A/c: |
|
Profit and Loss A/c |
1,20,000 |
||||
Bhanu’s Current A/c |
80,000 |
|
Interest on Drawings A/c: |
|
|||
Partap’s Current A/c |
1,00,000 |
1,80,000 |
Bhanu’s Current A/c |
3,750 |
|
||
|
Partap’s Current A/c |
7,500 |
11,250 |
||||
|
Loss transferred to |
|
|||||
|
Bhanu’s Current A/c |
24,375 |
|
||||
|
Partap’s Current A/c |
24,375 |
48,750 |
||||
|
|
||||||
1,80,000 |
1,80,000 |
||||||
Page No 2.83:
Question 16:
Amar and Bimal entered into partnership on 1st April, 2018 contributing â¹ 1,50,000 and â¹ 2,50,000 respectively towards capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of â¹ 1,00,000 for the year ended 31st March 2019.
Pass the Journal entry for interest on capital.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
|
|
|
|
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. |
|
40,000 |
|
|
To Amar’s Current A/c |
|
|
|
15,000 |
|
To Bimal’s Current A/c |
|
|
|
25,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
Working Notes:
WN1: Calculation of Interest on Capital:
Page No 2.83:
Question 17:
Kamal and Kapil are partners having fixed capitals of â¹ 5,00,000 each as on 31st March, 2018. Kamal introduced further capital of â¹ 1,00,000 on 1st October, 2018 whereas Kapil withdrew â¹ 1,00,000 on 1st October, 2018 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned net profit of â¹ 6,00,000 for the year ended 31st March 2019.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
|
|
|
|
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. |
|
1,00,000 |
|
|
To Kamal’s Current A/c |
|
|
|
55,000 |
|
To Kapil’s Current A/c |
|
|
|
45,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
Profit and Loss Appropriation Account for the year ended 31 March 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Capital A/c: |
|
Profit and Loss A/c |
6,00,000 |
|
Kamal |
55,000 |
|
|
|
Kapil |
45,000 |
1,00,000 |
|
|
Profit transferred to: |
|
|
|
|
Kamal’s Current A/c |
2,50,000 |
|
|
|
Kapil’s Current A/c |
2,50,000 |
5,00,000 |
|
|
|
6,00,000 |
|
6,00,000 |
|
|
|
|
|
Working Notes:
WN1: Calculation of Interest on Capital:
Page No 2.83:
Question 18:
Simran and Reema are partners sharing profits in the ratio of 3 : 2. Their capitals as on 31st March, 2018 were â¹ 2,00,000 each whereas Current Accounts had balances of â¹ 50,000 and â¹ 25,000 respectively interest is to be allowed @ 5% p.a. on balances in Capital Accounts. The firm earned net profit of â¹ 3,00,000 for the year ended 31st March 2019.
Pass the Journal entries for interest on capital and distribution of profit. Also prepare Profit and Loss Appropriation Account for the year.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
|
|
|
|
|
|
|
Profit & Loss Appropriation A/c |
Dr. |
|
20,000 |
|
|
To Simran’s Current A/c |
|
|
|
10,000 |
|
To Reema’s Current A/c |
|
|
|
10,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
|
|
|
|
|
|
|
Profit & Loss Appropriation A/c |
|
|
2,80,000 |
|
|
To Simran’s Current A/c |
|
|
|
1,68,000 |
|
To Reema’s Current A/c |
|
|
|
1,12,000 |
|
(Profit transferred to Partners’ Current A/c) |
|
|
|
|
|
|
|
|
|
|
Profit and Loss Appropriation Account for the year ended 31 March 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Capital A/c: |
|
Profit and Loss A/c |
3,00,000 |
|
Simran |
10,000 |
|
|
|
Reema |
10,000 |
20,000 |
|
|
Profit transferred to: |
|
|
|
|
Simran’s Current A/c |
1,68,000 |
|
|
|
Reema’s Current A/c |
1,12,000 |
2,80,000 |
|
|
|
3,00,000 |
|
3,00,000 |
|
|
|
|
|
Working Notes:
WN1: Calculation of Interest on Capital
Page No 2.83:
Question 19:
Anita and Ankita are partners sharing profits equally. Their capitals, maintained following Fluctuating Capital Accounts Method, as on 31st March, 2018 were â¹ 5,00,000 and â¹ 4,00,000 respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. The firm earned net profit of â¹ 2,00,000 for the year ended 31st March, 2019.
Pass the Journal entry for interest on capital.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
|
|
|
|
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. |
|
90,000 |
|
|
To Anita’s Capital A/c |
|
|
|
50,000 |
|
To Ankita’s Capital A/c |
|
|
|
40,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
Working Notes:
WN1: Calculation of Interest on Capital
Page No 2.84:
Question 20:
Ashish and Aakash are partners sharing profit in the ratio of 3 : 2. Their Capital Accounts showed a credit balance of â¹ 5,00,000 and â¹ 6,00,000 respectively as on 31st March, 2019 after debit of drawings during the year of â¹ 1,50,000 and â¹ 1,00,000 respectively. Net profit for the year ended 31st March, 2019 was â¹ 5,00,000. Interest on capital is to be allowed @ 10% p.a.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
|
|
|
|
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. |
|
1,35,000 |
|
|
To Ashish’s Capital A/c |
|
|
|
65,000 |
|
To Aakash’s Capital A/c |
|
|
|
70,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
|
|
|
|
3,65,000 |
|
|
Profit & Loss Appropriation A/c |
|
|
|
2,19,000 |
|
To Ashish’s Capital A/c |
|
|
|
1,46,000 |
|
To Akash’s Capital A/c |
|
|
|
|
|
(Profit transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
|
Profit and Loss Appropriation Account for the year ended 31 March 2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital A/c: |
|
Profit and Loss A/c |
5,00,000 |
||
Ashish |
65,000 |
|
|
|
|
Aakash |
70,000 |
1,35,000 |
|
|
|
Profit transferred to: |
|
|
|
||
Ashish’s Capital A/c |
2,19,000 |
|
|
|
|
Aakash’s Capital A/c |
1,46,000 |
3,65,000 |
|
|
|
|
5,00,000 |
|
5,00,000 |
||
|
|
|
|
Working Notes:
WN1: Calculation of Opening Capital:
Particulars |
Ashish |
Aakash |
Capital at the end |
5,00,000 |
6,00,000 |
Add: Drawings made |
1,50,000 |
1,00,000 |
Capital at the beginning |
6,50,000 |
7,00,000 |
WN2: Calculation of Interest on Capital
Page No 2.84:
Question 21:
Naresh and Sukesh are partners with capitals of â¹ 3,00,000 each as on 31st March, 2019. Naresh had withdrawn â¹ 50,000 against capital on 1st October, 2018 and also â¹ 1,00,000 besides the drawings against capital. Sukesh also had drawings of â¹ 1,00,000.
Interest on capital is to be allowed @ 10% p.a.
Net profit for the year was â¹ 2,00,000, which is yet to be distributed.
Pass the Journal entries for interest on capital and distribution of profit.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
|
|
|
|
|
March 31 |
Profit & Loss Appropriation A/c |
Dr. |
|
82,500 |
|
|
To Naresh’s Capital A/c |
|
|
|
42,500 |
|
To Sukesh’s Capital A/c |
|
|
|
40,000 |
|
(Interest on capital transferred to Profit & Loss Appropriation A/c) |
|
|
|
|
|
|
|
|
|
|
|
Profit & Loss Appropriation A/c |
Dr. |
|
1,17,500 |
|
|
To Naresh’s Capital A/c |
|
|
|
58,750 |
|
To Sukesh’s Capital A/c |
|
|
|
58,750 |
|
(Profit transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Opening Capital:
Particulars |
Naresh |
Sukesh |
Capital at the end |
3,00,000 |
3,00,000 |
Add: Drawings out of capital |
50,000 |
- |
Add: Drawings against profit |
1,00,000 |
1,00,000 |
Capital at the beginning |
4,50,000 |
4,00,000 |
WN2: Calculation of Interest on Capital
Page No 2.84:
Question 22:
On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipments to government schools situated in remote and backward areas. They contributed capitals of â¹ 80,000 and â¹ 50,000 respectively and agreed to share the profits in the ratio of 3 : 2. The partnership Deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of â¹ 7,800. Showing your calculations cleary, prepare 'Profit and Loss Appropriation Account' of Jay and Vijay for the year ended 31st March, 2014.
Answer:
Profit and Loss Appropriation Account for the year ended March 2014 |
||||
Dr. |
|
Cr. |
||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|
Interest on Capital A/c: |
|
Profit and Loss A/c |
7,800 |
|
Jay |
4,800 |
|
|
|
Vijay |
3,000 |
7,800 |
|
|
|
|
|
|
|
|
7,800 |
|
7,800 |
|
|
|
|
|
Working Notes:
WN1: Calculation of Interest on Capital
WN2: Calculation of Proportionate Interest on Capital
Note: Interest on capital is to be treated as an appropriation of profits and is to be provided to the extent of available profits i.e. Rs 7,800.
Page No 2.84:
Question 23:
Amar, Bhanu, and Charu are partners in a firm. Amar and Bhanu are to get annual salary of â¹ 1,20,000 p.a. each as they are fully involved in the business. Net profit for the year is â¹ 4,80,000. Determine the share of profit to be credited to each partner.
Answer:
Profit and Loss Appropriation Account for the year ended … |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Salary: |
|
Profit and Loss A/c |
4,80,000 |
||
Amar |
1,20,000 |
|
|
|
|
Bhanu |
1,20,000 |
2,40,000 |
|
|
|
Profit transferred to: |
|
|
|
||
Amar’s Capital A/c |
80,000 |
|
|
|
|
Bhanu’s Capital A/c |
80,000 |
|
|
|
|
Charu’s Capital A/c |
80,000 |
2,40,000 |
|
|
|
|
4,80,000 |
|
4,80,000 |
||
|
|
|
|
Page No 2.84:
Question 24:
A, B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 respectively. A is entitled to a commission of 10% on the net profit. Net profit for the year is â¹ 1,10,000.
Determine the amount of commission payable to A.
Answer:
Net Profit before charging commission = Rs 1,10,000
Commission to A = 10% of on Net Profit before charging such commission
Page No 2.84:
Question 25:
X, Y and Z are partners sharing profits and losses equally. As per Partnership Deed, Z is entitled to a commission of 10% on the net profit after charging such commission. The net profit before charging commission is â¹ 2,20,000.
Determine the amount of commission payable to Z.
Answer:
Net Profit before charging Commission = Rs 2,20,000
Commission to Z = 10% of on Net Profit after charging such commission
Page No 2.84:
Question 26:
A, B, C, and D are partners in a firm sharing profits as 4 : 3 : 2 : 1 respectively. It earned a profit of â¹ 1,80,000 for the year ended 31st March, 2018. As per the Partnership Deed, they are to charge a commission @ 20% of the profit after charging such commission which they will share as 2 : 3 : 2 : 3. You are required to show appropriation of profits among the partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2018 |
|||||
Dr. |
Cr. |
||||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||
Partners’ Commission: |
|
Profit and Loss A/c (Net Profit) |
1,80,000 |
||
A |
6,000 |
|
|
|
|
B |
9,000 |
|
|
|
|
C |
6,000 |
|
|
|
|
D |
9,000 |
30,000 |
|
|
|
Profit transferred to: |
|
|
|
||
A’s Capital A/c |
60,000 |
|
|
|
|
B’s Capital A/c |
45,000 |
|
|
|
|
C’s Capital A/c |
30,000 |
|
|
|
|
D’s Capital A/c |
15,000 |
1,50,000 |
|
|
|
|
1,80,000 |
|
1,80,000 |
||
|
|
|
|
Working Notes:
WN 1 Calculation of Partners’ Commission
Partners’ Commission = 20% on Net Profit after charging such commission
This commission is to be shared by the partners in the ratio of 2 : 3 : 2 : 3
WN 2 Calculation of Profit Share of each Partner
Profit available for Distribution = 1,80,000 − 30,000 = Rs 1,50,000
Profit sharing ratio = 4 : 3 : 2 : 1
Page No 2.85:
Question 27:
X and Y are partners in a firm. X is entitled to a salary of â¹ 10,000 per month and commission of 10% of the net profit after partners' salaries but before charging commission. Y is entitled to a salary of â¹ 25,000 p.a. and commission of 10% of the net profit after charging all commission and partners' salaries. Net profit before providing for partners' salaries and commission for the year ended 31st March, 2019 was â¹ 4,20,000. Show distribution of profit.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
||||||
Dr. |
Cr. |
|||||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|||
Partners’ Salary: |
|
Profit and Loss A/c (Net Profit) |
4,20,000 |
|||
X (10,000 × 12) |
1,20,000 |
|
|
|
||
Y |
25,000 |
1,45,000 |
|
|
||
Partners’ Commission: |
|
|
|
|||
X |
27,500 |
|
|
|
||
Y |
22,500 |
50,000 |
|
|
||
Profit transferred to: |
|
|
|
|||
X’s Capital A/c |
1,12,500 |
|
|
|
||
Y’s Capital A/c |
1,12,500 |
2,25,000 |
|
|
||
|
4,20,000 |
|
4,20,000 |
|||
|
|
|
|
Working Notes:
WN 1 Calculation of Commission
Commission to X = 10% of Net Profit after partners’ salaries but before charging such commission
Profit after Partners’ Salaries = 4,20,000 − 1,45,000 = â¹ 2,75,000
Commission to Y = 10% of Net Profit after charging Commission and Partners’ Salaries
Profit after commission and partners’ salaries = 4,20,000 − 1,45,000 − 27,500 = â¹ 2,47,500
WN 2 Calculation of Profit Share of each Partner
Profit available for distribution = 4,20,000 − 1,45,000 − 50,000 = â¹ 2,25,000
Profit sharing ratio = 1 : 1
Page No 2.85:
Question 28:
Ram and Mohan, two partners, drew for their personal use â¹ 1,20,000 and â¹ 80,000. Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest chargeable from each partner?
Answer:
In this question, date of drawings made by the partners is not given. Therefore, interest on drawings is calculated on average basis for a period of six months.
Page No 2.85:
Question 29:
Brij and Mohan are partners in a firm. They withdrew â¹ 48,000 and â¹ 36,000 respectively during the year evenly in the middle of every month. According to the partnership agreement, interest on drawings is to be charged @ 10% p.a.
Calculate interest on drawings of the partners using the appropriate formula.
Answer:
Since, the drawings are made evenly at the middle of every month, therefore interest on drawings is calculated for a period of six months.
Page No 2.85:
Question 30:
A and B are partners sharing profits equally. A drew regularly â¹ 4,000 in the beginning of every month for six months ended 30th September, 2019. Calculate interest on drawings @ 5% p.a. for a period of six months.
Answer:
Page No 2.85:
Question 31:
One of the partners in a partnership firm has withdrawn â¹ 9,000 at the end of each quarter, throughout the year. Calculate interest on drawings at the rate of 6% per annum.
Answer:
Amount of Drawings = â¹ 9,000 per quarter
Annual Drawings= â¹ (9,000 × 4) = â¹ 36,000
Rate of Interest on Drawings = 6% p.a.
Average Period | = | (Months remaining after the first drawings + Months remaining after the last drawings)/2 |
= | (9 + 0)/2 = 4.5 months | |
Interest on Drawings | = | (Annual drawings × Rate of Drawings/100 × Average Period/12) |
= | (36,000 × 6/100 × 4.5/12) = â¹ 810 |
Page No 2.85:
Question 32:
A and B are partners sharing profits equally. A drew regularly â¹ 4,000 at the end of every month for six months ended 30th September, 2019. Calculate interest on drawings @ 5% p.a. for a period of six months.
Answer:
Page No 2.85:
Question 33:
Calculate interest on drawings of Ashok @ 10% p.a. for the year ended 31st March, 2019, in each of the following alternative cases:
Case 1. If he withdrew â¹ 7,500 in the beginning of each quarter.
Case 2. If he withdrew â¹ 7,500 at the end of each quarter.
Case 3. If he withdrew â¹ 7,500 during the middle of each quarter.
Answer:
Total Drawings = 7,500 × 4 = Rs 30,000
Interest Rate = 10% p.a.
Case (a)
When equal amount is withdrawn in the beginning of each quarter, the interest on drawings is calculated for an average period of 7.5 months
Case (b)
When equal amount is withdrawn at the end of each quarter, the interest on drawings is calculated for an average period of 4.5 months
Case (c)
When equal amount is withdrawn in the middle of each quarter, the interest on drawings is calculated for an average period of 6 months
Page No 2.85:
Question 34:
Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio 2 : 1 with capitals â¹ 5,00,000 and â¹ 4,00,000 respectively. Kanika withdrew the following amounts during the year to pay the hostel expenses of her son:
1st April | â¹ 10,000 |
1st June | â¹ 9,000 |
1st November | â¹ 14,000 |
1st December | â¹ 5,000 |
Gautam withdrew â¹ 15,000 on the first day of April, July, October and January to pay rent for the accommodation of his family. He also paid â¹ 20,000 per month as rent for the office of partnership which was in a nearby shopping complex.
Calculate interest on drawings @ 6% p.a.
Answer:
Interest on Kanika’s Drawings = Rs 1,500
Interest on Gautam’s Drawings = Rs 2,250
Working Notes:
WN1: Calculation of Interest on Kanika’s Drawings
By Product Method |
|||
Date |
Amount (I) |
Months (II) |
Product (I × II) |
Apr. 01 |
10,000 |
12 |
1,20,000 |
June 01 |
9,000 |
10 |
90,000 |
Nov. 01 |
14,000 |
5 |
70,000 |
Dec. 01 |
5,000 |
4 |
20,000 |
Sum of Product |
3,00,000 |
||
|
WN2: Calculation of Interest on Gautam’s Drawings
Gautam withdrew Rs 15,000 in the beginning of every quarter.
Page No 2.86:
Question 35:
A and B are partners sharing Profit and Loss in the ratio 3 : 2 having Capital Account balances of â¹ 50,000 and â¹ 40,000 on 1st April, 2018. On 1st July, 2018, A introduced â¹ 10,000 as his additional capital whereas B introduced only â¹ 1,000. Interest on capital is allowed to partners @ 10% p.a.
Calculate interest on capital for the financial year ended 31st March, 2019.
Answer:
Calculation of Interest on A’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2018 to June 30, 2018 |
50,000 |
× |
3 |
= |
1,50,000 |
July 01, 2018 to March 31, 2019 |
60,000 |
× |
9 |
= |
5,40,000 |
Sum of Product |
|
6,90,000 |
|||
|
|
Calculation of Interest on B’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2018 to June 30, 2018 |
40,000 |
× |
3 |
= |
1,20,000 |
July 01, 2018 to March 31, 2019 |
41,000 |
× |
9 |
= |
3,69,000 |
Sum of Product |
|
4,89,000 |
|||
|
|
Page No 2.86:
Question 36:
Ram and Mohan are partners in a business. Their capitals at the end of the year were â¹ 24,000 and â¹ 18,000 respectively. During the year, Ram's drawings and Mohan's drawings were â¹ 4,000 and â¹ 6,000 respectively. Profit (before charging interest on capital) during the year was â¹ 16,000. Calculate interest on capital @ 5% p.a. for the year ended 31st March, 2019.
Answer:
Interest on capital is calculated on the opening balance of partner’s capital.
Calculation of Capital balance at the beginning
Particulars |
Ram |
Mohan |
Capital at the end |
24,000 |
18,000 |
Less: Profit already credited (1:1) |
(8,000) |
(8,000) |
Add: Drawings already debited |
4,000 |
6,000 |
Capital at the beginning |
20,000 |
16,000 |
|
|
|
Page No 2.86:
Question 37:
Following is the extract of the Balance Sheet of Neelkant and Mahadev as on 31st March, 2019.
Liabilities | â¹ |
Assets |
â¹ |
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' Current A/c |
1,00,000
|
||
Profit and Loss Appropriation A/c (2018-19) |
8,00,000
|
||
30,00,000
|
30,00,000
|
||
During the year, Mahadev's drawings were â¹ 30,000. Profits during the year ended 31st March, 2019 is â¹ 10,00,000. Calculate interest on capital @ 5% p.a. for the year ending 31st March, 2019.
Answer:
Interest on Capital
Neelkant’s | |
Mahadev’s | â |
Note: In this question, as the balances of both Partner's Capital Account and of Partner's Current Account are mentioned, so it has been assumed that the capital of the partners is fixed.
As we know, when the capital of the partners is fixed, drawings and interest on capital does not affect the capital balances of the partners. Rather, it would affect their current account balances. Therefore, in this case, capital at the beginning (i.e. opening capital) and capital at the end (i.e. closing capital) of the year would remain same. Thus, the interest on capital is calculated on fixed capital balances (given in the Balance Sheet of the question).
Page No 2.86:
Question 38:
From the following Balance Sheet of Long and Short, calculate interest on capital @ 8% p.a. for the year ended 31st March, 2019.
BALANCE SHEET
as at 31st March, 2019 |
||||
Liabilities | â¹ | Assets | â¹ | |
Long's Capital A/c | 1,20,000 | Fixed Assets | 3,00,000 | |
Short's Capital A/c | 1,40,000 | Other Assets | 60,000 | |
General Reserve | 1,00,000 | |||
3,60,000 | 3,60,000 | |||
During the year, Long withdrew â¹ 40,000 and Short withdrew â¹ 50,000. Profit for the year was â¹ 1,50,000 out of which â¹ 1,00,000 was transferred to General Reserve.
Answer:
Calculation of Capital at the beginning (as on April 01, 2018)
Particulars |
Long |
Short |
Capital at the end |
1,60,000 |
1,40,000 |
Less: Adjusted Profit (1,50,000 – 1,00,000) in 1:1 ratio |
(25,000) |
(25,000) |
Add: Adjusted Drawings |
- |
50,000 |
Capital in the beginning |
1,35,000 |
1,65,000 |
|
|
|
Page No 2.86:
Question 39:
Moli and Bholi contribute â¹ 20,000 and â¹ 10,000 respectively towards capital. They decide to allow interest on capital @ 6% p.a. Their respective share of profits is 2 : 3 and the net profit for the year is â¹ 1,500. Show distribution of profits:
(i) where there is no agreement except for interest on capitals; and
(ii) where there is an agreement that the interest on capital as a charge.
Answer:
Calculation of Interest on Capital
Case (a)
Where there is no clean agreement except for interest on capitals
Profit for the year ended = â¹ 1,500
Total amount of interest = â¹ 1,800
Here, total amount of interest on capital is more than the profit available for distribution. Therefore, profit of Rs 1,500 is distributed between Moli and Bholi in the ratio of their interest on capital.
Particulars |
Moli |
: |
Bholi |
Interest on Capital |
1,200 |
: |
600 |
or, Ratio of interest on Capital |
2 |
: |
1 |
In case, there is a clear agreement that the interest on capital will be allowed even if the firm has incurred loss, then the whole amount of interest on capital is to be allowed to the partners.
Total Profit of the firm = â¹ 1,500
Therefore, loss to the firm amounts to â¹300. This loss is to shared by Moli and Bholi in their profit sharing ratio that is 2 : 3.
Page No 2.86:
Question 40:
Amit and Bramit started business on 1st April, 2018 with capitals of â¹ 15,00,000 and â¹ 9,00,000 respectively. On 1st October, 2018, they decided that their capitals should be â¹ 12,00,000 each. The necessary adjustments in capitals were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on capital for the year ended 31st March, 2019.
Answer:
Calculation of Interest on Amit’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2018 to Sept. 30, 2018 |
15,00,000 |
× |
6 |
= |
90,00,000 |
Oct. 01, 2018 to March 31, 2019 |
12,00,000 |
× |
6 |
= |
72,00,000 |
Sum of Product |
|
1,62,00,000 |
|||
|
|
Calculation of Interest on Bramit’s Capital
Date |
Capital |
× |
Period |
= |
Product |
April 01, 2018 to Sept. 30, 2018 |
9,00,000 |
× |
6 |
= |
54,00,000 |
Oct. 01, 2018 to March 31, 2019 |
12,00,000 |
× |
6 |
= |
72,00,000 |
Sum of Product |
|
1,26,00,000 |
|||
|
|
Page No 2.87:
Question 41:
Simrat and Bir are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 after closing the books of account, their Capital Accounts stood at â¹ 4,80,000 and â¹ 6,00,000 respectively. On 1st May, 2018, Simrat introduced an additional capital of â¹ 1,20,000 and Bir withdrew â¹ 60,000 from his capital.On 1st October, 2018, Simrat withdrew â¹ 2,40,000 from her capital and Bir introduced â¹ 3,00,000. Interest on capital is allowed at 6% p.a. Subsequently, it was noticed that interest on capital @ 6% p.a. had been omitted. Profit for the year ended 31st March, 2019 amounted to â¹ 2,40,000 and the partners' drawings had been: Simrat – â¹ 1,20,000 and Bir – â¹ 60,000. Compute the interest on capital if the capitals are (a) fixed, and (b) fluctuating.
Answer:
Case 1: If Capitals are fixed:
Calculation of Interest on Capital
Working Notes:
WN1: Calculation of Opening Capital:
Particulars |
Simrat |
Bir |
Capital at the end |
4,80,000 |
6,00,000 |
Add: Drawings out of capital |
2,40,000 |
60,000 |
Less: Fresh capital introduced |
1,20,000 |
3,00,000 |
Capital at the beginning |
6,00,000 |
3,60,000 |
Case2: If Capitals are Fluctuating:
Calculation of Interest on Capital
Working Notes:
WN1: Calculation of Opening Capital:
Particulars |
Simrat |
Bir |
Capital at the end |
4,80,000 |
6,00,000 |
Add: Drawings out of capital |
2,40,000 |
60,000 |
Add: Drawings out of profit |
1,20,000 |
60,000 |
Less: Fresh capital introduced |
1,20,000 |
3,00,000 |
Less: Profit already credited |
1,44,000 |
96,000 |
Capital at the beginning |
5,76,000 |
3,24,000 |
Page No 2.87:
Question 42:
C and D are partners in a firm; C has contributed â¹ 1,00,000 and D â¹ 60,000 as capital. Interest in payable @ 6% p.a. and D is entitled to a salary of â¹ 3,000 per month. In the year ended 31st March, 2019, the profit was â¹ 80,000 before interest and salary. Divide the amount between C and D.
Answer:
Profit and Loss Appropriation Account for the year ended 2018-2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
80,000 |
||
C |
6,000 |
|
|
|
|
D |
3,600 |
9,600 |
|
|
|
Salary to D (3000 × 12) |
36,000 |
|
|
||
Profit transferred to : |
|
|
|
||
C’s Capital A/c |
17,200 |
|
|
|
|
D’s Capital A/c |
17,200 |
34,400 |
|
|
|
|
80,000 |
|
80,000 |
||
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Profit available for distribution = 80,000 − 9,600 − 36,000 = Rs 34,400
Total amount received by C = Interest on Capital + Profit Share = 6,000 + 17,200 = Rs 23,200
Total amount received by D = Interest on Capital + Salary + Profit Share = 3,600 + 36,000 + 17,200 = Rs 56,800
Page No 2.87:
Question 43:
Amit and Vijay started a partnership business on 1st April, 2018. Their capital contributions were â¹ 2,00,000 and â¹ 1,50,000 respectively. The Partnership Deed provided as follows:
(a) Interest on capital be allowed @ 10% p.a.
(b) Amit to get a salary of â¹ 2,000 per month and Vijay â¹ 3,000 per month.
(c) Profits are to be shared in the ratio of 3 : 2.
Net profit for the year ended 31st March, 2019 was â¹ 2,16,000. Interest on drawings amounted to â¹ 2,200 for Amit and â¹ 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
2,16,000 |
||
Amit |
20,000 |
|
Interest on Drawings A/c: |
|
|
Vijay |
15,000 |
35,000 |
Amit |
2,200 |
|
Salary to: |
|
Vijay |
2,500 |
4,700 |
|
Amit (2,000 × 12) |
24,000 |
|
|
|
|
Vijay (3,000 × 12) |
36,000 |
60,000 |
|
|
|
Profit transferred to: |
|
|
|
||
Amit’s Capital A/c |
75,420 |
|
|
|
|
Vijay’s Capital A/c |
50,280 |
1,25,700 |
|
|
|
|
2,20,700 |
|
2,20,700 |
||
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Page No 2.87:
Question 44:
Show how the following will be recorded in the Capital Accounts of the Partners Sohan and Mohan when their capitals are fluctuating:
Sohan (â¹) |
Mohan (â¹) |
|
Capital on 1st April, 2018 | 4,00,000 | 3,00,000 |
Drawings during the year ended 31st march, 2019 | 50,000 | 30,000 |
Interest on Capital | 5% | 5% |
Interest on Drawings | 1,250 | 750 |
Share of Profit for the year ended 31st march, 2019 | 60,000 | 50,000 |
Partner's Salary | 36,000 | ..... |
Commission | 5,000 | 3,000 |
Answer:
Partners’ Capital Accounts |
||||||
Dr. |
Cr. |
|||||
Particulars |
Sohan |
Mohan |
Particulars |
Sohan |
Mohan |
|
Drawings A/c |
50,000 |
30,000 |
Balance b/d |
4,00,000 |
3,00,000 |
|
Interest on Drawings A/c |
1,250 |
750 |
Interest on Capital A/c |
20,000 |
15,000 |
|
|
|
|
P&L Appropriation A/c |
60,000 |
50,000 |
|
Balance c/d |
4,69,750 |
3,37,250 |
Partners’ Salary |
36,000 |
– |
|
|
|
|
Commission |
5,000 |
3,000 |
|
|
5,21,000 |
3,68,000 |
|
5,21,000 |
3,68,000 |
|
|
|
|
|
|
|
Working Note:
Calculation of Interest on Capital
Page No 2.87:
Question 45:
Sajal and Kajal are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2018 their Capitals were: Sajal – â¹ 50,000 and Kajal – â¹ 40,000.
Prepare Profit and Loss Appropriation Account and the Partners' Capital Accounts at the end of the year after considering the following items:
(a) Interest on Capital is to be allowed @ 5% p.a.
(b) Interest on the loan advanced by Kajal for the whole year, the amount of loan being â¹ 30,000.
(c) Interest on partners' drawings @ 6% p.a. Drawings: Sajal â¹ 10,000 and Kajal â¹ 8,000.
(d) 10% of the divisible profit is to be transferred to Reserve.
Net profit for the year ended 31st March, 2019 is â¹ 68,460.
Note: Net profit means net profit after debit of interest on loan by the partner.
Answer:
Profit and Loss Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
Interest on Kajal’s loan@ 6% p.a. |
1,800 |
Profit |
70,260 |
Profit transferred to P/L Appropriation A/c |
68,460 |
|
|
|
|
|
|
|
70,260 |
|
70,260 |
|
|
|
|
Profit and Loss Appropriation Account |
||||||
Dr. |
|
|
Cr. |
|||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|||
Interest on Capital A/c: |
|
Profit and Loss A/c |
68,460 |
|||
Sajal |
2,500 |
|
|
|
||
Kajal |
2,000 |
4,500 |
Interest on Drawings A/c: |
|
||
|
|
Sajal |
300 |
|
||
Reserve |
6,450 |
Kajal |
240 |
540 |
||
Profit transferred to: |
|
|
|
|||
Sajal’s Capital A/c |
38,700 |
|
|
|
||
Kajal’s Capital A/c |
19,350 |
58,050 |
|
|
||
|
69,000 |
|
69,000 |
|||
|
|
|
|
Partners’ Capital Accounts |
||||||
Dr. |
Cr. |
|||||
Particulars |
Sajal |
Kajal |
Particulars |
Sajal |
Kajal |
|
Drawings A/c |
10,000 |
8,000 |
Balance b/d |
50,000 |
40,000 |
|
Interest on Drawings A/c |
300 |
240 |
Interest on Capital A/c |
2,500 |
2,000 |
|
|
|
|
P&L Appropriation A/c |
38,700 |
19,350 |
|
Balance c/d |
80,900 |
53,110 |
|
|
|
|
|
91,200 |
61,350 |
|
91,200 |
61,350 |
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Interest on Drawings
WN 3 Calculation of Amount to be transferred to Reserve
Amount for Reserve = 10% of Divisible Profit
Divisible Profit = Profit + Interest on Drawings − Interest on Capital
= 68,460 + 540 − 4,500 = Rs 64,500
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 68,460 + 540 − 4,500 − 6,450 = Rs 58,050
Profit sharing ratio = 2 : 1
Page No 2.88:
Question 46:
A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1st April, 2018, their capitals were: A â¹ 50,000 and B â¹ 30,000. During the year ended 31st March, 2019 they earned a net profit of â¹ 50,000. The terms of partnership are:
(a) Interest on capital is to allowed @ 6% p.a.
(b) A will get a commission @ 2% on turnover.
(c) B will get a salary of â¹ 500 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A â¹ 8,000 and B â¹ 6,000. Turnover for the year was â¹ 3,00,000.
After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partners' Capital Accounts.
Answer:
Profit and Loss Appropriation Account for the year ended 31st March, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
50,000 |
|
A |
3,000 |
|
|
|
B |
1,800 |
4,800 |
|
|
B’s Salary (500 × 12) |
6,000 |
|
|
|
Partner’s Commission |
|
|
|
|
A |
6,000 |
|
|
|
B |
1,581 |
7,581 |
|
|
Profit transferred to: |
|
|
|
|
A’s Capital A/c |
23,714 |
|
|
|
B’s Capital A/c |
7,905 |
31,619 |
|
|
|
50,000 |
|
50,000 |
|
|
|
|
|
Partners’ Capital Accounts |
|||||
Dr. |
|
|
|
|
Cr. |
Particulars |
A |
B |
Particulars |
A |
B |
Drawings A/c |
8,000 |
6,000 |
Balance b/d |
50,000 |
30,000 |
|
|
|
Interest on Capital A/c |
3,000 |
1,800 |
|
|
|
Commission A/c |
6,000 |
1,581 |
|
|
|
Salary A/c |
|
6,000 |
Balance c/d |
74,714 |
41,286 |
P/L Appropriation A/c |
23,714 |
7,905 |
|
82,714 |
47,286 |
|
82,714 |
47,286 |
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Commission to Partners
Commission to B = 5% on Profits after all Expense including such Commission
Profits after all expense = 50,000 − 4,800 − 6,000 − 6,000 = Rs 33,200
WN 3 Calculation of Profit Share of each Partner
Profit available for Distribution = 50,000 − 4,800 − 6,000 −7,581 = Rs 31,619
Profit sharing ratio = 3 : 1
Page No 2.88:
Question 47:
A, B and C were partners in a firm having capitals of â¹ 50,000 ; â¹ 50,000 and â¹ 1,00,000 respectively. Their Current Account balances were A: â¹ 10,000; B: â¹ 5,000 and C: â¹ 2,000 (Dr.). According to the Partnership Deed the partners were entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of â¹ 12,000 p.a. The profits were to be divided as:
(a) The first â¹ 20,000 in proportion to their capitals.
(b) Next â¹ 30,000 in the ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm earned net profit of â¹ 1,72,000 before charging any of the above items.
Prepare Profit and Loss Appropriation Account and pass necessary Journal entry for the appropriation of profits.
Answer:
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
1,72,000 |
|
A |
5,000 |
|
|
|
B |
5,000 |
|
|
|
C |
10,000 |
20,000 |
|
|
Salary to C |
|
12,000 |
|
|
Profit transferred to: |
|
|
|
|
A’s Current A/c |
50,000 |
|
|
|
B’s Current A/c |
44,000 |
|
|
|
C’s Current A/c |
46,000 |
1,40,000 |
|
|
|
1,72,000 |
|
1,72,000 |
|
|
|
|
|
|
|||||
Date |
Particulars |
|
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
|
|
|
|
|
|
Interest on Capital A/c |
Dr. |
|
20,000 |
|
|
To A’s Current A/c |
|
|
|
5,000 |
|
To B’s Current A/c |
|
|
|
5,000 |
|
To C’s Current A/c |
|
|
|
10,000 |
|
(Interest on partners’ capital allowed to partners) |
|
|
|
|
|
|
|
|
|
|
|
Salary A/c |
Dr. |
|
12,000 |
|
|
To C’s Current A/c |
|
|
|
12,000 |
|
(Salary allowed to C) |
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Appropriation A/c |
Dr. |
|
1,40,000 |
|
|
To A’s Current A/c |
|
|
|
50,000 |
|
To B’s Current A/c |
|
|
|
44,000 |
|
To C’s Current A/c |
|
|
|
46,000 |
|
(Profit available for distribution transferred to partners’ current accounts) |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Profits available for Distribution = 1,72,000 − 20,000 − 12,000
= Rs 1,40,000
1. Distribution of first Rs 20,000 in the Capital Ratio i.e. 1:1:2
2. Distribution of Next Rs 30,000 in the ratio of 5:3:2
3. Remaining Profit available for distribution = Rs 1,40,000 − 20,000 − 30,000 = Rs 90,000
This profit of Rs 90,000 is to be shared equally by the partners.
Therefore,
Total Profit Share of A = 5,000 + 15,000 + 30,000 = Rs 50,000
Total Profit Share of B = 5,000 + 9,000 + 30,000 = Rs 44,000
Total Profit Share of C = 10,000 + 6,000 + 30,000 = Rs 46,000
Page No 2.88:
Question 48:
A and B are partners sharing profits in the ratio of 3 : 2 with capitals of â¹ 50,000 and â¹ 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of â¹ 2,500. During the year profit prior to interest on capital but after charging B's salary amounted to â¹ 12,500. A provision of 5% of the profits is to be made in respect of Manager's Commission.
Answer:
Profit and Loss Account for the year ended ... |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
Manager’s Commission |
750 |
Profit before B’s Salary |
15,000 |
(5% of Rs 15,000) |
|
(12,500 + 2,500) |
|
Profit transferred to Profit and Loss Appropriation Account |
14,250 |
|
|
|
15,000 |
|
15,000 |
|
|
|
|
Profit and Loss Appropriation Account for the year ended ... |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital A/c: |
|
Profit and Loss A/c |
14,250 |
||
A |
3,000 |
|
|
|
|
B |
1,800 |
4,800 |
|
|
|
B’s Salary |
2,500 |
|
|
||
Profit transferred to: |
|
|
|
||
A’s Capital A/c |
4,170 |
|
|
|
|
B’s Capital A/c |
2,780 |
6,950 |
|
|
|
|
14,250 |
|
14,250 |
||
|
|
|
|
Partners’ Capital Accounts |
||||||
Dr. |
Cr. |
|||||
Particulars |
A |
B |
Particulars |
A |
B |
|
Balance c/d |
57,170 |
37,080 |
Balance b/d |
50,000 |
30,000 |
|
|
|
|
Interest on Capital A/c |
3,000 |
1,800 |
|
|
|
|
Salary A/c |
|
2,500 |
|
|
|
|
P/L Appropriation A/c |
4,170 |
2,780 |
|
|
57,170 |
37,080 |
|
57,170 |
37,080 |
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Managers’ Commission
1. Managers’ Commission = 5% on Net Profit (before Salary)
Profit before Salary = Profit after Salary + Salary = 12,500 + 2500 = Rs 15,000
WN 2 Calculation of Interest on Capital
WN 3 Calculation of Profit Share of each Partner
Profit available for distribution = 12,500 − 750 − 3,000 − 1,800 = Rs 6,950
Profit sharing ratio = 3 : 2
Page No 2.88:
Question 49:
P, Q and R are in a partnership and as at 1st April, 2018 their respective capitals were: â¹ 40,000, â¹ 30,000 and â¹ 30,000. Q is entitled to a salary of â¹ 6,000 and R â¹ 4,000 p.a. payable before division of profits. Interest is allowed on capital @ 5% p.a. and is not charged on drawings. Of the divisible profits, P is entitled to 50% of the first â¹ 10,000, Q to 30% and R to 20%, rest of the profit are shared equally. Profits for the year ended 31st March, 2019, after debiting partners' salaries but before charging interest on capital was â¹ 21,000 and the partners had drawn â¹ 10,000 each on account of salaries, interest and profit.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2019 showing the distribution of profit and the Capital Accounts of the partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||
Dr. | Cr. | ||||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit (after Salary) |
21,000 |
||
P |
2,000 |
|
|
|
|
Q |
1,500 |
|
|
|
|
R |
1,500 |
5,000 |
|
|
|
Profit transferred to: |
|
|
|
||
P’s Capital A/c |
7,000 |
|
|
|
|
Q’s Capital A/c |
5,000 |
|
|
|
|
R’s Capital A/c |
4,000 |
16,000 |
|
|
|
|
21,000 |
|
21,000 |
||
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
P |
Q |
R |
Particulars |
P |
Q |
R |
Drawings A/c |
10,000 |
10,000 |
10,000 |
Balance b/d |
40,000 |
30,000 |
30,000 |
|
|
|
|
Salaries A/c |
- |
6,000 |
4,000 |
|
|
|
|
Interest Capital A/c |
2,000 |
1,500 |
1,500 |
Balance c/d |
39,000 |
32,500 |
29,500 |
P/L Appropriation A/c |
7,000 |
5,000 |
4,000 |
|
49,000 |
32,500 |
29,500 |
|
49,000 |
42,500 |
39,500 |
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Profit available for distribution = 21,000 − 5000 = Rs 16,000
a. Distribution of first Rs 10,000 (50%, 30% and 20%)b. Distribution of Reaming Profit i.e. Rs 6,000 (16,000 − 10,000) equally
Therefore,
Page No 2.89:
Question 50:
A, B and C are partners sharing profits and losses in the ratio of A 1/2, B 3/10, C 1/5 after providing for interest @ 5% on their respective capitals, viz., A â¹ 50,000; B â¹ 30,000 and C â¹ 20,000 and allowing B and C a salary of â¹ 5,000 each per annum. During the year ended 31st March, 2019, A has drawn â¹ 10,000 and B and C in addition to their salaries have drawn â¹ 2,500 and â¹ 1,000 respectively. Profit and Loss Account for the year ended 31st March, 2019 showed a net profit of â¹ 45,000. On 1st April, 2018, the balances in the Current Accounts of the partners were A (Cr.) â¹ 4,500; B (Cr.) â¹ 1,500 and C (Cr.) â¹ 1,000. Interest is not charged on Drawings or Current Account balances. Show Partners' Capital and Current Accounts as at 31st March, 2019 after division of profits in accordance with the partnership agreement.
Answer:
Profit and Loss Appropriation Account |
||||||
Dr. |
|
|
Cr. |
|||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|||
Interest on Capital: |
|
Profit and Loss A/c |
45,000 |
|||
A |
2,500 |
|
|
|
||
B |
1,500 |
|
|
|
||
C |
1,000 |
5,000 |
|
|
||
Salary to: |
|
|
|
|||
B |
5,000 |
|
|
|
||
C |
5,000 |
10,000 |
|
|
||
Profit transferred to: |
|
|
|
|||
A’s Current A/c |
15,000 |
|
|
|
||
B’s Current A/c |
9,000 |
|
|
|
||
C’s Current A/c |
6,000 |
30,000 |
|
|
||
|
45,000 |
|
45,000 |
|||
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
50,000 |
30,000 |
20,000 |
Balance c/d |
50,000 |
30,000 |
20,000 |
|
|
|
|
|
50,000 |
30,000 |
20,000 |
|
50,000 |
30,000 |
20,000 |
|
|
|
|
|
|
|
|
Partners’ Current Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
Drawings A/c |
10,000 |
7,500 |
6,000 |
Balance b/d |
4,500 |
1,500 |
1,000 |
|
|
|
|
Interest on Capital A/c |
2,500 |
1,500 |
1,000 |
|
|
|
|
Salaries A/c |
|
5,000 |
5,000 |
Balance c/d |
12,000 |
9,500 |
7,000 |
P/L Appropriation A/c |
15,000 |
9,000 |
6,000 |
|
22,000 |
17,000 |
13,000 |
|
22,000 |
17,000 |
13,000 |
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Profit Share of each Partner
Profit available for Distribution = 45,000 − 15,000 = Rs 30,000
Page No 2.89:
Question 51:
Ali the Bahadur are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1st April, 2018 stand as Ali â¹ 25,000 and Bahadur â¹ 20,000. The partners are allowed interest on capitals @ 5% p.a. Drawings of the partners during the year ended 31st March, 2019 amounted to â¹ 3,500 and â¹ 2,500 respectively.
Profit for the year, before charging interest on capital and annual salary of Bahadur @ â¹ 3,000, amounted to â¹ 40,000, 10% of divisible profit is to be transferred to Reserve.
You are asked to show Partners' Current Account and Capital Accounts recording the above transactions.
Answer:
Partners’ Capital Accounts |
||||||
Dr. |
Cr. |
|||||
Particulars |
Ali |
Bahadur |
Particulars |
Ali |
Bahadur |
|
|
|
|
Balance b/d |
25,000 |
20,000 |
|
Balance c/d |
25,000 |
20,000 |
|
|
|
|
|
25,000 |
20,000 |
|
25,000 |
20,000 |
|
|
|
|
|
|
|
Partners’ Current Accounts |
|||||
Dr. |
|
Cr. |
|||
Particulars |
Ali |
Bahadur |
Particulars |
Ali |
Bahadur |
Drawings A/c |
3,500 |
2,500 |
Interest on Capital A/c |
1,250 |
1,000 |
|
|
|
Bahadur’s Salary A/c |
|
3,000 |
Balance c/d |
19,642 |
10,883 |
P/L Appropriation A/c |
21,892 |
9,383 |
|
23,142 |
13,383 |
|
23,142 |
13,383 |
|
|
|
|
|
|
Working Notes:
WN 1
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c |
40,000 |
||
Ali |
1,250 |
|
|
|
|
Bahadur |
1,000 |
2,250 |
|
|
|
Reserve |
3,475 |
|
|
||
Bahadur’s Salary |
3,000 |
|
|
||
Profit transferred to: |
|
|
|
||
Ali’s Capital A/c |
21,892 |
|
|
|
|
Bahadur’s Capital A/c |
9,383 |
31,275 |
|
|
|
|
40,000 |
|
40,000 |
||
|
|
|
|
WN 2 Calculation of Interest on Capital
WN 3 Calculation of Amount to be transferred to Reserve
WN 4 Calculation of Profit Share of each Partner
Profit available for distribution = 40,000 − 2,250 − 3,000 − 3,475 = Rs 31,275
Page No 2.89:
Question 52:
Amal, Bimal and Kamal are three partners. On 1st April, 2018, their Capitals stood as: Amal â¹ 40,000, Bimal â¹ 30,000 and Kamal â¹ 25,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amal would get a salary of â¹ 250 per month,
(c) Bimal would receive commission @ 4% on net profit after deducting commission, interest on capital and salary, and
(d) After deducting all of these 10% of the profit should be transferred to the General Reserve.
Before the above items were taken into account, net profit for the year ended 31st March, 2019 was â¹ 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the Partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c |
33,360 |
||
Amal |
2,000 |
|
(Net Profit) |
|
|
Bimal |
1,500 |
|
|
|
|
Kamal |
1,250 |
4,750 |
|
|
|
Salary to Amal (250 × 12) |
3,000 |
|
|
||
Commission to Bimal |
985 |
|
|
||
General Reserve |
2,462 |
|
|
||
Profit transferred to: |
|
|
|
||
Amal’s Capital A/c |
7,388 |
|
|
|
|
Bimal’s Capital A/c |
7,388 |
|
|
|
|
Kamal’s Capital A/c |
7,387 |
22,163 |
|
|
|
|
33,360 |
|
33,360 |
||
|
|
|
|
Partners’ Capital Accounts |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
Amal |
Bimal |
Kamal |
Particulars |
Amal |
Bimal |
Kamal |
|
|
|
|
|
Balance b/d |
40,000 |
30,000 |
25,000 |
|
|
|
|
|
Interest on Capital A/c |
2,000 |
1,500 |
1,250 |
|
|
|
|
|
Salary A/c |
3,000 |
– |
– |
|
|
|
|
|
Commission |
– |
985 |
– |
|
Balance c/d |
52,388 |
39,873 |
33,637 |
P/L Appropriation A/c |
7,388 |
7,388 |
7,387 |
|
|
52,388 |
39,873 |
33,637 |
|
52,388 |
39,873 |
33,637 |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Commission to Bimal
Commission to Bimal = 4% on Net Profits after Commission
Profit after expenses = 33,360 − 4,750 − 3,000 = Rs 25,610
WN 3 Calculation of Amount to be transferred to General Reserve
Amount for General Reserve = 10% of Profit
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 33,360 − 4,750 − 3,000− 985 − 2,462
= Rs 22,163
Page No 2.89:
Question 53:
Amit, Binita and Charu are three partners. On 1st April, 2018, their Capitals stood as: Amit â¹ 1,00,000, Binita â¹ 2,00,000 and Charu â¹ 3,00,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amit would get a salary of â¹ 10,000 per month,
(c) Binita would receive commission @ 5% of net profit after deduction of commission, and
(d) 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2019 was â¹ 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
5,00,000 |
||
Amit |
5,000 |
|
|
|
|
Binita |
10,000 |
|
|
|
|
Charu |
15,000 |
30,000 |
|
|
|
Salary to Amit (10,000 × 12) |
1,20,000 |
|
|
||
Commission to Binita |
23,810 |
|
|
||
General Reserve |
50,000 |
|
|
||
Profit transferred to: |
|
|
|
||
Amit’s Capital A/c |
92,063 |
|
|
|
|
Binita’s Capital A/c |
92,063 |
|
|
|
|
Charu’s Capital A/c |
92,064 |
2,76,190 |
|
|
|
|
33,360 |
|
33,360 |
||
|
|
|
|
Partners’ Capital Accounts |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
Amit |
Binita |
Charu |
Particulars |
Amit |
Binita |
Charu |
|
|
|
|
|
Balance b/d |
1,00,000 |
2,00,000 |
3,00,000 |
|
|
|
|
|
Interest on Capital A/c |
5,000 |
10,000 |
15,000 |
|
|
|
|
|
Salary A/c |
1,20,000 |
– |
– |
|
|
|
|
|
Commission |
– |
23,810 |
– |
|
Balance c/d |
3,17,063 |
3,25,873 |
4,07,064 |
P/L Appropriation A/c |
92,063 |
92,063 |
92,064 |
|
|
3,17,063 |
3,25,873 |
4,07,064 |
|
3,17,063 |
3,25,873 |
4,07,064 |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Commission to Binita
Commission to Binita = 5% on Net Profits after Commission
WN 3 Calculation of Amount to be transferred to General Reserve
Amount for General Reserve = 10% of Profit
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 5,00,000 - 30,000 - 1,20,000 - 23,810 - 50,000
= Rs 2,76,190
Page No 2.89:
Question 54:
Anita, Bimla and Cherry are three partners. On 1st April, 2018, their Capitals stood as: Anita â¹ 1,00,000, Bimla â¹ 2,00,000 and Cherry â¹ 3,00,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Anita would get a salary of â¹ 5,000 per month,
(c) Bimla would receive commission @ 5% of net profit after deduction of commission, and
(d) 10% of the net divisible profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2019 was â¹ 5,00,000. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
|||||
Dr. |
|
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Interest on Capital: |
|
Profit and Loss A/c (Net Profit) |
5,00,000 |
||
Anita |
5,000 |
|
|
|
|
Bimla |
10,000 |
|
|
|
|
Cherry |
15,000 |
30,000 |
|
|
|
Salary to Anita (5,000 × 12) |
60,000 |
|
|
||
Commission to Bimla |
23,810 |
|
|
||
General Reserve |
38,619 |
|
|
||
Profit transferred to: |
|
|
|
||
Anita’s Capital A/c |
1,15,857 |
|
|
|
|
Bimla’s Capital A/c |
1,15,857 |
|
|
|
|
Cherry’s Capital A/c |
1,15,857 |
3,47,571 |
|
|
|
|
5,00,000 |
|
5,00,000 |
||
|
|
|
|
Partners’ Capital Accounts |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
Anita |
Bimla |
Cherry |
Particulars |
Anita |
Bimla |
Cherry |
|
|
|
|
|
Balance b/d |
1,00,000 |
2,00,000 |
3,00,000 |
|
|
|
|
|
Interest on Capital A/c |
5,000 |
10,000 |
15,000 |
|
|
|
|
|
Salary A/c |
60,000 |
- |
- |
|
|
|
|
|
Commission |
- |
23,810 |
- |
|
Balance c/d |
2,80,857 |
3,49,667 |
4,30,857 |
P/L Appropriation A/c |
1,15,857 |
1,15,857 |
1,15,857 |
|
|
2,80,857 |
3,49,667 |
4,30,857 |
|
2,80,857 |
3,49,667 |
4,30,857 |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Calculation of Commission to Bimla
Commission to Bimla = 5% on Net Profits after Commission
WN 3 Calculation of Amount to be transferred to General Reserve
Amount for General Reserve = 10% of Divisible Profit
Divisible Profit = 5,00,000 – 30,000 – 23,810 – 60,000 = 3,86,190
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 5,00,000 – 30,000 – 60,000 – 23,810 – 38,619
= Rs 3,47,571
Page No 2.90:
Question 55:
Anshul and Asha are partners sharing profits and losses in the ratio of 3 : 2. Anshul being a non-working partner contributed â¹ 8,00,000 as her capital. Asha being a working partner did not contribute capital. The partnership Deed provides for interest on capital @ 5% and salary to every working partner @ â¹ 2,000 per month. Net profit (before providing for interest on capital and partner's salary) for the year ended 31st March, 2019 was â¹ 32,000.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
||||
Dr. |
Cr. |
|||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Anshul’s Capital |
20,000 |
Profit and Loss A/c |
32,000 |
|
Asha’s Salary |
12,000 |
|
|
|
|
32,000 |
|
32,000 |
|
|
|
|
|
Working Note:
Salary to Asha = Rs 24,000
Total appropriation to be made = 40,000 + 24,000 = Rs 64,000
Profit earned during the year = 32,000
Here, profit available for distribution (i.e. Rs 32,000) is less than the sum total of Interest on Capital and Salary (i.e. Rs 64,000).
Therefore, profit will be distributed in the ratio of Interest on Capital and Salary.
Page No 2.90:
Question 56:
X and Y entered into partnership on 1st April, 2017. Their capitals as on 1st April, 2018 were â¹ 2,00,000 and â¹ 1,50,000 respectively. On 1st October, 2018, X gave â¹ 50,000 as loan to the firm. As per the provisions of the partnership Deed:
(i) 20% of Profits before charging interest on Drawings but after making appropriations to be transferred to General Reserve.
(ii) Interest on capital at 12% p.a. and Interest on Drawings @ 10% p.a.
(iii) X to get monthly salary of â¹ 5,000 and Y to get salary of â¹ 22,500 per quarter.
(iv) X is entitled to a commission of 5% on sales. Sales for the year were â¹ 3,50,000.
(v) Profit to be shared in the ratio of their capitals up to â¹ 1,75,000 and balance equally.
Profit for the year ended 31st March, 2019 before allowing or charging interest was â¹ 4,61,000. The drawings of X and Y were â¹ 1,00,000 and â¹ 1,25,000 respectively.
Pass the necessary Journal entries relating to appropriation out of profit. Prepare Profit and Loss Appropriation Account and the Partners' Capital Accounts.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
||||||
Dr. |
Cr. |
|||||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|||
Interest on Capital A/c: | Profit and Loss A/c (4,61,000 – 1,500) |
4,59,500 |
||||
X |
24,000 |
Interest on Drawings A/c: | ||||
Y |
18,000 |
42,000 |
X |
5,000 |
||
X’s Capital A/c (Commission) (3,50,000 × 5%) |
17,500 |
Y |
6,250 |
11,250 |
||
Salary: | ||||||
X |
60,000 |
|||||
Y |
90,000 |
1,50,000 |
||||
Reserve (WN 1) |
50,000 |
|||||
Profit transferred to: | ||||||
X’s Capital A/c |
1,18,125 |
|||||
Y’s Capital A/c |
93,125 |
2,11,250 |
||||
4,70,750 |
4,70,750 |
|||||
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X (â¹) |
Y (â¹) |
Particulars |
X (â¹) |
Y (â¹) |
||
Drawings A/c |
1,00,000 |
1,25,000 |
Balance b/d |
2,00,000 |
1,50,000 |
||
Interest on Drawings |
5,000 |
6,250 |
Interest on Capital A/c |
24,000 |
18,000 |
||
|
|
Salary A/c |
60,000 |
90,000 |
|||
|
|
Commission A/c |
17,500 |
|
|||
Balance c/d |
3,14,625 |
2,19,875 |
P/L Appropriation A/c |
1,18,125 |
93,125 |
||
4,19,625 |
3,51,125 |
|
4,19,625 |
3,51,125 |
|||
Working Notes:
WN1: Calculation of Reserve
Profit before charging Interest on Drawings but after making appropriations
WN2: Division of Profit
Partners |
Up to Rs 1,75,000 |
Rs 36,250 (Above Rs 1,75,000) |
Total |
X |
1,00,000 |
18,125 |
1,18,125 |
Y |
75,000 |
18,125 |
93,125 |
Page No 2.90:
Question 57:
Reya, Mona and Nisha shared profits in the ratio of 3 : 2 : 1. The profits for the last three year were â¹ 1,40,000; â¹ 84,000 and â¹ 1,06,000 respectively. These profits were by mistake shared equally for all the give necessary Journal entry for the same.
Answer:
Journal |
||||
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
Nisha’s Capital A/c |
Dr. |
|
55,000 |
|
To Reya’s Capital A/c |
|
|
55,000 |
|
(Adjustment of profit made) |
|
|
|
Working Note:
Total Profits for Last 3 years = 1,40,000 + 84,000 + 1,06,000 = Rs 3,30,000
Statement Showing Adjustment |
||||
Particulars |
Reya |
Mona |
Nisha |
Total |
Right Distribution of Profit (3 : 2 :1) |
1,65,000 |
1,10,000 |
55,000 |
3,30,000 |
Wrong Distribution of Profit (1: 1 : 1) |
(1,10,000) |
(1,10,000) |
(1,10,000) |
(3,30,000) |
Net Effect |
55,000 |
NIL |
(55,000) |
NIL |
|
|
|
|
|
Page No 2.90:
Question 58:
P and Q were partners in a firm sharing profits and losses equally. Their fixed capitals were â¹ 2,00,000 and â¹ 3,00,000 respectively. The Partnership Deed provided for interest on capital @ 12% per annum. For the year ended 31st March, 2016, the profits of the firm were distributed without providing interest on capital.
Pass necessary adjustment entry to rectify the error.
Answer:
Adjusting Journal Entry
Journal
|
|||||
Date
|
Particulars
|
L.F.
|
Debit
Amount
(â¹) |
Credit
Amount
(â¹) |
|
P’s Current A/c |
Dr.
|
|
6,000
|
|
|
To Q’s Current A/c
|
|
|
6,000
|
||
(Interest on capital omitted, now adjusted.) |
|
|
Working Notes:
Statement Showing Adjustment |
|||
Particulars |
P |
Q |
Total |
Interest on Capital @ 12% |
24,000 |
36,000 |
(60,000) |
Less: Profits wrongly distributed to the extent of interest amount |
(30,000) |
(30,000) |
60,000 |
Net Effect |
(6,000) |
6,000 |
NIL |
Page No 2.91:
Question 59:
Profit earned by a partnership firm for the year ended 31st March, 2018 were distributed equally between the partners – Pankaj and Anu – without allowing interest on capital. Interest due on capital was Pankaj – â¹ 3,000 and Anu – â¹ 1,000.
Pass necessary adjustment entry.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
|
Anu’s Capital A/c |
Dr. |
|
1,000 |
|
|
To Pankaj’s Capital A/c |
|
|
1,000 |
|
|
(Adjustment of omission of Interest on Capital) |
|
|
|
|
|
|
|
|
|
Working Note:
Statement Showing Adjustment |
|||
Particulars |
Pankaj |
Anu |
Total |
Interest on Capital to be credited |
3,000 |
1,000 |
4,000 |
Profit wrongly distributed equally to be debited |
(2,000) |
(2,000) |
(4,000) |
Net Effect |
1,000 (Cr.) |
1,000 (Dr.) |
NIL |
|
|
|
|
Page No 2.91:
Question 60:
Azad and Benny are equal partners. Their capitals are â¹ 40,000 and â¹ 80,000 respectively. After the accounts for the year had been prepared, it was noticed that interest @ 5% p.a. as provided in the Partnership Deed was not credited to their Capital Accounts before distribution of profits. It is decided to pass an adjustment entry in the beginning of the next year. Record the necessary Journal entry.
Answer:
Interest on Capital
Azad | = | 40,000 × | = â¹ 2,000 | |
Benny | = | 80,000 × | = â¹ 4,000 |
Adjustment of Profit
Azad |
Benny |
Total |
||
Interest on Capital |
2,000 |
4,000 |
= |
6,000 |
Less: Wrong distribution of Profit Rs 6,000 (1: 1) |
(3,000) |
(3,000) |
= |
(6,000) |
Adjusted Profit |
(1,000) |
(1,000) |
= |
NIL |
Adjusting Journal Entry
Date
|
Particular
|
L.F
|
Debit Amount
(â¹)
|
Credit Amount
(â¹) |
|
|
Azad's Current A/c
|
Dr.
|
1,000
|
|
|
|
To Benny's Current A/c
|
|
|
1,000
|
|
|
(Adjustment of profit made)
|
|
|
|
Page No 2.91:
Question 61:
Ram, Mohan and Sohan sharing profits and losses equally have capitals of â¹ 1,20,000, â¹ 90,000 and â¹ 60,000 respectively. For the year ended 31st March, 2019, interest was credited to them @ 6% instead of 5%.
Give adjustment Journal entry.
Answer:
Journal |
||||
Particulars |
L. F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
Ram’s Capital A/c |
Dr. |
|
300 |
|
To Sohan’s Capital A/c |
|
|
300 |
|
(Interest on Capital was wrongly credited, now adjusted) |
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital at 6% p.a.
WN 2 Calculation of Interest on Capital at 5% p.a.
WN 3
Statement Showing Adjustment |
||||
Particulars |
Ram |
Mohan |
Sohan |
Total |
Interest on Capital wrongly credited at 6% p.a. reversed |
(7,200) |
(5,400) |
(3,600) |
(16,200) |
Interest on Capital credited at 5% p.a. |
6,000 |
4,500 |
3,000 |
13,500 |
Wrong Distribution |
(1,200) |
(900) |
(600) |
(2,700) |
Right Distribution of Rs 2,700 (1:1:1) |
900 |
900 |
900 |
(2,700) |
Net Effect |
(300) |
NIL |
300 |
NIL |
|
|
|
|
|
Page No 2.91:
Question 62:
Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at â¹ 3,00,000, â¹ 1,00,000, â¹ 2,00,000. For the year ended 31st March, 2019, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was â¹ 2,50,000.
Show your working notes clearly and pass necessary adjustment entry.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 March 31 |
|
|
|
|
|
Mohan’s Current A/c |
Dr. |
|
400 |
|
|
To Ram’s Current A/c |
|
|
600 |
||
(Interest on Capital adjusted) |
|
|
|
||
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital 10% p.a.
WN 2 Calculation of Interest on Capital 9% p.a.
WN 3
Statement Showing Adjustment |
||||
Particulars |
Ram |
Shyam |
Mohan |
Total |
Interest on Capital credited at 10% p.a. |
30,000 |
10,000 |
20,000 |
60,000 |
Interest on Capital wrongly credited at 9% p.a. reversed |
(27,000) |
(9,000) |
(18,000) |
(54,000) |
Right distribution |
3,000 |
1,000 |
2,000 |
6,000 |
Wrong distribution of Rs 6,000 (2 : 1 : 2) |
(2,400) |
(1,200) |
(2,400) |
(6,000) |
Net Effect |
600 |
(200) |
(400) |
NIL |
|
|
|
|
|
Page No 2.91:
Question 63:
Mita and Usha are partners in a firm sharing profits in the ratio of 2 : 3. Their Capital Accounts as on 1st April, 2015 showed balances of â¹ 1,40,000 and â¹ 1,20,000 respectively. The drawings of Mita and Usha during the year 2015-16 were â¹ 32,000 and â¹ 24,000 respectively. Both the amounts were withdrawn on 1st January 2016. It was subsequently found that the following items had been omitted while preparing the final accounts for the year ended 31st March, 2016:
(a) Interest on Capital @ 6% p.a.
(b) Interest on Drawings @ 6% p.a.
(c) Mita was entitled to a commission of â¹ 8,000 for the whole year.
Showing your working clearly, pass a rectifying entry in the books of the firm.
Answer:
Journal |
||||
Particular |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
Usha’s Capital A/c | Dr. |
6,816 |
|
|
To Mita’sCapital A/c |
|
6,816 |
||
(Adjustment made) |
Particular |
Mita |
Usha |
Total |
Interest on Capital @ 6% p.a. |
8,400 |
7,200 |
(15,600) |
Interest on Drawings @ 6% p.a. |
(480) |
(360) |
840 |
Commission |
8,000 |
– |
(8,000) |
Right Share |
15,920 |
6,840 |
(22,760) |
Wrong Share |
(9,104) |
(13,656) |
22,760 |
Net Effect |
6,816 (Cr.) |
6,816 (Dr.) |
Nil |
|
|
|
|
Page No 2.91:
Question 64:
Mohan, Vijay and Anil are partners, the balances of their Capital Accounts being â¹ 30,000, â¹ 25,000 and â¹ 20,000 respectively. In arriving at these amounts profit for the year ended 31st March, 2019, â¹ 24,000 had already been credited to partners in the proportion in which they shared profits. Their drawings were â¹ 5,000 (Mohan), â¹ 4,000 (Vijay) and â¹ 3,000 (Anil) during the year. Subsequently, the following omissions were noticed and it was decided to rectify the errors:
(a) Interest on capital @ 10% p.a.
(b) Interest on drawings: Mohan â¹ 250, Vijay â¹ 200 and Anil â¹ 150.
Make necessary corrections through a Journal entry and show your workings clearly.
Answer:
Journal |
|||||
Date |
Particulars |
L. F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019
March 31
|
|
|
|
|
|
To Mohan’s Capital A/c |
|
|
550 |
||
(Interest on capital and interest on drawings was omitted, now adjusted) |
|
|
|
Working Notes:
WN 1 Calculation of Capital at the beginning
Particulars |
Mohan |
Vijay |
Anil |
Total |
Capital at the end |
30,000 |
25,000 |
20,000 |
75,000 |
Add: Drawings |
5,000 |
4,000 |
3,000 |
12,000 |
Less: Profit (1:1:1) |
(8,000) |
(8,000) |
(8,000) |
(24,000) |
Capital in the beginning |
27,000 |
21,000 |
15,000 |
63,000 |
|
|
|
|
|
WN 2 Calculation of Interest on Capital
WN 3
Statement Showing Adjustment |
||||
|
Mohan |
Vijay |
Anil |
Total |
Interest on Capital to be credited |
2,700 |
2,100 |
1,500 |
6,300 |
Less: Interest on Drawings |
(250) |
(200) |
(150) |
(600) |
Right Distribution of Rs 5,700 |
2,450 |
1,900 |
1,350 |
5,700 |
Wrong Distribution of Rs 5,700 (1 : 1 : 1) |
(1,900) |
(1,900) |
(1,900) |
(5,700) |
Net Effect |
550 |
Nil |
(550) |
NIL |
|
|
|
|
|
WN 4 Calculation of Final Profit Share of Partners
Total Corrected Profit Available for Distribution = Profit - Interest on Capital + Interest on Drawings = 24,000 – 6,300 + 600 = Rs 18,300
Page No 2.91:
Question 65:
Piya and Bina are partners in a firm sharing profits and losses in the ratio of 3 : 2. Following was the Balance Sheet of the firm as on 31st March, 2016:
Liabilities | â¹ | Assets | â¹ | |
Capitals: | Sundry Assets | 1,20,000 | ||
Piya | 80,000 | |||
Bina | 40,000 | 1,20,000 | ||
1,20,000 | 1,20,000 | |||
The profits â¹ 30,000 for the year ended 31st March, 2016 were divided between the partners without allowing interest on capital @ 12% p.a. salary to Piya @ â¹ 1,000 per month. During the year Piya withdrew â¹ 8,000 and Bina withdrew â¹ 4,000. Showing your working notes clearly, pass the necessary rectifying entry.
Answer:
Journal |
||||
Particular |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
Bina’s Capital A/c |
Dr. |
|
5,856 |
|
To Piya’s Capital A/c |
|
|
5,856 |
|
(Adjustment made) |
|
|
|
|
|
|
|
|
Particular |
Piya |
Bina |
Total |
Interest on Capital @ 12% p.a. |
8,400 |
3,840 |
(12,240) |
Salary |
12,000 |
– |
(12,000) |
Profit (30,000 – 12,240 –12,000) |
3,456 |
2,304 |
5,760 |
Right Share |
23,856 |
6,144 |
(30,000) |
Wrong Share |
(18,000) |
(12,000) |
30,000 |
Net Effect |
5,856 (Cr.) |
5,856 (Dr.) |
Nil |
Working Notes:
Particular |
Piya |
Bina |
Closing Capitals |
80,000 |
40,000 |
Add: Drawings |
8,000 |
4,000 |
Less: Profit Share |
18,000 |
12,000 |
Opening Capital |
70,000 |
32,000 |
Page No 2.92:
Question 66:
The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for same 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 were for the three years. Harry and Porter have agreement on this account. The profits for the last three years were:
Year | 2015-16 | 2016-17 | 2017-18 |
Profit (â¹) | 2,20,000 | 2,40,000 | 2,90,000 |
Answer:
Journal (Adjusting entry)
Date |
Particular |
L.F |
Debit Amount |
Credit Amount |
|
Harry's Capital A/c |
Dr. |
|
50,000 |
|
|
Porter's Capital A/c |
Dr. |
|
50,000 |
|
|
To Ali's Capital A/c |
|
|
|
1,00,000 |
|
(Profit adjusted due to change in profit sharing ratio) |
|
|
|
Distribution of Profit
Old Ratio (2:2:1) |
Harry |
Porter |
Ali |
Total |
|
2015 – 16 |
(88,000) |
(88,000) |
(44,000) |
= |
(2,20,000) |
2016 – 17 |
(96,000) |
(96,000) |
(48,000) |
= |
(2,40,000) |
2017 – 18 |
(1,16,000) |
(1,16,000) |
(58,000) |
= |
(2,90,000) |
Total Profit of 3 years in old ratio |
(3,00,000) |
(3,00,000) |
(1,50,000) |
= |
(7,50,000) |
Distribution of 3 years profit in new Ratio (1 : 1 : 1) |
2,50,000 |
2,50,000 |
2,50,000 |
= |
7,50,000 |
Adjusted Profit |
(50,000) |
(50,000) |
1,00,000 |
NIL |
Page No 2.92:
Question 67:
On 31st March, 2019, after the closing of the accounts, the Capital Accounts of P, Q and R stood in the books of the firm at â¹ 40,000; â¹ 30,000 and â¹ 20,000 respectively. Subsequently, it was noticed that interest on capital @ 5% had been omitted. Profit for the year ended 31st March, 2019 was â¹ 60,000 and the partners' drawings had been P – â¹ 10,000, Q – â¹ 7,500 and R – â¹ 4,500. Profit-sharing ratio of P, Q and R is 3 : 2 : 1. Give necessary adjustment entry.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 Mar.31 |
|
|
|
|
|
|
To Q’s Capital A/c |
|
|
8 |
|
|
To R’s Capital A/c |
|
|
292 |
|
|
(Interest on Capital was omitted, now adjusted) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Capital at the beginning (as on April 01, 2018)
Particulars |
P |
Q |
R |
Capital as on March 31, 2017 (Closing) |
40,000 |
30,000 |
20,000 |
Add: Drawings |
10,000 |
7,500 |
4,500 |
Less: Profit Rs 60,000 (3:2:1) |
(30,000) |
(20,000) |
(10,000) |
Capital as on April 01, 2016 (Opening) |
20,000 |
17,500 |
14,500 |
|
|
|
|
WN 2 Calculation of Interest on Capital
WN 3
Statement Showing Adjustment |
||||
Particulars |
P |
Q |
R |
Total |
Interest on Capital (to be credited) |
1,000 |
875 |
725 |
2,600 |
For sharing above Loss (3:2:1) |
(1,300) |
(867) |
(433) |
(2,600) |
Net Effect |
(300) |
8 |
292 |
NIL |
|
|
|
|
|
Page No 2.92:
Question 68:
A, B and C were partners. Their capitals were A–â¹ 30,000; B–â¹ 20,000 and C–â¹ 10,000 respectively. According to the Partnership Deed, they were entitled to an interest on capital @ 5% p.a. In addition, B was also entitled to draw a salary of â¹ 500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the salary payable to B. The net profit for the year were â¹ 30,000 distributed in the ratio of capitals without providing for any of the above adjustments. The profits were to be shared in the ratio of 5 : 3 : 2.
Pass necessary adjustment entry showing the workings clearly.
Answer:
Journal |
||||
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
A’s Current A/c |
Dr. |
|
3,675 |
|
To B’s Current A/c |
|
|
2,895 |
|
To C’s Current A/c |
|
|
780 |
|
(Adjustment of profit made) |
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Calculation of Interest on Capital
WN 2 Salary to B = Rs 500 × 12 = Rs 6,000
WN 3 Calculation of Commission to C
Commission to C = 5% on profit after interest on capital but before salary
Profit after Interest on Capital but before Salary = 30,000 − 3,000 = Rs 27,000
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 30,000 − 3,000 − 6,000 − 1,350 = Rs 19,650
WN 5
Statement Showing Adjustment |
||||
Particulars |
A |
B |
C |
Total |
Interest on Capital (to be credited) |
1,500 |
1,000 |
500 |
3,000 |
Salary/ Commission (to be credited) |
- |
6,000 |
1,350 |
7,350 |
Profit (to be credited) |
9,825 |
5,895 |
3,930 |
19,650 |
Right Distribution |
11,325 |
12,895 |
5,780 |
30,000 |
Wrong Distribution of Rs 30,000 (3:2:1) |
(15,000) |
(10,000) |
(5,000) |
(30,000) |
Net Effect |
(3,675) |
2,895 |
780 |
NIL |
|
|
|
|
|
Page No 2.92:
Question 69:
Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3 : 2. Following information is of the firm as on 31st March 2019:
Liabilities | â¹ | Assets | â¹ | ||
Mannu’s Capital | 30,000 | Drawings: | |||
Shristhi’s Capital | 10,000 |
40,000
|
Mannu | 4,000 | |
Shristhi | 2,000 | 6,000 | |||
Other Assets | 34,000 | ||||
40,000 | 40,000 | ||||
Profit for the year ended 31st March, 2019 was â¹ 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently omitted. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.
Answer:
Adjusting Journal Entry
Date
|
Particular
|
L.F
|
Debit Amount
(â¹) |
Credit Amount
(â¹) |
|
2019 Mar.31 |
Shrishti's Capital A/c
|
Dr.
|
288
|
||
To Mannu's Capital A/c
|
288
|
||||
(Adjustment of profit made)
|
Adjustment of Profit
Mannu’s
|
Shrishti
|
Total
|
||
Interest on Capital
|
1,500
|
500
|
=
|
2,000
|
Less: Interest on Drawings
|
(120)
|
(60)
|
=
|
(180)
|
Right distribution of Rs 1,820
|
1,380
|
440
|
=
|
1,820
|
Less: Wrong distribution of Rs 1,820 (3 : 2)
|
(1,092)
|
(728)
|
=
|
(1,820)
|
Adjusted Profit
|
288
|
(288)
|
=
|
NIL
|
Page No 2.92:
Question 70:
Mudit, Sudhir and Uday are partners in a firm sharing profits in the ratio of 3 : 1 : 1. Their fixed capital balances are â¹ 4,00,000, â¹ 1,60,000 and â¹ 1,20,000 respectively. Net profit for the year ended 31st March, 2018 distributed amongst the partners was â¹ 1,00,000, without taking into account the following adjustments:
(a) Interest on capitals @ 2.5% p.a.;
(b) Salary to Mudit â¹ 18,000 p.a. and commission to Uday â¹ 12,000.
(c) Mudit was allowed a commission of 6% of divisible profit after charging such commission.
Pass a rectifying Journal entry in the books of the firm. Show workings clearly.
Answer:
In the books of Mudit, Sudhir and Uday Journal |
|||||||
Date |
Particulars |
|
|
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2018 |
|
|
|
|
|||
March 31 | Sudhir’s Current A/c |
Dr. |
|
6,000 |
|
||
To Mudit’s Current A/c |
|
|
1,000 |
||||
To Uday’s Current A/c |
|
|
5,000 |
||||
(Being adjustment entry passed for rectification of errors) |
|
|
|
Working Notes:
Table Showing Adjustment |
||||||||
Particulars |
Mudit’s Current A/c |
Sudhir’s Current A/c |
Uday’s Current A/c |
Firm |
||||
|
Dr.( â¹) |
Cr.( â¹) |
Dr.( â¹) |
Cr.( â¹) |
Dr.( â¹) |
Cr.( â¹) |
Dr.( â¹) |
Cr.( â¹) |
Profits wrongly Distributed (Dr.) |
60,000 |
|
20,000 |
|
20,000 |
|
|
1,00,000 |
Interest on Capital to be |
|
|
|
|
|
|
|
|
Provided (Cr.) |
|
10,000 |
|
4,000 |
|
3,000 |
17,000 |
|
Salary to be provided (Cr.) |
|
18,000 |
|
|
|
|
18,000 |
|
Commission to be provided (Cr.) |
|
3,000 |
|
|
|
12,000 |
15,000 |
|
Profit correctly distributed (Cr.) |
|
30,000 |
|
10,000 |
|
10,000 |
50,000 |
|
Balance to be adjusted |
1,000(Cr.) |
6,000(Dr.) |
5,000(Cr.) |
NIL |
Divisible Profits | = | Profits before appropriation – (Interest on Capital + Salary + Uday’s Commission) |
= | â¹ 1,00,000 – (17,000 + 18,000 + 12,000) = â¹ 53,000 | |
Mudit’s Commission | = | (Divisible Profit × Rate/ 100 + Rate) |
= | â¹ (53,000 × 6/106) = â¹ 3,000 |
Page No 2.93:
Question 71:
A, B and C are partners in a firm. Net profit of the firm for the year ended 31st March, 2019 is â¹ 30,000, which has been duly distributed among the partners, in their agreed ratio of 3 : 1 : 1. It is noticed on 10th April, 2019 that the undermentioned transactions were not passed through the books of account of the firm for the year ended 31st March, 2019.
(a) Interest on Capital @ 6% per annum, the capital of A, B and C being â¹ 50,000; â¹ 40,000 and â¹ 30,000 respectively.
(b) Interest on drawings: A â¹ 350; B â¹ 250; C â¹ 150.
(c) Partners' Salaries: A â¹ 5,000; B â¹ 7,500.
(d) Commission due to A (for some special transaction) â¹ 3,000.
You are required to pass a Journal entry, which will not affect Profit and Loss Account of the firm and rectify the position of partners inter se.
Answer:
|
Journal |
||||
Date |
Particular |
L.F. |
Debit Amount |
Credit Amount |
|
2019 March 31 |
A’s Capital A/c |
Dr. |
2,520 |
||
|
C’s Capital A/c |
Dr. |
2,740 |
||
|
To B’s Capital A/c |
5,260 |
|||
|
(Adjustment made) |
Particular
|
A
|
B
|
C
|
Total
|
Interest on Capital @ 6% p.a.
|
3,000
|
2,400
|
1,800
|
(7,200)
|
Interest on Drawings
|
(350)
|
(250)
|
(150)
|
750
|
Salary
|
5,000
|
7,500
|
–
|
(12,500)
|
Commission
|
3,000
|
–
|
–
|
(3,000)
|
Profit (30,000 – 7,200 – 12,500 – 3,000 + 750)
|
4,830
|
1,610
|
1,610
|
(8,050)
|
Right Share
|
15,480
|
11,260
|
3,260
|
(30,000)
|
Wrong Share
|
(18,000)
|
(6,000)
|
(6,000)
|
30,000
|
Net Effect
|
2,520 (Dr.)
|
5,260 (Cr.)
|
2,740
(Dr.)
|
Nil
|
|
|
|
|
|
Page No 2.93:
Question 72:
On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were â¹ 80,000, â¹ 60,000, â¹ 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted.
(a) The profit for the year ended 31st March, 2014 was â¹ 80,000.
(b) During the year Saroj and Mahinder each withdrew a sum of â¹ 24,000 in equal instalments in the end of each month and Umar withdrew â¹ 36,000.
(c) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.
(d) The profit-sharing ratio among partners was 4 : 3 : 1.
Showing your workings clearly, pass the necessary rectifying entry.
Answer:
Journal |
||||
Particular |
L.F. |
Debit Amount |
Credit Amount |
|
Saroj’s Capital A/c |
Dr. |
2,350 |
|
|
Mahinder’s Capital A/c |
Dr. |
1,300 |
|
|
To Umar’s Capital A/c |
|
3,650 |
||
(Adjustment made) | ||||
Working Notes:
Particular |
Saroj |
Mahinder |
Umar |
Closing Capitals |
80,000 |
60,000 |
40,000 |
Add: Drawings |
24,000 |
24,000 |
36,000 |
Less: Profit Share |
40,000 |
30,000 |
10,000 |
Opening Capital |
64,000 |
54,000 |
66,000 |
Particular
|
Saroj
|
Mahinder
|
Umar
|
Total
|
Interest on Capital @ 10% p.a. |
6,400
|
5,400
|
6,600
|
(18,400)
|
Interest on Drawings@ 5% p.a. |
(550)
|
(550)
|
(900)
|
2,000
|
Profit (80,000 – 18,400 + 2,000) |
31,800
|
23,850
|
7,950
|
(63,600)
|
Right Share |
37,650
|
28,700
|
13,650
|
(80,000)
|
Wrong Share |
(40,000)
|
(30,000)
|
(10,000)
|
80,000
|
Net Effect
|
2,350 (Dr.)
|
1,300
(Dr.)
|
3,650
(Cr.)
|
Nil
|
|
Page No 2.93:
Question 73:
Capitals of A, B and C as on 31st March, 2019 amounted to â¹ 90,000, â¹ 3,30,000 and â¹ 6,60,000 respectively. Profit of â¹ 1,80,000 for the year ended 31st March, 2019 was distributed in the ratio of 4 : 1 : 1 after allowing interest on Capital @ 10% p.a. During the year, each partner withdrew â¹ 3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12%.
Pass the necessary adjustment entry showing the working clearly.
Answer:
In the books of A, B and C Journal |
||||||
Date |
Particulars |
|
|
L.F. |
Debit Amount (â¹) |
Credit Amount |
2019 Mar.31 |
|
|
|
|
|
|
|
To B’s Capital A/c |
|
|
|
|
30,000 |
|
To C’s Capital A/c |
|
|
|
|
36,600 |
|
(Being adjustment made for interest on capital and profits) |
|
|
|
|
|
Statement Showing Adjustment:
Particulars |
A’s Capital A/c |
B’s Capital A/c |
C’s Capital A/c |
Firm |
||||
|
Dr. ( â¹) |
Cr. ( â¹) |
Dr. ( â¹) |
Cr. ( â¹) |
Dr. ( â¹) |
Cr. ( â¹) |
Dr. ( â¹) |
Cr. ( â¹) |
Profits wrongly credited in the ratio 4:1:1(Dr.) |
1,20,000 |
|
30,000 |
|
30,000 |
|
1,80,000 |
|
Interest on Capital wrongly credited @10% p.a. (Dr.) |
33,000 |
|
66,000 |
|
99,000 |
|
|
1,98,000 |
Interest on Capital to be provided @12% p.a. (Cr.) |
|
39,600 |
|
79,200 |
|
1,18,800 |
2,37,600 |
|
Profits to be credited in the ratio 1:1:1 (Cr.) |
|
46,800 |
|
46,800 |
|
46,800 |
1,40,400 |
|
Balance to be adjusted |
66,600 (Dr.) |
30,000 (Cr.) |
36,600 (Cr.) |
NIL |
Note: Since, there is no provision of interest on drawings in the partnership deed so we will not provide it.
Calculation of Opening Capital of the Partners:
Particulars |
A |
B |
C |
Closing Capital of the partners |
90,000 |
3,30,000 |
6,60,000 |
Add: Drawings made during the year |
3,60,000 |
3,60,000 |
3,60,000 |
Less: Profits for the year |
1,20,000 |
30,000 |
30,000 |
Opening Capital of the partners as on 1st April, 2017 |
3,30,000 |
6,60,000 |
9,90,000 |
Note: Interest on Capital is always computed on the opening capitals.
Page No 2.93:
Question 74:
Capital Accounts of A and B stood at â¹ 4,00,000 and â¹ 3,00,000 respectively after necessary adjustments in respect of the drawings and the net profit for the year ended 31st March, 2019. It was subsequently noticed that 5% p.a. interest on capital and also drawings were not taken into account in arriving at the distributable profit. The drawings of the partners had been: A – â¹ 12,000 drawn at the end of each quarter and B – â¹ 18,000 drawn at the end of each half year.
The profit for the year as adjusted amounted to â¹ 2,00,000. The partners share profits in the ratio of 3 : 2. You are required to pass Journal entries and show adjusted Capital Accounts of the partners.
Answer:
Journal |
|||||
Date |
Particulars |
L. F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
2019 |
P&L Adjustment A/c | Dr. |
29,200 |
||
Mar.31 |
To A's Capital A/c |
16,400 |
|||
To B's Capital A/c |
12,800 |
||||
(Interest on capital omitted, now provided) | |||||
A's Capital A/c | Dr. |
900 |
|||
B's Capital A/c | Dr. |
450 |
|||
To P&L Adjustment A/c |
1,350 |
||||
(Interest on drawings omitted, now charged) | |||||
A's Capital A/c | Dr. |
16,710 |
|||
B's Capital A/c | Dr. |
11,140 |
|||
To P&L Adjustment A/c (29,200 – 1,350) |
27,850 |
||||
(Loss on adjustment is distributed between the partner) | |||||
Partners’ Capital Accounts |
||||||
Dr. |
Cr. |
|||||
Particulars |
A |
B |
Particulars |
A |
B |
|
B’s Capital A/c |
1,210 |
Balance b/d |
4,00,000 |
3,00,000 |
||
A’s Capital A/c |
– |
1,210 |
||||
Balance c/d |
3,98,790 |
3,01,210 |
||||
4,00,000 |
3,01,210 |
4,00,000 |
3,01,210 |
|||
Working Notes:
WN 1 Calculation of Capital as on April 01, 2018 (Opening Capital)
Particulars |
A |
B |
Total |
Capital as on March 31, 2019 (Closing) |
4,00,000 |
3,00,000 |
7,00,000 |
Add: Drawings |
48,000 |
36,000 |
84,000 |
Less: Profit (3:2) |
(1,20,000) |
(80,000) |
(2,00,000) |
Capital as on April 01, 2018 (Opening) |
3,28,000 |
2,56,000 |
5,84,000 |
WN 2 Calculation on Interest on Capital
WN 3 Calculation of Interest on Drawings
If instead of all entries, adjustment entry is asked in the question
Journal |
|||||
Date |
Particulars |
L. F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
|
A’s Capital A/c | Dr. |
1,210 |
|||
To B’s Capital A/c |
1,210 |
||||
(Amount of interest on Capital and interest on drawings adjusted) | |||||
Working Notes: Statement Showing Adjustment
Statement Showing Adjustment |
|||
Particulars |
A |
B |
Total |
Interest on Capital (to be credited) |
16,400 |
12,800 |
29,200 |
Less: Interest on Drawings |
(900) |
(450) |
(1,350) |
Right distribution of Rs 27,850 |
15,500 |
12,350 |
27,850 |
Less: Wrong Distribution of Rs 27,850 (3 : 2) |
(16,710) |
(11,140) |
(27,850) |
Net Effect |
(1,210) |
1,210 |
NIL |
Page No 2.94:
Question 75:
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They employed Z as their Manager to whom they paid a salary of â¹ 7,500 per month. Z had deposited â¹ 2,00,000 on which interest was payable â¹ 9% p.a. At the end off the accounting year (i.e., 31st March, 2018) 2017-18 (after division of the year's profits), it was decided that Z should be treated as a partner with effect from 1st April, 2014 with 1/6th share of profits, his deposit being considered as capital carrying interest @ 6% p.a. like capitals of other partners. The firm's profits and losses after allowing interest on capitals were – 2014-15:
Profit â¹ 5,90,000; 2015-16: Profit â¹ 6,26,000; 2016-17: Loss â¹ 40,000 and 2017-18: Profit â¹ 7,80,000.
Record necessary Journal entries to give effect to the above.
Answer:
Journal |
||||
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
Z’s Loan A/c |
Dr. |
|
2,00,000 |
|
To Z’s Capital A/c |
|
|
2,00,000 |
|
(Z’s Loan transferred to his Capital Account) |
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
3,600 |
|
Y’s Capital A/c |
Dr. |
|
2,400 |
|
To Z’s Capital A/c |
|
|
6,000 |
|
(Z's excess credit balance paid to him by X and Y in the ratio of 3:2) |
|
|
|
|
|
|
|
|
Working Notes:
WN 1 Profit before Z’s Salary and Interest on Loan.
Year |
Profit/ Loss |
+ |
Salary |
+ |
Interest on Z’s loan |
= |
Profit before Z’s Salary and Interest on Loan |
2012-2013 |
5,90,000 |
+ |
90,000 |
+ |
18,000 |
= |
6,98,000 |
2013-2014 |
6,26,000 |
+ |
90,000 |
+ |
18,000 |
= |
7,34,000 |
2014-2015 |
(40,000) |
+ |
90,000 |
+ |
18,000 |
= |
68,000 |
2015-2016 |
7,80,000 |
+ |
90,000 |
+ |
18,000 |
= |
8,88,000 |
Profit before Interest on Z’s Capital (for 4 years) |
23,88,000 |
||||||
|
|
WN 2 Calculation of Interest on Capital
Interest on Z’s Capital for 4 years = 12,000 × 4 = Rs 48,000
WN 3 Calculation of Z’s Share of Profit as a Partner
Profit after Interest on Z’s Capital = Profit before Interest on Z’s Capital − Interest on Z’s Capital
= 23,88,000 − 48,000 = Rs 23,40,000
Z’s Profit Share as a Partner for 4 years
∴ Z’s Share of Interest on Capital and Profit Share as a Partner = 48,000 + 3,90,000 = Rs 4,38,000
Z’s Salary and Interest on Loan as Manager = 72,000 + 3,60,000 = Rs 4,32,000
Adjustment of Z's share of Profit
Z’s Share as a Partner Less: Z’s Share as a Manager Z will get from X and Y in their profit sharing ratio
|
4,38,000 |
(4,32,000) |
|
6,000 |
|
|
Profit to be transferred by X and Y in favour of Z
Page No 2.94:
Question 76:
A and B are partners sharing profits in the ratio of 2 : 1. They admitted C, their manager, as a partner form 1st April, 2018, for 1/5th share of profit C, while being manager, was getting salary of â¹ 50,000 p.a. plus commission of 10% of net profit after charging such salary and commission. It was also agreed that any excess amount which C receives as a partner (over his salary and commission) will be borne by A. Profit for the year ended 31st March, 2019 was â¹ 6,44,000, before payment of salary and commission. Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account for the year and March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
6,44,000 |
|
A’s Capital A/c |
3,35,200 |
|
|
|
B’s Capital A/c |
1,80,000 |
|
|
|
C’s Capital A/c |
1,28,800 |
6,44,000 |
|
|
|
6,44,000 |
|
6,44,000 |
|
|
|
|
|
Working Notes:
WN 1 Calculation of Remuneration to C as a Manager
Salary to C = Rs 50,000
Commission to C = 10% of Net Profit after Salary and Commission
Net Profit after Salary and Commission = 6,44,000 − 50,000 = Rs 5,94,000
C’s remuneration as Manager = Salary + Commission = 50,000 + 54,000 = Rs 1,04,000WN 2 Calculation of Profit Share of C as a Partner
Profit = Rs 6,44,000
Part of C’s Profit Share to be borne by A = 1,28,800 − 1,04,000 = Rs 24,800
Profit available for distribution between A and B = 6,44,000 − 1,04,000 = Rs 5,40,000
A’s Profit share after adjusting C’s deficiency = 3,60,000 − 24,800 = Rs 3,35,200
Page No 2.94:
Question 77:
A, B and C were in partnership sharing profits and losses in the ratio of 4 : 2 : 1. It was provided that C's share in profit for a year would not be less then â¹ 7,500. Profit for the year ended 31st March, 2019 amounted to â¹ 31,500. You are required to show the appropriation among the partners. The profit and Loss Appropriation Account is not required.
Answer:
Profit and Loss Appropriation Account for the year ended 31st March, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c (Net Profit) |
31,500 |
|
A’s Capital A/c |
16,000 |
|
|
|
B’s Capital A/c |
8,000 |
|
|
|
C’s Capital A/c |
7,500 |
31,500 |
|
|
|
31,500 |
|
31,500 |
|
|
|
|
|
Working Notes:
Profit for the year = Rs 31,500
Profit sharing ratio = 4 : 2 : 1
C is given a guarantee of minimum profit of Rs 7,500
C’s Actual Profit Share (i.e. Rs 4,500) is less than his Minimum Guaranteed Profit (i.e. Rs 7,500)
∴ Deficiency in C’s Profit Share = 7,500 − 4,500 = Rs 3,000
This deficiency is to be borne by A and B in their profit sharing ratio i.e. 4 : 2
Therefore,
Final Profit Share of A = 18,000 − 2,000 = Rs 16,000
Final Profit Share of B = 9,000 − 1,000 = Rs 8,000
Final Profit Share of C = 4,500 + 3,000 = Rs 7,500
Page No 2.94:
Question 78:
A and B are partners sharing profits in the ratio of 3 : 2. C was admitted for 1/6th share of profit with a minimum guaranteed amount of â¹ 10,000. At the close of the first financial year the firm earned a profit of â¹ 54,000. Find out the share of profit which A, B and C will get.
Answer:
Profit and Loss Appropriation Account |
|||||
Dr. |
for the year ended 31st March, 2019 |
Cr. |
|||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
||
Profit transferred to: |
Profit and Loss A/c (Net Profit) |
54,000 |
|||
A |
26,400 |
||||
B |
17,600 |
||||
C |
10,000 |
54,000 |
|||
54,000 |
54,000 |
||||
âWorking Note
C will get higher of the two:
(i) Share of Profit as per profit sharing ratio, i.e.,
(ii) Minimum guaranteed profit, i.e. Rs 10,000
Thus from net profit of Rs 54,000, minimum guaranteed profit to C of Rs 10,000 is to be adjusted first.
And the balance profit of Rs 44,000 (54,000 – 10,000) is to be shared by A and B in the ratio 3:2
Page No 2.94:
Question 79:
X, Y and Z entered into partnership on 1st October, 2018 to share profits in the ratio of 4 : 3 : 3. X, personally guaranteed that Z's share of profit after charging interest on capital @ 10% p.a. would not be less then â¹ 80,000 in any year. Capital contributions were: X – â¹ 3,00,000, Y – â¹ 2,00,000 and Z – â¹ 1,50,000.
Profit for the year ended 31st March, 2019 was â¹ 1,60,000. Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
||||
Dr. |
|
Cr. |
||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Interest on Capital: | Net Profit b/d |
1,60,000 |
||
X |
15,000 |
|||
Y |
10,000 |
|||
Z |
7,500 |
32,500 |
||
Profit transferred to: | ||||
X (51,000 – 1,750) |
49,250 |
|
||
Y (38,250) |
38,250 |
|
||
Z (38,250 + 1,750) |
40,000 |
1,27,500 |
||
1,60,000 |
1,60,000 |
|||
Note: Since Z is admitted on 1st October, 2018 and Profit is ascertained on March 31, 2019, therefore, interest on capital is calculated for 6 months and guaranteed amount is considered as Rs 40,000 (half of the total amount).
Page No 2.94:
Question 80:
A, B and C are partners in a firm. Their profit-sharing ratio is 2 : 2 : 1. C is guaranteed a minimum of â¹ 10,000 as share of profit every year. Any deficiency arising on that amount shall be met by B. The profits for the two years ended 31st March, 2018 and 2019 were â¹ 40,000 and â¹ 60,000 respectively. Prepare Profit and Loss Appropriation Account for the two years.
Answer:
Profit and Loss Appropriation Account for the year ended 31st March, 2018 |
||||
Dr. | Cr. | |||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: (WN 1) |
|
Profit and Loss A/c (Net Profit) |
40,000 |
|
A’s Capital A/c |
16,000 |
|
|
|
B’s Capital A/c |
14,000 |
|
|
|
C’s Capital A/c |
10,000 |
40,000 |
|
|
|
40,000 |
|
40,000 |
|
|
|
|
|
Profit and Loss Appropriation Account for the year ended 31st March, 2019 |
||||
Dr. | Cr. | |||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c (Net Profit) |
60,000 |
|
A’s Capital A/c |
24,000 |
|
|
|
B’s Capital A/c |
24,000 |
|
|
|
C’s Capital A/c |
12,000 |
60,000 |
|
|
|
60,000 |
|
60,000 |
|
|
|
|
|
Working Notes:
WN 1 Distribution of Profit for the year 2017-18
Profit for 2018 = Rs 40,000
Profit sharing ratio = 2 : 2 : 1
C is given a guarantee of minimum profit of Rs 10,000
Deficiency in C’s Profit Share = 10,000 − 8,000 = Rs 2,000
This deficiency is to be borne by B.
Therefore,
Final Profit Share of A = 16,000
Final Profit Share of B = 16,000 − 2,000 = Rs 14,000
Final Profit Share of C = 8,000 + 2,000 = Rs 10,000
WN 2 Distribution of Profit for the year 2018-19
Profit for 2019 = Rs 60,000
Profit sharing ratio = 2 : 2 : 1
C is given a guarantee of minimum profit of Rs 10,000
Page No 2.95:
Question 81:
A, B and C are partners sharing profits in the ratio of 5 : 4 : 1. C is given a guarantee that his minimum share of profit in any given year would be at least â¹ 5,000. Deficiency, if any, would be borne by A and B equally. Profit for the year ended 31st March 2019 was â¹ 40,000.
Pass necessary Journal entries in the books of the firm.
Answer:
Profit and Loss Appropriation Account for the year ended 2018–19 |
||||
Dr. | Cr. | |||
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c (Net Profit) |
40,000 |
|
A’s Capital A/c |
19,500 |
|
|
|
B’s Capital A/c |
15,500 |
|
|
|
C’s Capital A/c |
5,000 |
40,000 |
|
|
|
40,000 |
|
40,000 |
|
|
|
|
|
Working Notes:
Profit for the year = Rs 40,000
Profit sharing ratio = 5 : 4 : 1
C is given a guarantee of minimum profit of Rs 5,000
Deficiency in C’s share = 5,000 − 4,000 = Rs 1,000
This deficiency is to be borne by A and B equally.
Therefore,
Final Profit Share of A = 20,000 − 500 = Rs 19,500
Final Profit Share of B = 16,000 − 500 = Rs 15,500
Final Profit Share of C = 4,000 + 1,000 = Rs 5,000
Page No 2.95:
Question 82:
Vikas and Vivek were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2018, they admitted Vandana as a new partner for 1/8th share in the profits with a guaranteed profit of â¹ 1,50,000. New profit-sharing ratio between Vikas and Vivek will remain same but they decided to bear any deficiency on account of guarantee to Vandana in the ratio 3 : 2. Profit of the firm for the year ended 31st March, 2019 was â¹ 9,00,000. Prepare Profit and Loss Appropriation Account of Vikas, Vivek and Vandana for the year ended 31st March, 2019.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
9,00,000 |
|
Vikas’s Capital A/c |
4,50,000 |
|
|
|
Vivek’s Capital A/c |
3,00,000 |
|
|
|
Vandana’s Capital A/c |
1,50,000 |
9,00,000 |
|
|
|
|
|
|
|
|
9,00,000 |
|
9,00,000 |
|
|
|
|
|
Working Notes:
Page No 2.95:
Question 83:
Pranshu and Himanshu are partners sharing profits and losses in the ratio of 3 : 2 respectively. They admit Anshu as partner with 1/6 share in the profits of the firm. Pranshu personally guaranteed that Anshu's share of profit would not be less than â¹ 30,000 in any year. The net profit of the firm for the ear ending 31st March, 2013 was â¹ 90,000 .
Prepare Profit and Loss Appropriation Account.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2013 |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount (Rs) |
Particulars |
Amount (Rs) |
|||
Profit transferred to: |
|
Profit & Loss A/c |
90,000 |
|||
Pranshu’s Capital A/c |
30,000 |
|
|
|
||
Himanshu’s Capital A/c |
30,000 |
|
|
|
||
Anshu’s Capital A/c |
30,000 |
90,000 |
|
|
||
|
90,000 |
|
90,000 |
|||
|
|
|
|
Working Notes:
WN1: Calculation of New Profit Sharing Ratio
Old ratio = 3 : 2
Let the total share of the firm be Re 1
Anshu is admitted for 1/6th share in profits
WN2:Distribution of Profit
Page No 2.95:
Question 84:
A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They earned a profit of â¹ 30,000 during the year ended 31st March, 2019. Distribute profit among A, B and C if:
(a) C's share of profit is guaranteed to be â¹ 6,000 Minimum.
(b) Minimum profit payable to C amounting to â¹ 6,000 is guaranteed by A.
(c) Guaranteed minimum profit of â¹ 6,000 payable to C is guaranteed by B.
(d) Any deficiency after making payment of guaranteed â¹ 6,000 will be borne by A and B in the ratio of 3 : 1.
Answer:
Case (a)
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
30,000 |
|
A’s Capital A/c |
14,400 |
|
|
|
B’s Capital A/c |
9,600 |
|
|
|
C’s Capital A/c |
6,000 |
30,000 |
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Working Notes:
Profit = Rs 30,000
Profit sharing ratio = 3 : 2 : 1
C is given a guarantee of minimum profit of Rs 6,000
Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000
This deficiency is to be borne by A and B in their profit sharing ratio i.e. 3 : 2
Therefore,
Final Profit Share of A = 15,000 − 600 = Rs 14,400
Final Profit Share of B = 10,000 − 400 = Rs 9,600
Final Profit Share of C = 5,000 + 1,000 = Rs 6,000
Case (b)
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
30,000 |
|
A’s Capital A/c |
14,000 |
|
|
|
B’s Capital A/c |
10,000 |
|
|
|
C’s Capital A/c |
6,000 |
30,000 |
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Working Notes:
Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000
This deficiency is to be borne by A only.
Therefore,
Final Profit Share of A = 15,000 − 1,000 = Rs 14,000
Final Profit Share of B = 10,000
Final Profit Share of C = 5,000 + 1,000 = Rs 6,000
Case (c)
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
30,000 |
|
A’s Capital A/c |
15,000 |
|
|
|
B’s Capital A/c |
9,000 |
|
|
|
C’s Capital A/c |
6,000 |
30,000 |
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Working Notes:
Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000
This deficiency is to be borne by B only.
Therefore,
Final Profit Share of A = 15,000
Final Profit Share of B = 10,000 − 1,000 = Rs 9,000
Final Profit Share of C = 5,000 + 1,000 = Rs 6,000
Case (d)
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
30,000 |
|
A’s Capital A/c |
14,250 |
|
|
|
B’s Capital A/c |
9,750 |
|
|
|
C’s Capital A/c |
6,000 |
30,000 |
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Working Notes:
Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000
This deficiency is to be borne by A and B in the ratio of 3 : 1.
Therefore,
Final Profit Share of A = 15,000 − 750 = Rs 14,250
Final Profit Share of B = 10,000 − 250 = Rs 9,750
Final Profit Share of C = 5,000 + 1,000 = Rs 6,000
Page No 2.95:
Question 85:
A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They admit C, their Manager, as a partner with effect from 1st April, 2018, for 1/4th share of profits.
C, while a Manager, was in receipt of a salary of â¹ 27,000 p.a. and a commission of 10% of the net profits after charging such salary and commission.
In terms of the Partnership Deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the manager, would have to be personally borne by A out of his share of profit. Profit for the year ended 31st March, 2019 amounted to â¹ 2,25,000. You are required to show Profit and Loss Appropriation Account for the year ended 31at March, 2019.
Answer:
Profit and Loss Appropriation Account for the year and March 31, 2019 |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (â¹) |
Particulars |
Amount (â¹) |
|
Profit transferred to: |
|
Profit and Loss A/c |
2,25,000 |
|
A’s Capital A/c |
96,750 |
|
|
|
B’s Capital A/c |
72,000 |
|
|
|
C’s Capital A/c |
56,250 |
2,25000 |
|
|
|
2,25000 |
|
2,25000 |
|
|
|
|
|
Working Notes:
WN 1 Calculation of Remuneration to C as a Manager
Salary to C = Rs 27,000
Commission to C = 10% of Net Profit after Salary and Commission
Net Profit after Salary and Commission = 2,25,000 − 27,000 = Rs 1,98,000
C’s remuneration as Manager = Salary + Commission = 27,000 + 18,000 = Rs 45,000WN 2 Calculation of Profit Share of C as a Partner
Profit = Rs 2,25,000
Part of C’s Profit Share to be borne by A = 56,250 − 45,000 = Rs 11,250
Profit available for distribution between A and B = 2,25,000 − 45,000 = Rs 1,80,000
A’s Profit share after adjusting C’s deficiency = 1,08,000 − 11,250 = Rs 96,750
Page No 2.95:
Question 86:
Asgar, Chaman and Dholu are partners in a firm. Their Capital Accounts stood at â¹ 6,00,000; â¹ 5,00,000 and â¹ 4,00,000 respectively on 1st April, 2017. They shared Profits and Losses in the proportion of 4 : 2 : 3. Partners are entitled to interest on capital @ 8% per annum and salary to Chaman and Dholu @ â¹ 7,000 per month and â¹ 10,000 per quarter respectively as per the provision of the Partnership Deed. Sholu's share of profit ( excluding interest on capital but including salary) is guaranteed at a minimum of â¹ 1,10,000 p.a. Any deficiency arising on that account shall be met by Asgar. The profit for the year ended 31st March, 2018 amounted to â¹ 4,24,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2018 |
||||
Dr. |
|
|
|
Cr. |
Particulars |
|
Amount Rs |
Particulars | Amount Rs |
Interest on Capital to: | Profit and Loss A/c (Net Profit) | 4,24,000 | ||
Asgar | 48,000 | |||
Chaman | 40,000 | |||
Dholu | 32,000 | 1,20,000 | ||
Salary to Chaman (Rs 7,000 × 12) | 84,000 | |||
Salary to Dholu (Rs 10,000 × 4) | 40,000 | |||
Profit transferred to: | ||||
Asgar | 70,000 | |||
Chaman | 40,000 | |||
Dholu | 70,000 | 1,80,000 | ||
4,24,000 | 4,24,000 | |||
Working Notes:
Profit available for distribution = 4,24,000 – (1,20,000 + 84,000+ 40,000) = Rs 1,80,000
Profit sharing ratio = 4 : 2 : 3
Dholu’s Minimum Guaranteed Profit = Rs 1,10,000 (excluding interest on capital, but including salary)
Dholu’s Minimum Guaranteed Profit (excluding salary) = 1,10,000 – 40,000 = Rs 70,000
But, Dholu’s Actual Profit Share = Rs 60,000
Deficiency in Dholu’s Profit Share = 70,000 – 60,000 = 10,000
This deficiency is to be borne by Asgar alone.
Therefore,
Asgar’s New Profit Share = 80,000 – 10,000 = Rs 70,000
Page No 2.96:
Question 87:
P, Q and R entered into partnership on 1st April, 2015 to share profits and losses in the ratio of 12 : 8 : 5. It was provided that in no case R's share in profit be less then â¹ 30,000 p.a. The profits and losses for the period ended 31st March were: 2015-16 Profit â¹ 1,20,000 2016-17 Profit â¹ 1,80,000; 2017-18 Loss â¹ 1,20,000.
Pass the necessary Journal entries in the books of the firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
2015-16 |
P’s Capital A/c |
Dr. |
|
3,600 |
|
|
Q’s Capital A/c |
Dr. |
|
2,400 |
|
|
To R’s Capital A/c |
|
|
|
6,000 |
|
(Deficiency adjusted) |
|
|
|
|
|
|
|
|
|
|
2017-18 |
P’s Capital A/c |
Dr. |
|
32,400 |
|
|
Q’s Capital A/c |
Dr. |
|
21,600 |
|
|
To R’s Capital A/c |
|
|
|
54,000 |
|
(Deficiency adjusted) |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of amount of deficiency of R
Page No 2.96:
Question 88:
Ankur, Bhavns and Disha are partners in a firm. On 1st April, 2017, the balance in their Capital Accounts stood at â¹ 14,00,000, â¹ 6,00,000 and â¹ 4,00,000 respectively. They shared profits in the proportion of 7 : 3 : 2 respectively. Partners are entitled to interest on capital @ 6% per annum and salary to Bhavna @ â¹ 50,000 p.a. and a commission of â¹ 3,000 per month to Disha as per the provisions of the partnership Deed. Bhavna's share of profit (excluding interest on capital) is guaranteed at not less than â¹ 1,70,000 p.a. Disha's share of profit (including interest on capital but excluding commission) is guaranteed at not less than â¹ 1,50,000 p.a. Any deficiency arising on that account shall be met by Ankur. The profit of the firm for the year ended 31st March, 2018 amounted to â¹ 9,50,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2018.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2018 |
||||
Dr. |
|
|
|
Cr. |
Particulars |
|
Amount Rs |
Particulars | Amount Rs |
Interest on Capital to: | Profit and Loss A/c (Net Profit) | 9,50,000 | ||
Ankur | 84,000 | |||
Bhavna | 36,000 | |||
Disha | 24,000 | 1,44,000 | ||
Salary to Bhavna | 50,000 | |||
Commission to Disha (Rs 3,000 × 12) | 36,000 | |||
Profit transferred to: | ||||
Ankur | 4,14,000 | |||
Bhavna | 1,80,000 | |||
Disha | 1,26,000 | 7,20,000 | ||
9,50,000 | 9,50,000 | |||
Working Notes:
Profit available for distribution = 9,50,000 – (1,44,000 + 50,000 + 36,000) = Rs 7,20,000
Profit sharing ratio = 7 : 3 : 2
Bhavna’s Minimum Guaranteed Profit = Rs 1,70,000 (excluding interest on capital)
But, Bhavna’s Actual Profit Share = Rs 1,80,000
This implies that there is no deficiency in Bhavna’s profit share as her actual profit share (i.e. Rs 1,80,000) exceeds his minimum guaranteed profit share (i.e. Rs 1,70,000).
Disha’s Minimum Guaranteed Profit = Rs 1,50,000 (including interest on capital but excluding salary)
Disha’s Minimum Guaranteed Profit (excluding interest) = 1,50,000 – 24,000 = Rs 1,26,000
But, Disha’s Actual Profit Share = 1,20,000
Deficiency in Disha’s Profit Share = 1,26,000 – 1,20,000 = 6,000
This deficiency is to be borne by Ankur alone.
Therefore,
Ankur’s New Profit Share = 4,20,000 – 6,000 = Rs 4,14,000
Page No 2.96:
Question 89:
Ankur and Bobby were into the business of providing software solutions in India. They were sharing profits and losses in the ratio 3 : 2. They admitted Rohit for a 1/5 share in the firm. Rohit, an alumni or IIT, Chennai would help them to expand their business to various South African countries where he had been working earlier. Rohit is guaranteed a minimum profit of â¹ 2,00,000 for the year. Any deficiency in Rohit's share is to be borne by Ankur and Bobby in the ratio 4 : 1. Loss for the year was â¹ 10,00,000. Pass the necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
Ankur’s Capital A/c |
Dr. |
|
4,80,000 |
|
|
Bobby’s Capital A/c |
Dr. |
|
3,20,000 |
|
|
Rohit’s Capital A/c |
Dr. |
|
2,00,000 |
|
|
To Profit and Loss A/c |
|
|
|
10,00,000 |
|
(Loss debited to Partners’ Capital Accounts) |
|
|
|
|
|
|
|
|
|
|
|
Ankur’s Capital A/c |
Dr. |
|
3,20,000 |
|
|
Bobby’s Capital A/c |
Dr. |
|
80,000 |
|
|
To Rohit’s Capital A/c |
|
|
|
4,00,000 |
|
(Deficiency borne by Ankur and Bobby in the ratio of 4:1) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1: Calculation of New Ratio
WN 2: Calculation of Share of Loss
WN 3: Calculation of Deficiency
Amount payable to Rohit = Guaranteed Profit Amount + Loss transferred to Rohit’s Capital A/c
Amount payable to Rohit = 2,00,000 + 2,00,000 = Rs 4,00,000
Deficiency is to be borne by Ankur and Bobby in the ratio of 4 : 1
Page No 2.96:
Question 90:
Ajay, Binay and Chetan were partners sharing profits in the ratio of 3 : 3 : 2. The Partnership Deed provided for the following:
(i) Salary of â¹ 2,000 per quarter to Ajay and Binay.
(ii) Chetan was entitled to a commission of â¹ 8,000
(iii) Binay was guaranteed a rofit of â¹ 50,000 p.a.
The profit of the firm for the year ended 31st March, 2015 was â¹ 1,50,000 which was distributed among Ajay, Binay and Chetan in the ratio of 2 : 2 : 1, without taking into consideration the provisions of Partnership Deed. Pass necessary rectifying entry for the above adjustments in the books of the firm. Show your workings clearly.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
Ajay’s Capital A/c |
Dr. |
|
6,400 |
|
|
Binay’s Capital A/c |
Dr. |
|
2,000 |
|
|
To Chetan’s Capital A/c |
|
|
|
8,400 |
|
(Adjustment entry made) |
|
|
|
|
Working Notes:
WN1: Profit & Loss Appropriation A/c
Profit and Loss Appropriation Account for the year ended 31st March, 2015 |
||||||
Dr. |
|
|
Cr. |
|||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|||
Salary: |
|
Profit and Loss A/c |
1,50,000 |
|||
Ajay |
8,000 |
|
|
|
||
Binay |
8,000 |
16,000 |
|
|
|
|
Chetan’s Capital A/c (Commission) |
8,000 |
|
|
|||
Profit transferred to: |
|
|
|
|||
Ajay’s Capital A/c (47,250 – 1,650) |
45,600 |
|
|
|
||
Binay’s Capital A/c (47,250 + 2,750) |
50,000 |
|
|
|
||
Chetan’s Capital A/c (31,500 – 1,100) |
30,400 |
1,26,000 |
|
|
||
|
1,50,000 |
|
1,50,000 |
|||
|
|
|
|
WN2: Statement Showing Adjustment
Statement Showing Adjustment |
||||
Particulars |
Ajay |
Binay |
Chetan |
Total |
Salary to be provided |
8,000 |
8,000 |
- |
(16,000) |
Commission to be provided |
|
|
8,000 |
(8,000) |
Profit to be credited |
45,600 |
50,000 |
30,400 |
(1,26,000) |
Total |
53,600 |
58,000 |
38,400 |
(1,50,000) |
Profit already distributed |
(60,000) |
(60,000) |
(30,000) |
1,50,000 |
Net Effect |
(6,400) |
(2,000) |
8,400 |
NIL |
Page No 2.96:
Question 91:
The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March, 2017, â¹ 80,000 in the ratio of 3 : 3 : 2 without providing for the following adjustments:
(a) Alia and Chand were entitled to a salary of â¹ 1,500 each p.a.
(b) Bhanu was entitled for a commission of â¹ 4,000.
(c) Bhanu and Chand had guaranteed a minimum profit of â¹ 35,000 p.a. to Alia any deficiency to borne equally by Bhanu and Chand.
Pass the necessary Journal entry for the above adjustments in the books of the firm. Show workings clearly.
Answer:
In the books of Mudit, Sudhir and Uday Journal |
|||||||
Date |
Particulars |
|
L.F. |
Debit Amount (â¹) |
Credit Amount (â¹) |
||
2017 |
|
|
|
|
|
||
March 31 |
Bhanu’s Capital A/c |
Dr. |
|
21,000 |
|
||
|
Chand’s Capital A/c |
Dr. |
|
2,000 |
|
||
|
To Alia’s Capital A/c |
|
|
|
23,000 |
||
(Being adjustment entry passed for rectification of errors) |
|
|
|
|
Working Notes:
Table Showing Adjustment |
||||||||
Particulars |
Alia’s Capital A/c |
Bhanu’s Capital A/c |
Chand’s Capital A/c |
Firm |
||||
|
Dr. |
Cr. |
Dr. |
Cr. |
Dr. |
Cr. |
Dr. |
Cr. |
Profits wrongly Distributed (Dr.) |
30,000 |
|
30,000 |
|
20,000 |
|
|
80,000 |
Salary to be provided (Cr.) |
|
18,000 |
|
|
|
18,000 |
36,000 |
|
Commission to be provided (Cr.) |
|
|
|
4,000 |
|
|
4,000 |
|
Profits correctly distributed |
|
35,000 |
|
5,000 |
|
Nil |
40,000 |
|
Balance to be adjusted |
23,000(Cr.) |
21,000(Dr.) |
2,000(Dr.) |
Nil |
Divisible Profits | = | Profits before appropriation – (Salary + Bhanu’s Commission) |
= | â¹ [80,000 – (36,000 + 4,000)] = â¹ 40,000 | |
Alia’s Share of Profits | = | â¹ (40,000 × 3/8) = 15,000 |
Deficiency in Alia’s Share of Profits | = | â¹ (35,000 – 15,000) = â¹ 20,000 (To be borne by Bhanu and Chand in 1 : 1) |
Alia’ final share of Profits | = | â¹ 35,000 |
Bhanu’s final share of Profits | = | â¹ [(40,000 × 3/8) – 10,000] = â¹ 5,000 |
Chand’s final share of Profits | = | â¹ [(40,000 × 2/8) – 10,000] = Nil |
Page No 2.97:
Question 92:
Three Chartered Accountants A, B and C form a partnership, profits being shared in the ratio of 3 : 2 : 1 subject to the following:
(a) C's share of profit guaranteed to be not less than â¹ 15,000 p.a.
(b) B gives a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average gross fee of the preceeding five years when he was carrying on profession alone, which on an average works out at â¹ 25,000.
The profit for the first year of the partnership are â¹ 75,000. The gross fee earned by B for the firm is â¹ 16,000. You are required to show Profit and Loss Appropriation Account after giving effect to the above.
Answer:
Profit and Loss Appropriation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|
Profit transferred to: |
|
Profit and Loss A/c (Net Profit) |
75,000 |
|
A’s Capital A/c |
41,400 |
|
B’s Capital A/c |
|
B’s Capital A/c |
27,600 |
|
(Deficiency in Revenue) |
9,000 |
C’s Capital A/c |
15,000 |
84,000 |
|
|
|
84,000 |
|
84,000 |
|
|
|
|
|
Working Notes:
Deficiency in revenue guaranteed by B = 25,000 − 16,000 = Rs 9,000
∴Profit to be distributed among Partners = 75,000 + B’s deficiency in guaranteed interest
= 75,000 + 9,000 = Rs 84,000
Profit sharing ratio = 3 : 2 : 1
C is given a guarantee of minimum profit of Rs 15,000
Deficiency in C’s Profit Share = 15,000 − 14,000 = Rs 1,000
Therefore, Final Profit Share of A = 42,000 − 600 = Rs 41,400
Final Profit Share of B = 28,000 − 400 = Rs 27,600**
Final Profit Share of C =14,000 + 1,000 = Rs 15,000
** In the book, the final profit to B is given as Rs 18,600, however, as per the solution it should be Rs 27,600. The deficiency of Rs 9,000 that was guaranteed by B to the firm would not be deducted from his share as he is bearing it in form of profit.
View NCERT Solutions for all chapters of Class 15