Chapter 2-Accounting For Partnership Firms - Fundamentals: Exercise
Chapter 2-Accounting For Partnership Firms - Fundamentals: Exercise
Chapter 2-Accounting For Partnership Firms - Fundamentals: Exercise
Fundamentals
Exercise
Question 1
Solution:
Question 2
Following differences have arisen among P, Q and R. State who is correct in each case:
(a) P used ₹ 20,000 belonging to the firm and made a profit of ₹ 5,000. Q and R want the amount
to be given to the firm?
(b) Q used ₹ 5,000 belonging to the firm and suffered a loss of ₹ 1000. He wants the firm to bear
the loss?
(c) P and Q want to purchase goods from A Ltd., R does not agree?
Solution:
(a) P will pay ₹20,000 along with ₹ 5,000 profit to the company as the money belongs to the
company. It is because of the relation between the principal and agent. Here, P is both the
principal and the agent to Q and R and the firm. And according to the Partnership Act rules, if an
agent makes a profit made by utilising the firm’s assets is due to the company.
(b) Q has to pay the firm ₹ 5,000. The Partnership Act, 1932, all the partnership firm partners’ are
liable for all the losses made by their negligence. In this scenario, Q is liable for the loss as he has
utilized the company’s property and portrayed himself as a principal and not an agent to the firm
and other partners.
(c) A partner can purchase and trade products without discussing with the other partners. The
discussion happens only if a partner has some restriction to purchase and trade firm properties
and a public notice is issued.
(d) In this scenario, C will not be included in the firm as P, has disagreed to admit C. The Act says,
a new partner will not get admission to a firm if the existing partners disagree for his/her
admission.
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 a 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.
Solution:
Question 4
Jaspal and Rosy were partners with a capital contribution of ₹ 10,00,000 and ₹ 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.
Solution:
In any partnership firm when there is no partnership deed, then the rule of the Indian Partnership
Act of 1932 applies. In the act, when the agreement is not signed then the profit should be
distributed equally to all the partners.
In this scenario, Jaspal’s point of view does not align with the partnership Act rule and therefore,
Rosy would have convinced her by explaining her the Partnership Act, 1932 provisions.
Question 5
Harshad and Dhiman have been in partnership since 1st April, 2018. No partnership agreement
was made. They contributed ₹ 4,00,000 and ₹ 1,00,000 respectively as capital. In addition,
Harshad advanced an amount of ₹ 1,00,000 to the firm on 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 ₹ 1,80,000. The dispute has arisen between
Harshad and Dhiman.
Harshad Claims :
(i) He should be given interest @ 10% per annum on capital and loan;
Dhiman Claims :
(ii) He should be allowed ₹ 2,000 p.m. as remuneration for the period he managed the business in
the absence of Harshad;
You are required to settle the dispute between Harshad and Dhiman. Also, prepare Profit and Loss
Appropriation Account.
Solution:
Harshad Declaration:
(i) According to Indian partnership act 1932, in the absence of agreement, only 6% of interest is
allowed on a partner’s loan and no interest will be incurred in partner’s capital..
(ii) As per the partnership act 1932, in the absence of agreement profit will be shared equally.
Dhiman Claims:
(i) True, according to partnership act 1932, if no agreement is signed between the partners the
profit will be equally distributed.
(ii) No partners are entitled to any sort of salary or remuneration when there is no agreement.
(iii) Here, if there is no agreement between the partners only 6% will be allowed to partner’s loan
and no interest in a partner’s capital.
Profit Distribution:
Question 6
A and B are partners from 1st April 2018, without a Partnership Deed and they introduced capitals
of ₹ 35,000 and ₹ 20,000 respectively. On 1st October 2018, A advanced loan of ₹ 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 ₹ 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.
Solution:
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 ₹ 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.
Solution:
Note: Because there is no partnership agreement only 6% of the interest rate is allowed on the
loan.
Question 8
X and Y are partners sharing profits and losses in the ratio of 2 : 3 with capitals ₹ 2,00,000 and ₹
3,00,000 respectively. On 1st October, 2018, X and Y gave loans of ₹ 80,000 and ₹ 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 ₹ 21,000.
Case 2: If the profits before interest for the year amounted to ₹ 3,000.
Case 3: If the profits before interest for the year amounted to ₹ 5,000.
Case 4: If the loss before interest for the year amounted to ₹ 1,400.
Solution:
X’s loan interest for six months = 80,000 X 6/100 X 6/12 = ₹ 2,400
Y’s loan interest for six months = 40,000 X 6/100 X 6/12 = ₹ 1,200
3,600 3,600
5,000 5,000
Question 9
Bat and Ball are partners sharing the profits in the ratio of 2 : 3 with capitals of ₹ 1,20,000 and ₹
60,000 respectively. On 1st October, 2018, Bat and Ball gave loans of ₹ 2,40,000 and ₹ 1,20,000
respectively to the firm. Bat had allowed the firm to use his property for business for a monthly
rent of ₹ 5,000. The loss for the year ended 31st March, 2019 before rent and interest amounted
to ₹ 9,000. Show distribution of profit/loss.
Solution:
Bat’s Loan interest for six months = ₹ 2,40,000 X 6/100 X 6/12 = ₹ 7,200
Bat’s Loan interest for six months = ₹1,20,000 X 6/100 X 6/12 = ₹ 3,600
Question 10
A and B are partners. A’s Capital is ₹ 1,00,000 and B’s Capital is ₹ 60,000. Interest on capital is
payable @ 6% p.a. B is entitled to a salary of ₹ 3,000 per month. Profit for the current year before
interest and salary to B is ₹ 80,000.
Solution:
X, Y and Z are partners in a firm sharing profits in 2 : 2 : 1 ratio. The fixed capitals of the partners
were : X ₹5,00,000; Y ₹ 5,00,000 and Z ₹ 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 ₹ 2,000 per
month. The profit of the firm for the year ended 31st March, 2018 after debiting Z’s salary was ₹
4,00,000.
Solution:
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 1: Z’s salary will not be debited to the Profit and Loss Appropriation A/c because
₹ 4,00,000 Profit is given after adjusting Z’s salary.
Question 12
X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 8,00,000 and ₹ 6,00,000
respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of ₹
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 ₹ 2,40,000.
Solution:
2,85,000 2,85,000
Profit for making Managers’ Commission = 2,40,000 + 60,000 (Y’s Salary) = ₹3,00,000
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 a salary of ₹ 2,500 per month and Manoj was to get a
commission of ₹ 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 ₹ 1,250 and on Manoj’s
drawings was ₹ 425. Interest on Capitals of the partners were ₹ 10,000 and ₹ 7,500 respectively.
The firm earned a profit of ₹ 90,575 for the year ended 31st March, 2018.
Solution:
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.
Solution:
Note: There will be no capital and salary share to the partners as the company has incurred loss.
Question 15
Bhanu and Partab are partners sharing profits equally. Their fixed capitals as on 1st April, 2018 are
₹ 8,00,000 and ₹ 10,00,000 respectively. Their drawings during the year were ₹ 50,000 and ₹
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 ₹
1,20,000.
Solution:
1,80,000 1,80,000
Question 16
Amar and Bimal entered into partnership on 1st April, 2018 contributing ₹ 1,50,000 and ₹
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 the Fixed Capital
Accounts method. The firm earned net profit of ₹ 1,00,000 for the year ended 31st March 2019.
Solution:
Journal
Debit Credit
Date Particulars L.F.
₹ ₹
March
Profit & Loss Appropriation A/c Dr. 40,000
31
To Amar’s Current A/c 15,000
To Bimal’s Current A/c 25,000
(Capital interest transferred to Profit & Loss Appropriation
A/c)
Question 17
Kamal and Kapil are partners having fixed capitals of ₹ 5,00,000 each as on 31st March, 2018.
Kamal introduced further capital of ₹ 1,00,000 on 1st October, 2018 whereas Kapil withdrew ₹
1,00,000 on 1st October, 2018 out of capital.
The firm earned net profit of ₹ 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.
Solution:
Journal
Credit
Date Particulars L.F. Debit ₹
₹
March
Profit & Loss Appropriation A/c Dr. 1,00,000
31
To Kamal’s Current A/c 55,000
To Kapil’s Current A/c 45,000
(Capital interest transferred to Profit & Loss Appropriation
A/c)
Profit and Loss Appropriation A/c as on 31st March 2019
Dr. Cr.
Particulars ₹ Particulars ₹
Capital Interest 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
Question 18
Simran and Reema are partners sharing profits in the ratio of 3 : 2. Their capitals as on 31st
March, 2018 were ₹ 2,00,000 each whereas Current Accounts had balances of ₹ 50,000 and ₹
25,000 respectively interest is to be allowed @ 5% p.a. on balances in Capital Accounts. The firm
earned net profit of ₹ 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.
Solution:
Journal
Date Particulars L.F. Debit ₹ Credit ₹
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)
Dr. Cr.
Particulars ₹ Particulars ₹
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
Question 19
Anita and Ankita are partners sharing profits equally. Their capitals, maintained following the
Fluctuating Capital Accounts Method, as on 31st March, 2018 were ₹ 5,00,000 and ₹ 4,00,000
respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. The firm earned
net profit of ₹ 2,00,000 for the year ended 31st March, 2019.
Solution:
Journal
Debit Credit
Date Particulars L.F.
₹ ₹
2019
March
Profit & Loss Appropriation A/c Dr. 90,000
31
To Anita’s Capital A/c 50,000
To Ankita’s Capital A/c 40,000
(Capital Interest transferred to Profit & Loss Appropriation
A/c)
Question 20
Ashish and Aakash are partners sharing profit in the ratio of 3 : 2. Their Capital Accounts showed
a credit balance of ₹ 5,00,000 and ₹ 6,00,000 respectively as on 31st March, 2019 after debit of
drawings during the year of ₹ 1,50,000 and ₹ 1,00,000 respectively. Net profit for the year ended
31st March, 2019 was ₹ 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.
Solution:
Journal
Date Particulars L.F. Debit ₹ Credit ₹
March
Profit & Loss Appropriation A/c Dr. 1,35,000
31
To Ashish’s Capital A/c 65,000
To Aakash’s Capital A/c 70,000
(Capital Interest 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)
Question 21
Naresh and Sukesh are partners with capital of ₹ 3,00,000 each as on 31st March, 2019. Naresh
had withdrawn ₹ 50,000 against capital on 1st October, 2018 and also ₹ 1,00,000 besides the
drawings against capital. Sukesh also had drawings of ₹ 1,00,000.
Interest on capital is to be allowed @ 10% p.a.
Net profit for the year was ₹ 2,00,000, which is yet to be distributed.
Pass the Journal entries for interest on capital and distribution of profit.
Solution:
Journal
Credit
Date Particulars L.F. Debit ₹
₹
March
Profit & Loss Appropriation A/c Dr. 82,500
31
To Naresh’s Capital A/c 42,500
To Sukesh’s Capital A/c 40,000
(Capital interest 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)
Question 22
On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipment to
government schools situated in remote and backward areas. They contributed capital of ₹ 80,000
and ₹ 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 ₹ 7,800. Showing your calculations clearly, prepare ‘Profit and Loss
Appropriation Account’ of Jay and Vijay for the year ended 31st March, 2014.
Solution:
7,800 7,800
Question 23
Amar, Bhanu, and Charu are partners in a firm. Amar and Bhanu are to get an annual salary of ₹
1,20,000 p.a. each as they are fully involved in the business. Net profit for the year is ₹ 4,80,000.
Determine the share of profit to be credited to each partner.
Solution:
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 ₹ 1,10,000.
Solution:
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 ₹ 2,20,000.
Solution:
Question 26
Solution:
=1,80,000 X 20/100+20
Question 27
X and
Y are partners in a firm.
X is entitled to a salary of ₹ 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 ₹ 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 ₹ 4,20,000. Show distribution of profit.
Solution:
Profit after partners’ salaries and commission = 4,20,000 − 1,45,000 − 27,500 = ₹ 2,47,500
Question 28
Ram and Mohan, two partners, drew for their personal use ₹ 1,20,000 and ₹ 80,000. Interest is
chargeable @ 6% p.a. on the drawings. What is the amount of interest chargeable from each
partner?
Solution:
Since, the drawing’s date made by the partners is not mentioned, the interest drawing is evaluated
on average basis for six months.
Question 29
Brij and Mohan are partners in a firm. They withdrew ₹ 48,000 and ₹ 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.
Solution:
Every month in the middle, drawings are made even, so, drawings interest is evaluated for six
months.
Question 30
A and B are partners sharing profits equally. A drew regularly ₹ 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.
Solution:
Number of Drawing = 6
= 6+1/2
= 3.5 months
=350
Question 31
One of the partners in a partnership firm has withdrawn ₹ 9,000 at the end of each quarter,
throughout the year. Calculate interest on drawings at the rate of 6% per annum.
Solution:
Question 32
A and B are partners sharing profits equally. A drew regularly ₹ 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.
Solution:
Number of Drawing = 6
= 2.5 months
=250
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:
Solution:
Case (1)
In the beginning of each quarter when equal amount is withdrawn, the drawing interest would be
evaluated for 7.5 months as an average period.
Case (2)
At the end of each quarter when equal amount is withdrawn, the drawing interest would be
evaluated for 4.5 months as an average period.
Case (3)
At the middle of each quarter when equal amount is withdrawn, the drawing interest would be
evaluated for 6 months as an average period.
Question 34
Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the
ratio 2 : 1 with capitals ₹ 5,00,000 and ₹ 4,00,000 respectively. Kanika withdrew the following
amounts during the year to pay the hostel expenses of her son:
Gautam withdrew ₹ 15,000 on the first day of April, July, October and January to pay rent for the
accommodation of his family. He also paid ₹ 20,000 per month as rent for the office of partnership
which was in a nearby shopping complex.
Solution:
By Product Method
Amount Months Product
Date
(I) (II) (I × II)
Question 35
A and B are partners sharing Profit and Loss in the ratio 3 : 2 having Capital Account balances of ₹
50,000 and ₹ 40,000 on 1st April, 2018. On 1st July, 2018, A introduced ₹ 10,000 as his additional
capital whereas B introduced only ₹ 1,000. Interest on capital is allowed to partners @ 10% p.a.
Calculate interest on capital for the financial year ended 31st March, 2019.
Solution:
Question 36
Ram and Mohan are partners in a business. Their capitals at the end of the year were ₹ 24,000
and ₹ 18,000 respectively. During the year, Ram’s drawings and Mohan’s drawings were ₹ 4,000
and ₹ 6,000 respectively. Profit (before charging interest on capital) during the year was ₹ 16,000.
Calculate interest on capital @ 5% p.a. for the year ended 31st March, 2019.
Solution:
Question 37
Following is the extract of the Balance Sheet of Neelkant and Mahadev as on 31st March, 2019.
Liabilities ₹ Assets ₹
Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000
Mahadev’s Capital 10,00,000
Neelkant’s Current A/c 1,00,000
Mahadev’ 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 ₹ 30,000. Profits during the year ended 31st March,
2019 is ₹ 10,00,000. Calculate interest on capital @ 5% p.a. for the year ending 31st March,
2019.
Solution:
Note: Since, both the partners capital and current accounts are mentioned, we can assume that
both the partners capital is fixed. Therefore, when there is a fixed capital and drawing the capital
balance does not get affected, but the current account does.
So, in this particular case the beginning and the closing capital remains the same and the capital
interest is evaluated on the fixed capital balances.
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.
During the year, Long withdrew ₹ 40,000 and Short withdrew ₹ 50,000. Profit for the year was ₹
1,50,000 out of which ₹ 1,00,000 was transferred to General Reserve.
Solution:
Long Short
Particulars
₹ ₹
Question 39
Moli and Bholi contribute ₹ 20,000 and ₹ 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 ₹ 1,500. Show distribution of profits:
Solution:
Case (1)
In this scenario, the total capital interest is more than the profit available for distribution. So, ₹
1,500 profit will be distributed between Moli and Bholi.THe distribution will be according to their
capital interest ratio.
Case (2)
So, the firm encountered the loss of ₹ 300 and shared between Moli and Bholi as per their profit
sharing ratio of 2 : 3.
Question 40
Amit and Bramit started business on 1st April, 2018 with capitals of ₹ 15,00,000 and ₹ 9,00,000
respectively. On 1st October, 2018, they decided that their capitals should be ₹ 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.
Solution:
= ₹ 1,08,000
= ₹ 84,000
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 ₹ 4,80,000 and ₹ 6,00,000
respectively. On 1st May, 2018, Simrat introduced an additional capital of ₹ 1,20,000 and Bir
withdrew ₹ 60,000 from his capital.On 1st October, 2018, Simrat withdrew ₹ 2,40,000 from her
capital and Bir introduced ₹ 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 ₹ 2,40,000 and the partners’ drawings had been: Simrat – ₹ 1,20,000
and Bir – ₹ 60,000. Compute the interest on capital if the capitals are (a) fixed, and (b)
fluctuating.
Solution:
Question 42
C and D are partners in a firm; C has contributed ₹ 1,00,000 and D ₹ 60,000 as capital. Interest in
payable @ 6% p.a. and D is entitled to a salary of ₹ 3,000 per month. In the year ended 31st
March, 2019, the profit was ₹ 80,000 before interest and salary. Divide the amount between C and
D.
Solution:
So, Total amount C received = Capital Interest + Profit Share = ₹ 6,000 + ₹ 17,200 = ₹ 23,200
Total amount D received = Interest on Capital + Salary + Profit Share = ₹ 3,600 + ₹ 36,000 + ₹
17,200 = ₹ 56,800
Question 43
Amit and Vijay started a partnership business on 1st April, 2018. Their capital contributions were ₹
2,00,000 and ₹ 1,50,000 respectively. The Partnership Deed provided as follows:
(b) Amit to get a salary of ₹ 2,000 per month and Vijay ₹ 3,000 per month.
Net profit for the year ended 31st March, 2019 was ₹ 2,16,000. Interest on drawings amounted to
₹ 2,200 for Amit and ₹ 2,500 for Vijay.
Solution:
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 (₹) Mohan (₹)
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
Solution:
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 – ₹ 50,000 and Kajal – ₹ 40,000.
Prepare Profit and Loss Appropriation Account and the Partners’ Capital Accounts at the end of the
year after considering the following items:
(b) Interest on the loan advanced by Kajal for the whole year, the amount of loan being ₹ 30,000.
(c) Interest on partners’ drawings @ 6% p.a. Drawings: Sajal ₹ 10,000 and Kajal ₹ 8,000.
Net profit for the year ended 31st March, 2019 is ₹ 68,460.
Note: Net profit means net profit after debit of interest on loan by the partner.
Solution:
70,260 70,260
Profit and Loss Appropriation A/c as on 31st March, 2019
Dr. Cr.
Particulars ₹ Particulars ₹
Capital Interest A/c: Profit and Loss A/c 68,460
Sajal 2,500
Kajal 2,000 4,500 Drawings Interest 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
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 ₹ 50,000 and B ₹ 30,000. During the year ended 31st March, 2019 they earned a
net profit of ₹ 50,000. The terms of partnership are:
(d) B will get commission of 5% on profits after deduction of all expenses including such
commission.
Partners’ drawings for the year were: A ₹ 8,000 and B ₹ 6,000. Turnover for the year was ₹
3,00,000.
After considering the above facts, you are required to prepare Profit and Loss Appropriation
Account and Partners’ Capital Accounts.
Solution:
Question 47
A, B and C were partners in a firm having capital of ₹ 50,000 ; ₹ 50,000 and ₹ 1,00,000
respectively. Their Current Account balances were A: ₹ 10,000; B: ₹ 5,000 and C: ₹ 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 ₹ 12,000 p.a. The profits were to be
divided as:
The firm earned net profit of ₹ 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.
Solution:
10,000
(Partners’ capital interest allowed to partners)
= ₹ 1,40,000
Question 48
A and B are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 50,000 and ₹ 30,000
respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of ₹
2,500. During the year profit prior to interest on capital but after charging B’s salary amounted to
₹ 12,500. A provision of 5% of the profits is to be made in respect of the Manager’s Commission.
Solution:
Profit before Salary = Profit after Salary + Salary = 12,500 + 2500 = ₹ 15,000
Question 49
P, Q and R are in a partnership and as of 1st April, 2018 their respective capitals were: ₹ 40,000,
₹ 30,000 and ₹ 30,000. Q is entitled to a salary of ₹ 6,000 and R ₹ 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 ₹ 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 ₹ 21,000 and the partners had drawn ₹ 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.
Solution:
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 ₹ 50,000; B ₹ 30,000 and C ₹
20,000 and allowing B and C a salary of ₹ 5,000 each per annum. During the year ended 31st
March, 2019, A has drawn ₹ 10,000 and B and C in addition to their salaries have drawn ₹ 2,500
and ₹ 1,000 respectively. Profit and Loss Account for the year ended 31st March, 2019 showed a
net profit of ₹ 45,000. On 1st April, 2018, the balances in the Current Accounts of the partners
were A (Cr.) ₹ 4,500; B (Cr.) ₹ 1,500 and C (Cr.) ₹ 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.
Solution:
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 ₹ 25,000 and Bahadur ₹ 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 ₹ 3,500 and ₹ 2,500 respectively.
Profit for the year, before charging interest on capital and annual salary of Bahadur @ ₹ 3,000,
amounted to ₹ 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.
Solution:
Working Notes 1:
Question 52
Amal, Bimal and Kamal are three partners. On 1st April, 2018, their Capitals stood as: Amal ₹
40,000, Bimal ₹ 30,000 and Kamal ₹ 25,000. It was decided that:
(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 ₹ 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the
Partners.
Solution:
= ₹ 22,163
Profit Share for each Partners’ Amal, Bimal, and Kamal = 22,163 X 1/3 = ₹ 7,388
Question 53
Amit, Binita and Charu are three partners. On 1st April, 2018, their Capitals stood as: Amit ₹
1,00,000, Binita ₹ 2,00,000 and Charu ₹ 3,00,000. It was decided that:
(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 ₹ 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.
Solution:
= ₹ 2,76,190
Question 54
Anita, Bimla and Cherry are three partners. On 1st April, 2018, their Capitals stood as: Anita ₹
1,00,000, Bimla ₹ 2,00,000 and Cherry ₹ 3,00,000. It was decided that:
(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 ₹ 5,00,000. Prepare Profit and Loss Appropriation Account and the Capital Accounts of the
partners.
Solution:
= ₹ 3,47,571