NCERT Solutions for Class 12 Accountancy Part 1 Chapter 2 Accounting for Partnership Firms Basic Concepts

Last Updated: August 25, 2024Categories: NCERT Solutions

Accounting For Partnership Firms Basic Concepts: NCERT Solutions Class 12 Accountancy Part 1 Chapter 2

SimplyAcad has brought you the solved NCERT Solutions for Class 12 Accountancy Part 1 Chapter 2 Accounting for Partnership Firms Basic Concepts for clearing your doubts on the topic. With the help of the solutions, you can understand the basic concepts of accounting people need for a partnership firm. The solutions are provided as a guide and a quick summary to learn all the functionings required for accounting.

Students must solve all the questions of the exercises to boost their confidence and do well in their exams. Scroll below to find the entire NCERT solutions for Accounting For Partnership Firms explained in detailed steps.

Access Solutions of Chapter 2: Accounting for Partnership Firms

Short Questions for NCERT Solutions for Class 12 Accountancy Part 1 Chapter 2 Accounting for Partnership Firms Basic Concepts

1. Define Partnership Deed.

A partnership deed, also referred to as a partnership agreement, is a document of importance that contains the details of all the rights and responsibilities of the concerned parties involved in a business. It helps in preventing any kind of disputes or disagreements that can arise between partners over their role in the business and the associated benefits from the partnership in the firm.

2. Why is it considered desirable to make the partnership agreement in writing?

According to the Partnership Act 1932, having a Partnership deed in writing is not mandatory. However, it is a safe option to have it in writing as it helps avoid any kind of disputes that may arise between partners of a firm in future. It also helps resolution of any kind of dispute as a written partnership that is signed by all the partners is suitable for use as evidence in a court of law.

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

(i) Capitals are fixed

(ii) Capitals fluctuate

(i) The items that get credited are as follows:

1. Opening capital balance

2. Additional capital or fresh capital that is added to the business

The items that get debited are as follows:

1. Part of capital that is withdrawn.

2. Closing capital balance

(ii) The items that get debited are as follows:

1. Opening capital balance

2. Fresh capital added in the accounting period

3. Salaries paid to partners

4. Profit share

5. Interest received on capital

The items that get debited are as follows:

1. Withdrawals done during the accounting year

2. Interest accumulated on withdrawals (drawing)

3. Closing capital balance

4. Loss on shares

4. Why is the Profit and Loss Adjustment Account prepared? Explain.

It is prepared because of the following reasons:

1. For recording transactions, errors or omissions which may be left while preparing the final accounts.

2. To act as an account for distributing profit and loss between partners

3. To accommodate for changes in the partnership deed

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

The following circumstances lead to change in the fixed capital of partners:

1. Introducing fresh capital in the firm by a partner with consent from other partners.

2. When a portion of capital is withdrawn with the consent of partners.

6. If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on the total amount withdrawn will be calculated?

When there is a withdrawal of money on the first day of each quarter, then the corresponding interest is calculated for a period of seven and half months on the total amount that is withdrawn.

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

(i) Sharing of profits and losses.

(ii) Interest on partner’s capital.

(iii) Interest on partner’s drawings.

(iv) Interest on partner’s loan

(v) Salary to a partner.

(i) Sharing of profits and losses: If the partnership deed is absent, then the profit-sharing ratio should be equal among all partners, as per Partnership Act, 1932.

(ii) Interest on partner’s capital: If the partnership deed is absent, then as per Partnership Act, 1932, the partners are not entitled to interest earned on capital.

(iii) Interest on partner’s drawings: If the partnership deed is absent, then as per the Partnership Act, 1932, in the event of drawing money, it shall be charged to the partners.

(iv) Interest on partner’s loan: If the partnership deed is absent, then the partner is eligible for a 6% interest on a loan to the firm.

(v) Salary to a partner: In case of the absence of the partnership deed, the partners are not eligible for any salary; any salary whatsoever, if paid, will be as appropriation of profit (in case there is profit).

Long Questions for NCERT Solutions for Class 12 Accountancy Part 1 Chapter 2 Accounting for Partnership Firms Basic Concepts

1. What is a partnership? What are its chief characteristics? Explain.

According to Section 4 of the Partnership Act 1932, a partnership is defined as “An agreement between two or more persons who have mutually agreed to share profits or losses that will be carried by all or any one of them acting for all”. The individuals who set up the business jointly are called partners, and all the partners collectively are known as the firm.

The following are the important characteristics of a partnership firm:

1. Number of Partners: The minimum number of persons to form a partnership is 2, and the maximum is 50 as per the Companies Rules Act, 2014. Any more than the specified limit makes the partnership illegal.

2. Partnership Deed: A partnership deed is a necessary document that contains all the terms of the partnership and the details about the contribution of each partner towards the firm. It should be in written format as it helps in resolving disputes between partners and acts as evidence at times of legal procedures.

3. Business: One of the important characteristics of business is that it is formed in order to do legal business. So any kind of business that is deemed illegal makes the partnership illegal.

4. Profit/Loss Sharing: Partners are supposed to take profit and loss as per the ratio that was agreed at the time of partnership.

5. Liability: When the firm has unlimited liability, the partners of the firm need to pay from the personal asset if the firm is unable to pay to any concerned third party.

6. Mutual Agency: The firm is an agency and all the partners are its agents. Every partner is an agent and binds other partners by their act, while at the same time is bound by other partners’ actions.

2. Discuss the main provisions of the Indian Partnership Act 1932 that are relevant to partnership accounts if there is no partnership deed.

As per the Indian Partnership Act 1932, the following provisions stay relevant when a partnership deed is not present:

1. Sharing of profits and losses: If a partnership deed is absent, then the profit-sharing ratio should be equal among all partners, as per Partnership Act, 1932.

2. Interest on partner’s capital: If the partnership deed is absent, then as per Partnership Act, 1932, the partners are not entitled to interest earned on capital.

3. Interest on partner’s drawings: If the partnership deed is absent, then as per Partnership Act, 1932, no interest shall be charged to the partners in the event of drawing money.

4. Interest on partner’s loan: If the partnership deed is absent, then the partner is eligible for a 6% interest on the loan to the firm.

5. Salary to a partner: In case of the absence of a partnership deed, the partners are not eligible for any salary; any salary whatsoever, if paid, will be as appropriation of profit (in case there is profit).

3. Explain why it is considered better to make a partnership agreement in writing.

According to the Partnership Act of 1932, it is not mandatory to have a partnership deed in writing. However, it is a safe option to have it in writing as there are chances that the partners may have conflicts in the future that gives rise to dispute among the partners regarding the operations of the firm. A partnership deed that is documented helps in the proper functioning of the firm and assists in avoiding any kind of disputes that may arise between partners of a firm in future. It also helps resolution of any kind of dispute as a written partnership that is signed by all the partners is suitable for use as an evidence in a court of law.

4. Illustrate how interest on drawings will be calculated under various situations.

Whenever a partner withdraws from the firm, any amount, which can be in the form of cash or other forms solely for personal use, is called the drawings. Interest on drawings is referred to the amount that is charged by the firm as interest on the total amount taken as drawings. Interest calculation is dependent on the time and the frequency in which the drawing is made. Here are some situations that can be shown where the calculation is done for interest charged on drawings.

5. How will you deal with a change in the profit-sharing ratio among existing partners? Take imaginary figures to illustrate your answer.

There is a change in profit sharing only when there is an addition of a new partner, retirement or death of a partner or due to a mutually agreed decision among the partners. Some of the factors that need to be taken into account while changing the profit-sharing ratio are: goodwill, accumulated profits and reserves, liabilities and adjustment of capital and profit or loss on the revaluation of the assets, etc.

General reserve is essentially the accumulated profits and profit or loss that is obtained on the revaluation of assets and liabilities, adjustments in capital etc.

If one or more partners decide that it is the right time to change the profit-sharing ratio, then the gaining partner shall gain, and the other will lose; therefore, the gainer should compensate the latter. This results in debiting the gaining partner capital account and crediting the sacrificing partners’ capital account.

Gaining Partner’s Capital A/c Dr.

To Sacrificing Partner’s Capital A/c

(Adjustment entry passed)

Example:

Ram, Shyam, and Mohan are partners in a firm sharing profit and loss in a 3:2:1 ratio. They decide to share profit and loss equally in future. On that date, the books of the firm show ₹ 90,000 as the general reserve, profit due to the revaluation of plant and machinery ₹ 30,000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.

Particulars Ram Shyam Mohan
Share of profit as per 3:2:1 45,000 30,000 15,000
Profit on revaluation of plant and machinery 15,000 10,000 5,000
60,000 40,000 20,000
Share of profit as per 1:1:1 50,000 50,000 5,000
Difference (Gain or Loss) 25,000 – 25,000
(Loss) (Gain)

Here, Mohan gains while Ram loses, so Ram needs to be compensated by Mohan with an amount of ₹ 25,000. The following adjustment entry is passed.

Adjustment Entry:

Mohan’s Capital A/c Dr. 25,000
To Ram’s Capital A/c 25,000
( Adjustment entry passed)

These were some of short and long answer questions from Accounting For Partnership Firms that you must prepare well to score good marks in your exams.

Numerical Questions for NCERT Solutions for Class 12 Accountancy Part 1 Chapter 2 Accounting for Partnership Firms Basic Concepts

Here are the numerical questions from the Chapter Accounting For Partnership Firms Basic Concepts for students to apply all the concepts they have learnt so far.

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

a) If interest on Capital and Partners’ salaries and interest on drawings is charged against profit, the solution will be as follows:

Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss 30,000
Tripathi’s Current Account 18,000
Chauhan’s Current Account 12,000
30,000 30,000
Partners’ Capital Account
Dr. Cr.
Particulars Tripathi Chauhan Particulars Tripathi Chauhan
Balance b/d 60,000 40,000
Balance c/d 60,000 40,000
60,000 40,000 60,000 40,000
Partners’ Current Account
Dr. Cr.
Particulars Tripathi Chauhan Particulars Tripathi Chauhan
Drawings 12,000 8,000 Interest on Capital 3,000 2,000
Interest on Drawings 600 400 Partners’ Salaries 12,000 12,000
Balance c/d 20,400 17,600 Profit & Loss Appropriation 18,000 12,000
33,000 26,000 33,000 26,000

b) ) If interest on Capital and Partners’ salaries and interest on drawings is distributed out of profit, the solution will be as follows:

Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Partners’ Salary Profit and Loss (Profit) 30,000
Tripathi 1,000 × 12 = 12,000 Interest on Drawings
Chauhan 1,000 × 12 = 12,000 24,000 Tripathi 600
Chauhan 400 1,000
Interest on Capital
Tripathi 3,000
Chauhan 2,000 5,000
Profit Transferred to
Tripathi’s Current 1,200
Chauhan’s Current 800 2,000
31,000 31,000
Partners’ Capital Account
Dr. Cr.
Particulars Tripathi Chauhan Particulars Tripathi Chauhan
Balance b/d 60,000 40,000
Balance c/d 60,000 40,000
60,000 40,000 60,000 40,000
Partners’ Current Account
Dr. Cr.
Particulars Tripathi Chauhan Particulars Tripathi Chauhan
Drawings 12,000 8,000 Partners’ Salaries 12,000 12,000
Interest on Drawings 600 400 Interest on Capital 3,000 2,000
Balance c/d 3,600 6,400 Profit and Loss Appropriation 1,200 800
16,200 14,800 16,200 14,800

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

 

a) Note: If Partners’ Salaries, Interest on Capital and Interest on Drawing are treated as these have already been adjusted in the Profit and Loss Account, the solution will be as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Current A/c Profit and Loss 45,000
Anubha’s Capital 30,000
Kajal’s Capital 15,000 45,000
45,000 45,000
Partners’ Capital Account
Dr.         Cr.
Particulars Anubha Kajal Particulars Anubha Kajal
Drawings 8,500 6,500 Balance b/d 90,000 60,000
Interest on Drawings 425 325 Partners’ Salaries 8,400 6,000
Interest on Capital 4,500 3,000
Balance c/d 1,23,975 77,175 Profit and Loss Appropriation 30,000 15,000
1,32,900 84,000 1,32,900 84,000

b) Alternative Note: If Partners’ Salaries, Interest on Capital and Interest on Drawings are adjusted in the Profit and Loss Appropriation Account, the solution will be as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Partners’ Salaries: Profit and Loss Account 45,000
Anubha 8,400 Interest on Drawings
Kajal 6,000 14,400 Anubha 425
Kajal 325 750
Interest on Capital:
Anubha 4,500
Kajal 3,000 7,500
Profit Transferred to
Anubha’s Capital 15,900
Kajal’s Capital 7,950 23,850
45,750 45,750
Partners’ Capital Account
Dr.         Cr.
Particulars Anubha Kajal Particulars Anubha Kajal
Drawings 8,500 6,500 Balance b/d 90,000 60,000
Interest on Drawings 425 325 Partners’ Salaries 8,400 6,000
Interest on Capital 4,500 3,000
Balance c/d 1,09,875 70,125 Profit and Loss Appropriation 15,900 7,950
1,18,800 76,950 1,18,800 76,950

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

Dhiman Claims:

(i) Profits should be distributed equally.

(ii) He should be allowed ₹ 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 a Profit and Loss Appropriation Account.

The solution to this question is as follows:

DISTRIBUTION OF PROFITS

Harshad Claims:

Decisions

(i) If there is no agreement on interest on the partner’s capital, according to the 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 the Partnership Act 1932, profit shall be distributed equally.

Dhiman Claims:

Decisions

(i) Dhiman’s claim is justified according to the 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 the 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 the loan. If there is no agreement on interest on the partner’s loan, interest shall be provided at 6% p.a.

Profit and Loss Adjustment Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Partner’s Loan Profit and Loss 1,80,000
Harshad 1,00,000 × (6/100) × (6/12) 3,000
Profit and Loss Appropriation 1,77,000
1,80,000 1,80,000
Profit and Loss Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss Adjustment 1,77,000
Harshad’s Capital 88,500
Sharma’s Capital 88,500
1,77,000 1,77,000

4. Aakriti and Bindu entered into a partnership to make garments on April 01, 2016, without any Partnership agreement. They introduced Capitals of ₹ 5,00,000 and ₹ 3,00,000, respectively, on October 01, 2016. Aakriti advanced ₹ 20,000 by way of a loan to the firm without any agreement as to interest. The profit and Loss account for the year ended March 2017 showed a profit of ₹ 43,000. Partners could not agree upon the question of interest and the basis of the division of profit. You are required to divide the profits between them, giving the reason for your solution.

The solution to this question is as follows:

Profit and Loss Adjustment Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Partner’s Loan Profit and Loss 43,000
Aakriti 20,000 × (6/100) × (6/12) 600
Profit Transferred to
Aakriti’s Capital 21,200
Bindu’s Capital 21,200 42,400
43,000 43,000

Reason

a) Interest on the partner’s loan shall be allowed at 6% p.a. because there is no partnership agreement.

b) Interest on capital shall not be allowed because there is no agreement on interest on capital.

c) Profit shall be distributed equally because the profit-sharing ratio has not been given.

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

If interest on capital and Partners’ salaries will be provided even if the firm involves in the loss.

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars

Amount

₹
Partner’s Salaries Profit and Loss 23,200
Shikha 60,000 Loss Transferred to
Rakhi Capital 34,720
Interest on Capital Shikha’s Capital 52,080 86,800
Rakhi 20,000
Shikha 30,000 50,000
1,10,000 1,10,000

 

Partners’ Capital Account
Dr.         Cr.
Particulars Rakhi Shikha Particulars Rakhi Shikha
Drawings 7,000 10,000 Balance b/d 2,00,000 3,00,000
Profit & Loss Appropriation 34,720 52,080 Partner’s Salaries 60,000
Balance c/d 1,78,280 3,27,920 Interest on Capital 20,000 30,000
2,20,000 3,90,000 2,20,000 3,90,000

 

If interest on capital and salaries will be provided out of profit:

 

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars

Amount

₹
Partner’s Salaries Profit and Loss

23,200
Shikha {23,200 × (6/11)} 12,655
Interest on Capital
Rakhi {23,200 × (2/11)} 4,218
Shikha {23,200 × (3/11)} 6,327
23,200 23,200

If profit is less than the sum of distributable items, the distribution shall be in proportion to items for distribution.

 

Partners Salaries Ratio
Shikhar (₹ 60,000) 6 23,200 × (6/11) 12,655
Interest on Capital
Rakhi (₹ 20,000) 2 23,200 × (2/11) 4,218
Shikhar (₹ 30,000) 3 23,200 × (3/11) 6,327
11 23,200
Partners’ Capital Account
Dr.         Cr.
Particulars Rakhi Shikha Particulars Rakhi Shikha
Drawings 7,000 10,000 Balance b/d 2,00,000 3,00,000
Partner’s Salaries 12,655
Balance c/d 1,97,218 3,08,972 Interest on Capital 4,218 6,327
2,04,218 3,18,972 2,04,218 3,18,972

6. Lokesh and Azad are partners sharing profits in the ratio of 3:2, with capitals of ₹ 50,000 and ₹ 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of ₹ 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to ₹ 12,500. A provision of 5% of profits is to be made in respect of the manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.

The solution to this question is as follows:

 

Profit and Loss Adjustment Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital By Profit and Loss (12,500 + 2,500) 15,000
Lokesh 3,000
Azad 1,800 4,800
Partner’s Salaries
Azad 2,500
Provision for

Manager’s Commission 15,000 × (5/100)

 750
Profit Transferred to
Lokesh Capital 4,170
Azad Capital 2,780 6,950
15,000 15,000
Partners’ Capital Account
Dr.         Cr.
Particulars Lokesh Azad Particulars Lokesh Azad
Balance b/d 50,000 30,000
Interest on Capital 3,000 1,800
Balance c/d 57,170 37,080 Partner’s Salaries 2,500
Profit and Appropriation 4,170 2,780
57,170 37,080 57,170 37,080

7. The partnership agreement between Maneesh and Girish provides that:

(i) Profits will be shared equally.

(ii) Maneesh will be allowed a salary of ₹ 400/month.

(iii) Girish, who manages the sales department, will be allowed a commission equal to 10% of the net profits after allowing Maneesh’s salary.

(iv) 7% interest will be allowed on the partner’s fixed capital.

(v) 5% interest will be charged on the partner’s annual drawings.

(vi) The fixed capitals of Maneesh and Girish are ₹ 1,00,000 and ₹ 80,000, respectively. Their annual drawings were ₹ 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015, amounted to ₹ 40,000.

Prepare the firm’s Profit and Loss Appropriation Account.

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Partner’s Salary Profit and Loss 40,000
Maneesh 4,800 Interest on Drawings
Maneesh 800
Partner’s Commission Girish 700 1,500
Girish {(40,000 – 4,800) × (10/100)} 3,520
Interest on Capital
Maneesh 7,000
Girish 5,600 12,600
Profit Transferred to
Maneesh’s Current 10,290
Girish’s Current 10,290 20,580
41,500 41,500

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

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss 40,000
Ram’s Capital (20,000 – 1,250) 18,750
Raj’s Capital (12,000 – 750) 11,250
George’s Capital (8,000 + 1,250 + 750) 10,000
40,000 40,000

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

The solution to this question is as follows:

Profit and Loss Appropriation Account for the Year Ended 31st March 2016
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss 40,000
Amann’s Capital 16,000 16,000
Babita’s Capital (16,000 – 2,000) 14,000
Suresh’s Capital (8,000 + 2,000) 10,000
40,000 40,000
Profit and Loss Appropriation Account for the Year Ended 31st March 2017
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit transferred to Profit and Loss 60,000
Amann’s Capital 24,000
Babita’s Capital 24,000
Suresh’s Capital 12,000
60,000 60,000

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

(i) Partners’ capital on April 1, 2016

Simmi ₹ 30,000, Sonu ₹ 60,000

(ii) Current accounts balance on April 1, 2016

Simmi ₹ 30,000 (cr.), Sonu ₹ 15,000 (cr.)

(iii) Partners’ drawings during the year amounted to

Simmi ₹ 20,000, Sonu ₹ 15,000

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

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

(vi) Partners’ salaries: Simmi ₹ 12,000 and Sonu ₹ 9,000. Also, show the partners’ current accounts.

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital Profit and Loss Account 1,50,000
Simmi 1,500 Interest on Drawings
Sonu 3,000 4,500 Simmi 600
Sonu 450 1,050
Partners’ Salaries
Simmi 12,000
Sonu 9,000 21,000
Profit transferred to
Simmi’s Current 94,162
Sonu’s Current 31,388 1,25,550
1,51,050 1,51,050
Partners’ Capital Account
Dr.         Cr.
Particulars Simmi Sonu Particulars Simmi Sonu
Balance b/d 30,000 60,000
Balance c/d 30,000 60,000
30,000 60,000 30,000 60,000
Partners’ Current Account
Dr.         Cr.
Particulars Simmi Sonu Particulars Simmi Sonu
Drawings 20,000 15,000 Balance b/d 30,000 15,000
Interest on Drawings 600 450 Interest on Capital 1,500 3,000
Partners’ Salaries 12,000 9,000
Balance c/d 1,17,662 43,388 Profit and Loss Appropriation 94,162 31,388
1,37,662 58,388 1,37,662 58,388

11. Ramesh and Suresh were partners in a firm, sharing profits in the ratio of their capital contributed on commencement of business which was ₹ 80,000 and ₹ 60,000, respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹ 2,000 and ₹ 3,000, respectively.
The profits for the year ended March 31, 2017, before making the above appropriations, was ₹ 1,00,300. The drawings of Ramesh and Suresh were ₹ 40,000 and ₹ 50,000, respectively. Interest on drawings amounted to ₹ 2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and Partners’ Capital Accounts, assuming that their capitals are fluctuating.

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital Profit and Loss 1,00,300
Ramesh 9,600 Interest on Drawings
Suresh 7,200 16,800 Ramesh 2,000
Suresh 2,500 4,500
Partners’ Salaries
Ramesh 24,000
Suresh 36,000 60,000
Profit Transferred to
Ramesh’s Capital {28,000 × (4/7)} 16,000
Suresh’s Capital {28,000 × (3/7)} 12,000
1,04,800 1,04,800
Partners’ Capital Account
Dr. Cr.
Particulars Ramesh Suresh Particulars Ramesh Suresh
Drawings 40,000 50,000 Cash 80,000 60,000
Interest on Drawings 2,000 2,500 Interest on Capital 9,600 7,200
Balance c/d 87,600 62,700 Partners’ Salaries 24,000 36,000
Profit & Loss Appropriation 16,000 12,000
1,29,600 1,15,200 1,29,600 1,15,200
Capital Ratio = Ramesh : Suresh
80,000 : 60,000
4 : 3

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

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

(ii) 5% interest is to be allowed on capital.

(iii) Vanita should be paid a monthly salary of ₹ 600.

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

 

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

Net profit for the year, before charging interest on capital and after charging partner’s salary, was ₹ 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.

The solution to this question is as follows:

 

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital Profit and Loss 9,500
Sukesh 2,000
Vanita 2,000 4,000
Profit Transferred to
Sukesh’s Current {5,500 × (3/5)} 3,300
Vanita’s Current {28,000 × (2/5)} 2,200
9,500 9,500
Partner’s Capital Account
Dr.         Cr.
Particulars Sukesh Vanita Particulars Sukesh Vanita
Balance b/d 40,000 40,000
Balance c/d 40,000 40,000
40,000 40,000 40,000 40,000
Partner’s Current Account
Dr.         Cr.
Particulars Sukesh Vanita Particulars Sukesh Vanita
Drawings 10,850 8,150 Balance b/d 7,200 2,800
Partner’s Salaries 7,200
Profit and Loss Appropriation 3,300 2,200
Balance c/d 1,650 6,050 Interest on Capital 2,000 2,000
12,500 14,200 12,500 14,200

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

The solution to this question is as follows:

Product Method

Sunflower

01 April 2016 to 30 September 2016 2,50,000 × 6 = 15,00,000
01 October 2016 to 31 March 2017 2,00,000 × 6 = 12,00,000
Sum of Product 27,00,000

Pink Rose

01 April 2016 to 30 September 2016 1,50,000 × 6 = 9,00,000
01 October 2016 to 31 March 2017 2,00,000 × 6 = 12,00,000
Sum of Product 21,00,000

Alternative Method:

Simple Interest Method

Sunflower

April 01, 2016 to September 30, 2016 2,50,000 ×

10

 ×

6

 = ₹ 12,500
100 12
October 01, 2016 to March 31, 2017 2,00,000 ×

10

 ×

6

 = ₹ 10,000
100 12
Interest on Sunflower’s Capital

₹ 22,500

Pink Rose

April 01, 2016 to September 30, 2016 1,50,000 ×

10

 ×

6

 = ₹ 7,500
100 12
October 01, 2016 to March 31, 2017 2,00,000 ×

10

 ×

6

 = ₹ 10,000
100 12
Interest on Pink Rose’s Capital

₹ 17,500

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

The solution to this question is as follows:

Generally, interest on Capital is calculated on the opening balance of capital if additional capital is not given.

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

Interest on Capital

Mountain 3,70,000 ×10 / 100= ₹ 37,000
Hill 2,65,000 × 10 / 100= ₹ 26,500
Rock 1,60,000 × 10 / 100= ₹ 16,000

 

15. Following is the extract of the Balance Sheet of, Neelkant and Mahadev as on March 31, 2017:

 

Balance Sheet as of March 31, 2017

 
  Amount   Amount
Liabilities ₹ Assets ₹
Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000
Mahadev’s Capital 10,00,000    
Neelkant’s Current Account 1,00,000    
Mahadev’s Current Account 1,00,000    
Profit and Loss Appropriation      
(March 2017) 8,00,000    
  30,00,000   30,00,000
       

During the year, Mahadev’s drawings were ₹ 30,000. Profit during 2017 was ₹ 10, 00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.

Interest on Capital

Neelkant’s 10,00,000 × 5 / 100= ₹ 50,000
Mahadev’s 10,00,000 × 5 / 100= ₹ 50,000

16. Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2018.

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

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

Interest is calculated as follows:

Product Method

  Drawings × Period Product
01 May 2017 to 31 March 2018 12,000 × 11 = 1,32,000
31 July 2017 to 31 March 2018 6,000 × 8 = 48,000
30 September 2017 to 31 March 2018 9,000 × 6 = 54,000
30 Nov. 2017 to 31 March 2018 12,000 × 4 = 48,000
01 Jan. 2018 to 31 March 2018 8,000 × 3 = 24,000
31 March 2018 to 31 March 2018 7,000 × 0 = 0
Sum of Product 3,06,000

17. The capital accounts of Moli and Golu showed balances of ₹ 40,000 and ₹ 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings @ 12 p.a. Golu advanced a loan of ₹ 10,000 to the firm on August 01, 2016. During the year, Moli withdrew ₹ 1,000 per month at the beginning of every month, whereas Golu withdrew ₹ 1,000 per month at the end of every month. Profit for the year before the above-mentioned adjustments was ₹ 20,950. Calculate interest on drawings showing the distribution of profits and prepare partner’s capital accounts.

The solution to this question is as follows:

Profit and Loss Adjustment Account
Dr.         Cr.
Particulars

Amount

₹

Particulars

Amount

₹
Interest on Capital Profit and Loss Account 20,950
Moli 4,000 Interest on Drawings
Golu 2,000 6,000 Moli 780
Golu 660 1,440
Interest on Partner’s Loan
Golu’s {10,000 × (6/100) × (8/12)}

400
Profit Transferred to
Moli’s Capital {15,990 × (3/5)} 9,594
Golu’s Capital {15,990 × (2/5)} 6,396 15,990
22,390 22,390
Partners’ Capital Account
Dr.         Cr.
Particulars Moli Golu Particulars Moli Golu
Drawings 12,000 12,000 Balance b/d 40,000 20,000
Interest on Drawing 780 660 Interest on Capital 4,000 2,000
Balance c/d 40,814 15,736 Profit and Loss Adjustment 9,544 6,396
53,594 28,396 53,594 28,396

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

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

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

The solution to this question is as follows:

Rakesh’s Interest on Drawings

  Drawings × Period Product
31 May 2016 to 31 March 2017 600 × 10 = 6,000
30 June 2016 to 31 March 2017 500 × 9 = 4,500
31 August 2016 to 31 March 2017 1,000 × 7 = 7,000
1 November 2016 to 31 March 2017 400 × 5 = 2,000
31 December 2016 to 31 March 2017 1,500 × 3 = 4,500
31 January 2017 to 31 March 2017 300 × 2 = 6,00
01 March 2017 to 31 March 2017 700 × 1 = 700
Sum of Product 25,300

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

The solution to this question is as follows:

Interest on Capital

Raj

  Capital × Period Product
1 April 2017 to 30 June 2017 2,50,000 × 3 = 7,50,000
1 July 2017 to 31 March 2018 1,00,000 × 9 = 9,00,000
Sum of Product 16,50,000

Neeraj

  Capital × Period Product
1 April 2017 to 30 June 2017 1,50,000 × 3 = 4,50,000
1 July 2017 to 31 March 2018 1,00,000 × 9 = 9,00,000
Sum of Product 13,50,000

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

  ₹
February 01 4,000
May 01 10,000
June 30 4,000
October 31 12,000
December 31 4,000

Interest on drawings is to be charged @ 7.5 % p.a.

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

The solution to this question is as follows:

Calculation of interest on Harish’s drawings

  Drawings × Period Product
01 Feb. 17 to 31 Dec. 17 4,000 × 11 = 44,000
01 May 17 to 31 Dec. 17 10,000 × 8 = 80,000
30 June 17 to 31 Dec. 17 4,000 × 6 = 24,000
31 Oct. 17 to 31 Dec. 17 12,000× 2 = 24,000
31 Dec. 17 to 31 Dec. 17 4,000 × 0 = 0
Sum of Product 1,72,000

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

The solution to this question is as follows:

Ram Shyam Mohan
Capital on March 31 24,000 18,000 12,000
Add: Drawings 3,600 4,500 2,700
Less: Profit (3:2:1) (18,000) (12,000) (6,000)
Capital April 01, 2012 9,600 10,500 8,700

22. Amit, Sumit and Samiksha are in partnership, sharing profits in the ratio of 3:2:1. Samiksha’s share in profit has been guaranteed by Amit and Sumit to be a minimum sum of ₹ 8,000. Profits for the year ended March 31, 2017, was ₹ 36,000. Divide profit among the partners.

The solution to this question is as follows:

Guarantee of Profit to the Partners

Profit and Loss Appropriation Account
Dr. Cr.
Particulars

Amount

₹

Particulars

Amount

₹
Profit Transferred to Profit and Loss 36,000
Amit’s Capital 18,000
Less: Gurantee to Samiksha

{2,000 × (3/5)}

 (1,200) 16,800
Sumit’s Capital 12,000
Less: Gurantee to Samiksha

{2,000 × (2/5)}

 (800) 11,200
Samiksha Capital 6,000
Add: Amit’s Guarantee 1,200
Add: Sumit’s Guarantee 800 8,000
36,000

36,000

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

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.

Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Profit Transferred to

Profit & Loss

40,000
Pinki’s Capital

20,000
Less: Gurantee to Kaku

{1,000 × (1/2)}

(500)

19,500
Deepti’s Capital

16,000
Less: Guarantee to Kaku

{1,000 × (1/2)}

(500)

15,500
Kaku’s Capital 4,000
Add: Deficiency Received from
Pinki 500
Deepti 500 5,000
40,000

40,000

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

The solution to this question is as follows:

Profit and Loss Appropriation Account as on March 31, 2016
Dr.

 

 

 

 

Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Profit Transferred to

Profit and Loss

40,000
Abhay’s Capital

20,000
Siddharth’s Capital

12,000
Less: Guarantee to Kusum’s

(2,000)

10,000
Kusum’s Capital 8,000
Add: Deficiency Received from Siddharth 2,000 10,000
40,000

40,000
Profit and Loss Appropriation Account as on March 31, 2017
Dr.       Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit transferred to Profit and Loss 60,000
Abhay’s Capital 30,000
Siddharth’s Capital 18,000
Kusum’s Capital 12,000
60,000 60,000

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

The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.

 

 

 

 

Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Profit Transferred to

Profit and Loss

35,000
Radha’s Capital

17,500
Less: Fatima’s Deficiency {1,500 × (3/5)}

(900)

16,600
Mary’s Capital

14,000
Less: Fatima’s Deficiency {1,500 × (2/5)}

(600)

13,400
Fatima’s Capital 3,500
Add: Deficiency Born by
Radha

900
Mary

600

5,000
35,000 35,000
Journal

 
Date Particulars L.F. Debit

Amount

₹

 Credit

Amount

₹
Profit and Loss Appropriation A/c Dr. 35,000
To Radha’s Capital A/c 16,600
To Mary’s Capital A/c 13,400
To Fatima’s Capital A/c 5,000
(Profit distributed among Partners)

 

Alternative Method

Journal

 
Date Particulars L.F. Debit

Amount

₹

 Credit

Amount

₹
Profit and Loss Appropriation A/c Dr. 35,000
To Radha’s Capital A/c 17,500
To Mary’s Capital A/c 14,000
To Fatima’s Capital A/c 3,500
(Profit Distributed among Partners)
Radha’s Capital A/c Dr. 900
Mary’s Capital A/c Dr. 600
To Fatima’s Capital A/c 1,500
(Deficiency of Fatima’s Share Taken from Radha and

Mary)

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

The solution to this question is as follows:

Profit and Loss Appropriation Account as on March 31, 2017
Dr. Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Profit Transferred to Profit and Loss 30,000
X’s Capital 15,000
Less: Z’s Deficiency {3,000 × (3/5)} (1,800) 13,200
Y’s Capital 10,000
Less: Z’s Deficiency {3,000 × (2/5)} (1,200) 8,800
Z’s Capital

5,000
Add: Share of Deficiency born by
Radha

1,800
Mary

1,200

8,000
30,000 30,000

27. Arun, Boby and Chintu are partners in a firm sharing profit in the ratio of 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of ₹ 60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing the distribution of profits among partners in case the profits for the year 2015 are: (i) ₹ 2,50,000; (ii) 3,60,000.

The solution to this question is as follows:

(i)

Profit and Loss Appropriation Account as on March 31, 2015
Dr.

 

 

 

 

Cr.
Particulars Amount

₹

 Particulars

Amount

₹
Profit Transferred to

Profit and Loss

2,50,000
Arun’s Capital

1,00,000
Less: Chintu’s Share of Deficiency

(10,000)

90,000
Bobby’s Capital

1,00,000
Chintu’s Capital

50,000
Add: Deficiency Received from Arun

10,000

60,000
2,50,000 2,50,000

(ii)

Profit and Loss Appropriation Account as on March 31, 2015
Dr.   Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss 3,60,000
Arun’s Capital {3,60,000 × (2/5)} 1,44,000
Bobby’s Capital {3,60,000 × (2/5)} 1,44,000
Chintu’s Capital {3,60,000 × (1/5)} 72,000
3,60,000 3,60,000

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

The solution to this question is as follows:

Profit and Loss Appropriation Account as on March 31, 2017
Dr.

Cr.
Particulars Amount

₹

 Particulars

Amount

₹
Profit Transferred to Profit and Loss

70,000
Ashok’s Capital

28,000
Less: Cheena’s Share of Deficiency {6,000 × (1/2)}

(3,000)

25,000
Brijesh’s Capital

28,000
Less: Cheena’s Share of Deficiency {6,000 × (1/2)}

(3,000)

25,000
Cheena’s Capital 14,000
Add: Deficiency Received from
Ashok

3,000
Brijesh

3,000

20,000
70,000 70,000

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

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

The solution to this question is as follows:

Profit and Loss Appropriation A/c as on 31 March 2017
Dr.       Cr.
Particulars   Amount

₹

 Particulars Amount

₹
Interest on Capital Profit and Loss 2,00,000
Ram 50,000
Mohan 25,000
Sohan 20,000 95,000
Profit Transferred to
Ram’s Capital 52,500
Less: Share of Deficiency {7,500 × (3/5)} (4,500) 48,000
Mohan’s Capital 35,000
Less: Share of Deficiency {7,500 × (2/5)} (3,000) 32,000
Sohan’s Capital 17,500
Add: Deficiency Received from
Ram 4,500
Mohan 3,000 25,000
2,00,000 2,00,000

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

(i) Sona’s share in the profits is guaranteed to be not less than ₹ 15,000 in any year.
(ii) Babita gives a guarantee to the effect that the gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years when she was carrying on her profession alone (which is ₹ 25,000). The net profit for the year ended March 31, 2017, is ₹ 75,000. The gross fee earned by Babita for the firm was ₹ 16,000.

You are required to show the Profit and Loss Appropriation Account (after giving effect to the alone).

The solution to this question is as follows:

Profit and Loss Appropriation Account as on March 31, 2017
Dr.       Cr.
Particulars Amount

₹

 Particulars Amount

₹
Profit Transferred to Profit and Loss 75,000
Amit’s Capital {84,000 × (3/6)} 42,000 Babita’s Capital 9,000
Less: Sona’s Share of Deficiency {1,000 × (3/5)} (600) 41,400 (Deficiency of Fees 25,000 – 16,000)
Babita’s Capital {84,000 × (2/6)} 28,000
Less: Sona’s Share of Deficiency {1,000 × (2/5)} (400) 27,600
Sona’s Capital {84,000 × (1/6)} 14,000
Add: Deficiency Received from
Amit 600
Babita 400 15,000
84,000 84,000

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

(i) Interest on Capital @ 5% p.a.
(ii) Interest on drawings amounting to X ₹ 700, Y ₹ 500 and Z ₹ 300.
(iii) Partner’s Salary: X ₹ 1000, Y ₹ 1500 p.a.

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

The solution to this question is as follows:

Past Adjustment

X Y Z   Total
Interest on Capital 5,000 4,000 3,000 = 12,000
Less: Interest on Drawings (700) (500) (300) = (1,500)
Add: Partner’s Salaries 1,000 1,500 NIL = 2,500
Right Distribution of ₹ 13,000 5,300 5,000 2,700 = 13,000
Less: Wrong distribution of ₹ 13,000 (3:1:1) (7,800) (2,600) (2,600) = (13,000)
(2,500) Dr. 2,400 Cr 100 Cr = NIL

Explanation:

Capital has a credit balance if it is deducted will be debited, and if it is added, it will be credited.

Here X wrongly took an excess ₹ 2,500; hence, ₹ 2,500 will be deducted from X’s capital Account; on the other hand, Y and Z took less amount than they should have been taken; hence the capital account of Y and Z will be added.

Date Particulars   L.F Debit Amount ₹ Credit Amount ₹
X’s Capital A/c Dr. 2,500
To Y’s Capital A/c 2,400
To Z’s Capital A/c 100
(Profit adjusted among partners)

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

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

Show adjustment of profits by means of a single adjustment journal entry.

The solution to this question is as follows:

Distribution of Profit

Old Ratio (2:2:1) Harry Porter Ali Total
Year          
2014 – 15 (8,800) (8,800) (4,400) = (22,000)
2015 – 16 (9,600) (9,600) (4,800) = (24,000)
2016 – 17 (11,600) (11,600) (5,800) = (29,000)
=
Total Profit of 3 Years in the Old Ratio (30,000) (30,000) (15,000) = (75,000)
Distribution of 3 Years Profit in New Ratio (1:1:1) 25,000 25,000 25,000 = 75,000
Adjusted Profit (5,000) (5,000) 10,000 NIL

Journal (Adjusting entry)

Date Particulars

 

 L.F Debit Amount ₹ Credit Amount ₹
         
Harry’s Capital A/c Dr. 5,000  
Porter’s Capital A/c Dr. 5,000
To Ali’s Capital A/c 10,000
(Profit adjusted due to change in profit sharing ratio)

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

    Amount     Amount
Liabilities ₹ Assets ₹
Mannu’s Capital 30,000   Drawings :    
Shrishti’s Capital 10,000 40,000 Mannu 4,000  
      Shrishti 2,000 6,000
      Other Assets 34,000
    40,000     40,000
           

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

The solution to this question is as follows:

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 ₹ 1,820 1,380 440 = 1,820
Less: Wrong Distribution of ₹ 1,820 (3:2) (1,092) (728) = (1,820)
Adjusted Profit 288 (288) = NIL

Adjusting Journal Entry

Date Particulars L.F Debit Amount

₹

 Credit Amount

₹
Shrishti’s Capital A/c Dr. 288
To Mannu’s Capital A/c 288
(Adjustment of profit made)

34. On March 31, 2017, the balance in the capital accounts of Elvin, Monu and Ahmed, after making adjustments for profits, drawing, etc., were ₹ 80,000, ₹ 60,000 and ₹ 40,000, respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Elvin ₹ 20,000, Monu ₹ 15,000 and Ahmed ₹ 9,000. Interest on drawings chargeable to partners were Elvin ₹ 500, Monu ₹ 360 and Ahmed ₹ 200. The net profit during the year amounted to ₹ 1, 20,000. The profit sharing ratio was 3:2:1. Pass necessary adjustment entries.

The solution to this question is as follows:

In this question, interest on capital shall be calculated on opening capital.

Elvin Monu Ahmed
Capital on 31 Mar. 2017 (Closing Capital) 80,000 60,000 40,000
Add: Drawings 20,000 15,000 9,000
Less: Profit ₹ 120,000 (3:2:1) (60,000) (40,000) (20,000)
Capital on April 01, 2016 (Opening Capital) 40,000 35,000 29,000

Adjustment of Profit

Elvin Monu Ahmed   Total
Interest on Capital (on Opening Capital) 2,000 1,750 1,450 = 5,200
Less: Interest on Drawings (500) (360) (200) = (1,060)
Right Distribution of ₹ 4,140 1,500 1,390 1,250 = 4,140
Less: Wrong Distribution of ₹ 4,140 (in the ratio 3:2:1) (2,070) (1,380) (690) = (4,140)
(570) 10 560 = NIL

 

Adjusting Journal Entry

Date Particulars

 

 L.F. Debit Amount

₹

 Credit Amount ₹
         
Elvin’s Capital A/c Dr. 570  
To Monu’s Capital A/c 10
To Ahmed’s Capital A/c 560
(Adjustment of Profit made)

 

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

The solution to this question is as follows:

Adjustment of Profit

Azad Benny Total
Interest on Capital 2,000 4,000 = 6,000
Less: Wrong Distribution of Profit ₹ 6,000 (1: 1) (3,000) (3,000) = (6,000)
Adjusted Profit (1,000) (1,000) = NIL

 

Adjusting Journal Entry

Date Particulars

 

 L.F Debit Amount

₹

 Credit Amount

₹
         
Azad’s Current A/c Dr. 1,000  
To Benny’s Current A/c 1,000
(Adjustment of profit made)

 

36. Kavita and Pradeep are partners, sharing profits in the ratio of 3:2. They employed Chandan as their manager, to whom they paid a salary of ₹ 750 p.m. Chandan deposited ₹ 20,000 on which interest is payable @ 9% p.a. At the end of 2017 (after the division of profit), it was decided that Chandan should be treated as partner w.e.f. Jan. 1, 2014, with 1/6 th share in profits. His deposit is considered as capital carrying interest @ 6% p.a., like the capital of other partners. Firm’s profits after allowing interest on capital were as follows:

    ₹
2014 Profit 59,000
2015 Profit 62,000
2016 Loss (4,000)
2017 Profit 78,000

Record the necessary journal entries to give effect to the above.

The solution to this question is as follows:

Interest on

Loan

 + Salary = Total
2014 59,000 + 1,800 + 9,000 = 69,800
2015 62,000 + 1,800 + 9,000 = 72,800
2016 (4,000) + 1,800 + 9,000 = 6,800
2017 78,000 + 1,800 + 9,000 = 88,800
1,95,000 + 7,200 + 36,000 = 2,38,200

Chandan received as Manager = Interest on Loan + Salary = 7,200 + 36,000 = ₹ 43,200

Total Profit of 4 years before interest on Chandan’s Loan and Salary = 2, 38,200

Interest on Chandan’s Capital for 4 years = {20,000 × (6/100) = 1,200}

= 1,200 × 4 = ₹ 4,800

Profit after interest on all partners’ Capital

= Total Profit of four years before interest on Chandan’s loan and Salary – Interest on Chandan’s Capital for four years

= 2, 38,200 – 4,800

= ₹ 2, 33,400

Wrong Distribution – Distribution of 4 years

Profit when Chandan as a Manager

Kavita {1,95,000 × (3/5)} = 1,17,000
Pradeep {1,95,000 × (2/5)} = 78,000
Chandan Received as Manager = Interest on Loan + Salary
= 7,200 + 36,000 = 43,200
2,38,200

Right Distribution – Division of Profit when Chandan as Partner

Chandan Share of Profit {2,33,400 × (1/6)} 38,900
Interest on Capital 4,800
43,700
Kavita’s Share of Profit {(2,33,400 – 38,900) ×(3/5)} = 1,16,700
Pradeep’s share of Profit {(2,33,400 – 38,900) × (2/5)} = 77,800

Adjustment of Profit

Kavita   Pradeep   Chandan = Total
Distribution of profit when Chandan as partner 1,16,700 77,800 43,700 = 2,38,200
Less: Distribution of profit when Chandan as the manager (1,17,000) (78,000) (43,200) = (2,38,200)
Right distribution of ₹ 4,140 (300) (200) (500) = NIL

 

Date Particulars

 

 L.F. Debit Amount ₹ Credit Amount ₹
  Kavita’s Capital A/c Dr.   300  
Pradeep’s Capital A/c Dr. 200  
To Chandan’s Capital A/c 500
(Adjustment of profit made)

 

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

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

Record necessary corrections through journal entries.

Interest on Capital shall be calculated on opening capital.

The solution to this question is as follows:

Mohan Vijay Anil
Closing Capital 30,000 25,000 20,000
Add: Drawings 5,000 4,000 3,000
Less: Profit (1:1:1) (8,000) (8,000) (8,000)
Opening Capital 27,000 21,000 15,000

Interest on Capital

Mohan = 27,000 ×

10

 = ₹ 2,700
100
Vijay = 21,000 ×

10

 = ₹ 2,100
100
Anil = 15,000 ×

10

 = ₹ 1,500
100

Adjustment of Profit

Mohan Vijay Anil   Total
Interest on Capital (on Opening Capital) 2,700 2,100 1,500 6,300
Interest on Drawings (250) (200) (150) (600)
2,450 1,900 1,350 5,700
Wrong Distribution (1,900) (1,900) (1,900) = (5,700)
550 NIL (550)

Adjusting Journal Entry

Date Particulars

 

 L.F Debit Amount

₹

 Credit Amount

₹
         
Anil’s Capital A/c Dr. 550  
To Vijay’s Capital A/c 550
(Adjustment of profit made)

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

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

 

Make necessary adjustment entry at the beginning of the fourth year, i.e. Jan. 2017.

The solution to this question is as follows:

Interest on Capital

Anuj = 10,000 ×

5

 = ₹ 500
100
Manju = 8,000 ×

5

 = ₹ 400
100
Mamta = 6,000 ×

5

 = ₹ 30
100

Adjustment of Profit

Year 2014

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong Distribution of ₹ 1,200 (4:3:5) (400) (300) (500) = (1,200)
100 100 (200) NIL

Year 2015

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong Distribution of ₹ 1,200 (3:2:1) (600) (400) (200) = (1,200)
(100) NIL 100 NIL

Year 2016

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong distribution of ₹ 1,200 (1:1:1) (400) (400) (400) = (1,200)
100 NIL (100) NIL

Final Adjustment

Anuj Manju Mamta
2014 100 100 (200)
2015 (100) NIL 100
2016 100 NIL (100)
100 100 (200)

Adjusting Journal Entry

Date Particulars L.F Debit Amount

₹

 Credit Amount

₹
Jan. 2017
Mamta’s Capital A/c Dr. 200
To Anuj’s Capital A/c 100
To Manju Capital A/c 100
(Adjustment of profit made)

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

Account Name Debit

Amount

₹

 Credit

Amount

₹
Capital
Dinaker 2,35,000
Ravinder 1,63,000
Drawings
Dinaker 6,000
Ravinder 5,000
Opening Stock 35,100
Purchases and Sales 2,85,000 3,75,800
Carriage Inward 2,200
Returns 3,000 2,200
Stationery 1,200
Wages 12,500
Bills Receivables and Bills Payables 45,000 32,000
Discount 900 400
Salaries 12,000
Rent and Taxes 18,000
Insurance Premium 2,400
Postage 300
Sundry Expenses 1,100
Commission 3,200
Debtors and Creditors 95,000 40,000
Building 1,20,000
Plant and Machinery 80,000
Investments 1,00,000
Furniture and Fixture 26,000
Bad Debts 2,000
Bad Debts Provision 4,600
Loan 35,000
Legal Expenses 200
Audit Fee 1,800
Cash in Hand 13,500
Cash at Bank 23,000
  8,91,200 8,91,200
     

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

(a) Stock on December 31, 2017, was ₹ 42,500.

(b) A provision is to be made for bad debts at 5% on debtors

(c) Rent outstanding was ₹ 1,600.

(d) Wages outstanding were ₹ 1,200.

(e) Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.

(f) Dinaker and Ravinder are entitled to a Salary of ₹ 2,000 per annum

(g) Ravinder is entitled to a commission of ₹ 1,500.

(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery at 6%, and furniture and fixture at 5%.

(i) Outstanding interest on loan amounted to ₹ 350.

The solution to this question is as follows:

Financial Statement as on December 31, 2017

Trading Account
Dr. Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Opening Stock 35,100 Sales 3,75,800
Purchases 2,85,000 Less: Sales Return (3,000) 3,72,800
Less: Purchases Return (2,200) 2,82,800
Closing Stock

42,500
Carriage Inwards 2,200
Wages

12,500
Add: Outstanding

1,200

13,700
Gross Profit 81,500
4,15,300 4,15,300
Profit and Loss Account
Dr. Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Stationery 1,200 Gross Profit 81,500
Discount Allowed 900 Discount Received 400
Salaries 12,000 Commission 3,200
Rent & Taxes 18,000
Add: Outstanding 1,600 19,600
Insurance Premium 2,400
Postage 300
Sundry Expenses 1,100
Depreciation on
Building 4,800
Plant and Machinery 4,800
Fixtures and Fittings 1,300
Provision for Bad Debts 4750
Add: Bad Debt 2,000
6,750
Less: (Old) Provision for Bad Debt (4,600) 2,150
Legal Expenses 200
Audit Fee 1,800
Outstanding Interest on Loan

350
Profit and Loss Appropriation 32,200
85,100 85,100
Profit and Loss Appropriation Account
Dr. Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital Net Profit 32,200
Dinaker 9,400 Interest on Drawings
Ravinder 6,520 15,920 Dinaker 180
Ravinder 150 330
Partner’s Salaries
Dinaker 2,000
Ravinder 2,000 4,000
Commission (Ravinder) 1,500
Profit Transferred to
Dinker’s Capital 7,407
Ravinder’s Capital 3,703 11,110
32,530 32,530
Partners’ Capital Account
Dr. Cr.
Particulars Dinaker Ravinder Particulars Dinaker Ravinder
Drawings 6,000 5,000 Balance b/d 2,35,000 1,63,000
Interest on Drawings 180 150 Interest on Capital 9,400 6,520
Balance c/d 2,47,627 1,71,573 Partner’s Salaries 2,000 2,000
Profit & Loss Appropriation 7,407 3,703
Commission 1,500
2,53,807 1,75,223 2,53,807 1,75,223
Balance Sheet
Liabilities

Amount

₹

Assets

Amount

₹
Bills Payable

32,000

Bills Receivables

45,000
Creditors

40,000

Debtors

95,000
Loan 35,000 Less: 5% Provision for Bad Debts (4,750) 90,250
Add: Outstanding Interest 350 35,350
Building

1,20,000
Rent Outstanding

1,600

Less: 4% Depreciation

(4,800)

1,15,200
Wages outstanding

1,200
Capital:

Plant and Machinery

80,000
Dinaker 2,47,627 Less: 6% Depreciation (4,800) 75,200
Ravinder 1,71,573 4,19,200
Investments

1,00,000
Furniture and Fixtures

26,000
Less: 5% Depreciation

(1,300)

24,700
Cash in Hand 13,500
Cash at Bank

23,000
Closing Stock

42,500
5,29,350

5,29,350

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

Account Name Debit Amount ₹ Credit Amount ₹
Capital
Kajol 1,15,000
Sunny 91,000
Current Accounts [on 1-04-2005*]
Kajol 4,500
Sunny 3,200
Drawings
Kajol 6,000
Sunny 3,000
Opening Stock 22,700
Purchases and Sales 1,65,000 2,35,800
Freight Inward 1,200
Returns 2,000 3,200
Printing and Stationery 900
Wages 5,500
Bills Receivables and Bills payables 25,000 21,000
Discount 400 800
Salaries 6,000
Rent 7,200
Insurance Premium 2,000
Travelling Expenses 700
Sundry Expenses 1,100
Commission 1,600
Debtors and Creditors 74,000 78,000
Building 85,000
Plant and Machinery 70,000
Motor Car 60,000
Furniture and Fixtures 15,000
Bad Debts 1,500
Provision for Doubtful Debts 2,200
Loan 25,000
Legal Expenses 300
Audit Fee 900
Cash in Hand 7,500
Cash at Bank 12,000
  5,78,100 5,78,100
 

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

(a) Stock on March 31, 2015, was ₹37,500.

(b) Bad debts ₹3, 000; Provision for bad debts is to be made at 5% on debtors

(c) Rent Prepaid were ₹1,200.

(d) Wages outstanding were ₹ 2,200.

(e) Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be charged @ 5% per annum.

(f) Kajol is entitled to a Salary of ₹ 1,500 per annum.

(g) Prepaid insurance was ₹ 500.

(h) Depreciation was charged on Building, @ 4%; Plant and Machinery, @ 5%; Motor car, @ 10% and Furniture and Fixture, @ 5%.

(i) Goods worth ₹ 7,000 were destroyed by fire on January 20, 2015. The Insurance company agreed to pay ₹ 5,000 in full settlement of the claim.*As per the question, this year should be 01-04-2014

The solution to this question is as follows:

Financial Statement as on March 31, 2015

Trading Account
Dr.         Cr.
Particulars

Amount

₹

 Particulars

Amount

₹
Opening Stock 22,700 Sales 2,35,800
Purchases 1,65,000 Less: Sales Return (2,000) 2,33,800
Less: Purchases Return (3,200)
Less: Goods Lost by Fire (7,000) 1,54,800 Closing Stock

37,500
Freight Inward 1,200
Wages 5,500
Add: Outstanding 2,200 7,700
Gross Profit 84,900
2,71,300 2,71,300

 

Profit and Loss Account
Dr.         Cr.
Particulars Amount

₹

 Particulars

Amount

₹
Printing and Stationery 900 Gross Profit 84,900
Discount Allowed 400 Discount Received 800
Salaries 6,000 Commission 1,600
Rent 7,200 Insurance Co. (Claim) 5,000
Less: Prepaid (1,200) 6,000
Insurance Premium 2,000
Less: Prepaid (500) 1,500
Travelling Expenses 700
Sundry Expenses 1,100
Bad Debt 1,500
Add: Further Bad Debt 3,000
Add: Provision for Bad Debts 3,550
8,050
Less: Provision for Bad Debt (Old) (2,200) 5,850
Legal Expenses 300
Audit Fee 900
Goods Lost by Fire 7,000
Depreciation on
Building 3,400
Plant and Machinery 3,500
Motor Car 6,000
Furniture and Fixture 750
Net Profit 48,000
92,300 92,300

 

Profit and Loss Appropriation Account
Dr.         Cr.
Particulars Amount

₹

 Particulars Amount

₹
Interest on Capital Net profit 48,000
Kajol 6,900
Sunny 5,460 12,360 Interest on Drawings
Kajol 300
Partner’s Salaries Sunny 150 450
Kajol 1,500
Profit & Loss – Gross Profit
Kajol’s Current 20,754
Sunny’s Current 13,836 34,590
48,450 48,450

 

Partners’ Capital Account
Dr.         Cr.
Particulars Kajol Sunny Particulars Kajol Sunny
Balance b/d 1,15,000 91,000
Balance c/d 1,15,000 91,000
1,15,000 91,000 1,15,000 90,000

 

Partners’ Current Account
Dr.         Cr.
Particulars Kajol Sunny Particulars Kajol Sunny
Balance b/d 3,200 Balance b/d 4,500
Drawings 6,000 3,000 Interest on Capital 6,900 5,460
Interest on Drawings 300 150 Partner’s Salaries 1,500
Balance c/d 27,354 12,946 Profit and Loss Appropriation 20,754 13,836
33,654 19,296 33,654 19,296

 

Balance Sheet as on March 31, 2015

 
Liabilities Amount

₹

 Assets Amount

₹
Bills Payable 21,000 Bills Receivable 25,000
Creditors 78,000 Debtors 74,000
Loan 25,000 Less: Further Bad debt (3,000)
Wages Outstanding 2,200 71,000
Capital: Less: 5% Provision for Bad Debt (3,550) 67,450
Kajol 1,15,000
Sunny 91,000 2,06,000 Building 85,000
Less: 5% Depreciation (3,400) 81,600
Current:
Kajol 27,354 Plant and Machinery 70,000
Sunn 12,946 40,300 Less: 5% Depreciation (3,500) 66,500
Motor Car 60,000
Less: 10% Depreciation (6,000) 54,000
Furniture & Fixture 15,000
Less: 5% Depreciation (750) 14,250
Cash in Hand 7,500
Cash at Bank 12,000
Closing Stock 37,500
Prepaid Rent 1,200
Prepaid Insurance 500
Insurance Co. (Claim) 5,000
3,72,500 3,72,500

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