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Class 12-commerce NCERT Solutions Accountancy Chapter 1 - Accounting for Partnership : Basic Concepts

The NCERT solutions for CBSE Class 12 Commerce Accountancy Chapter Accounting for Partnership: Basic Concepts at TopperLearning provide textbook solutions. These solutions help students to learn better and have access to detailed answers. These answers help students score more as they are extensive and detailed. The solutions are arranged both page-wise and unit-wise. Along with the NCERT solutions, students can also refer to our sample papers, past years’ papers, revision notes, video lessons etc.

Accounting for Partnership : Basic Concepts Exercise 96

Solution SA 1

Partnership Deed is a legal written agreement between partners containing the terms and conditions of the partnership and is signed by all partners. It incorporates the following clauses:

  1.  Names and addresses of all partners
  2.  Name and address of the firm
  3.  Type and nature of the business
  4.  Principal place of the firm
  5.  Date of commencement and duration of partnership
  6.  Contribution of capital by each partner
  7.  Profit-sharing ratio of partners
  8.  Method of calculation of goodwill
  9.  Salary and commission, if any, payable to partners
  10.  Rights and duties of partners
  11.  Rules in respect to admission, retirement and death of the partner and dissolution of the firm
  12.  Dispute settlement between partners

Solution SA 2

Partnership comes into existence by an agreement which may be oral or written. It is not mandatory to create a partnership agreement in writing under the Partnership Act, 1932. However, a written partnership deed is better than an oral agreement as it helps to avoid disputes and conflicts between partners. It also helps in settling disputes as a written partnership deed can be referred to anytime. If the written partnership deed is duly signed by all partners and registered under the Partnership Act, then it can be used as evidence in the court.

Solution SA 3

  1.  When Capitals are fixed:

Items credited to Partner's Capital Account:

  1. Opening balance of capital
  2. Additional capital introduced during the year

Items debited to Partner's Capital Account:

  1. Drawings made during the year
  2. Closing balance of capital
    ii.  When Capitals are fluctuating:

Items credited to Partner's Capital Account:

  1. Opening balance of capital
  2. Additional capital introduced during the year
  3. Salaries to partners
  4. Commission to partners
  5. Bonus to partners
  6. Interest on capital
  7. Share in profit

Items debited to Partner's Capital Account:

  1. Drawings made during the year
  2. Interest on drawings
  3. Share in loss
  4. Closing balance of capital 

Solution SA 4

A Profit and Loss Adjustment Account is prepared:

  1. To record omitted items and rectify errors, if any: If any error or omission is noticed after the Profit and Loss Account and Balance Sheet are prepared, then these adjustment are to be adjusted by preparing a Profit and Loss Adjustment Account in the succeeding accounting period without altering the old Profit and Loss Account.
  2. To distribute profit or loss between partners: This account is also used for distribution of profit (or loss) between partners in addition to adjusting and rectifying errors. It acts as an alternative to the Profit and Loss Appropriation Account.  The main reason for preparing a Profit and Loss Adjustment Account is to ascertain correct profit.

Solution SA 5

Two circumstances under which the fixed capitals of partners may change:

  1. When additional capital is introduced by partners during the year.
  2. When a part of capital is permanently withdrawn by the partner from the firm. 

Solution SA 6

When a fixed amount is withdrawn on the first day of every quarter, the interest on drawing will be calculated for a period of seven and half  months.

Example: If a partner withdraws Rs.6,000 on the first day of each quarter and the interest is charged @ 12% on the drawings, then the interest on drawings will be calculated as

Total drawing made during the year by the partner is Rs.24,000 (i.e. 6,000 × 4)   

begin mathsize 12px style interest space on space drawings space equals space 24 comma 000 cross times 12 over 100 cross times fraction numerator 7 begin display style 1 half end style over denominator 12 end fraction equals 1800 end style

Solution SA 7

In the absence of a partnership deed, the rules according to the Partnership Act, 1932, are as follows:

  1.  Sharing of profits and losses: To be shared equally by all partners in the firm.
  2.  Interest on partner's capital: No interest on capital should be given to the partner in the firm.
  3.  Interest on partner's drawing: No interest on drawing is to be charged from the partner of the firm.
  4.  Interest on partner's loan: Partners are entitled to 6% p.a. interest on the loan lent to the firm by them.
  5.  Salary to a partner: No salary should be given to any partner.

Solution LA 1

According to the Partnership Act, 1932 (Sec 4), a partnership is an agreement between two or more persons who have agreed to share profits or losses of business which are to be borne by all or any one of them acting for all. Persons who come together to set up the business are called 'partners' individually and 'firm' collectively, and the name under which the business is carried on is termed 'firm name'.

Important Characteristics of a Partnership 

Important characteristics of a partnership:

  1. Two or more persons: A partnership is an agreement between two or more persons coming together for a common purpose. There should be at least two persons to begin a partnership firm. In a partnership firm, there is no maximum limit according to the Partnership Act, 1932, on the number of partners, but according to Rule 10 of the Companies (Miscellaneous) Rules, 2014,  the maximum number of partners cannot exceed 50. In case the number of partners exceeds the aforesaid limit, then the concerned partnership is considered illegal. In concern to this, it must be noted that in Sec 464 of the Companies Act, 2013, the maximum number of partners cannot exceed 100. However, the maximum number of partners is not limited in case an association or partnership is formed by professionals such as doctors, lawyers, chartered accountants and company secretaries. These professionals are governed by their special laws as formed by their respective professional institutions. Before the enforcement of the Companies Act, 2013, the earlier act of 1956, imposed restrictions on the maximum number of partners to 10 in case of banking business and 20 in case of any other kind of business. However, with effect from 1 April 2014, the Companies Act, 1956, has been replaced by the Companies Act, 2013.
  2. Partnership Deed: A partnership among partners should be supported by a partnership deed. A partnership deed is an agreement between partners governing them in carrying out the business. The deed may be oral or written.
  3. Business: The business carried out by the partnership firm should be legal. Activities such as smuggling and black marketing are illegal business activities, and hence, the partnership is also illegal.
  4. Sharing of profit: The profit or loss earned by a partnership firm must be shared according to the partnership deed. If there is no partnership deed between partners, then the profit will be shared equally by them. It is an important feature of partnership. If a group is formed for charitable purpose or not to earn profit, then this group will not be regarded as a partnership.
  5. Liability: Liability of a partnership firm is unlimited. Each partner is liable for a firm's liabilities jointly and severally with other partners to outsiders. Furthermore, each partner along with his/her co-partners is responsible for all the acts of the partnership firm.
  6. Mutual agency: A partnership may be carried on by all or any one of them acting for all. It means that all partners of a firm are entitled to participate equally in the activities of the business or any one of them acting on behalf of all. Every partner acts as an agent for others and binds others by his/her act and in turn is bound by others by their acts.

Solution LA 2

In the absence of a partnership deed, the main provisions according to the Indian Partnership Act, 1932, which are relevant to partnership accounts are

  1. Sharing of profits and losses: Profits and losses are to be shared equally by all partners of the firm.
  2. Interest on partner's capital: No interest on capital should be given to partners in the firm. However, it is to be given only out of the profits, if agreed.
  3. Interest on partner's drawings: No interest on drawings is to be charged from the partner of the firm for the amount of capital withdrawn by them by the way of drawings.
  4. Interest on partner's loan: Partners are entitled to 6% p.a. interest on the loan lent to the firm by them.
  5. Salary to a partner:  No salary should be given to any partner.

Accounting for Partnership : Basic Concepts Exercise 97

Solution LA 3

A partnership deed is a legal written agreement between partners containing the terms and conditions of the partnership which is agreed by all partners.

It incorporates the following clauses:

  1.  Names and addresses of all partners
  2.  Name and address of the firm
  3.  Type and nature of the business
  4.  Principal place of the firm
  5.  Date of commencement and duration of partnership
  6.  Contribution of capital by each partner
  7.  Profit-sharing ratio of partners
  8.  Method of calculation of goodwill
  9.  Salary, commission, if any, payable to partners
  10.  Rights and duties of partners
  11.  Rules in respect to admission, retirement and death of the partner and dissolution of the firm
  12.  Dispute settlement between partners

A partnership can come into existence by an agreement which may be oral or written. The Partnership Act, 1932, has not made it mandatory to draft a partnership agreement in writing. The partnership deed in writing is better than an oral agreement as it ensures smooth functioning of business. It also helps avoid disputes and conflicts between partners. In addition, it helps in settling disputes as a written partnership deed can be called anytime. If the written partnership agreement is registered under the Partnership Act and is duly signed by all partners, then it can be used as evidence in court. 

Solution LA 4

Withdrawal made by the partner either in the form of cash or in any other form from the firm for his/her personal use is termed drawings. Interest on drawings is an interest charged by the firm on the amount of drawings made by the partner. Interest on drawings can be calculated by different methods depending on the time and frequency of drawings made by the partner.  The calculation of interest on drawings charged by the firm in different situations is explained with the illustration below:

 

Situation 1: When amount, date and rate of interest on drawings are given  

A partner withdrew Rs.10,000 on 1st August, and the interest on drawings is charged at 10% p.a. If the firm closes its books on 31st December every year, then the interest on drawings will be Rs.417.

 

  

 

Situation 2: When amount and rate of interest on drawings are given

Case 1: Amount and rate of interest on drawings (p.a.) are given, but date of drawings is not mentioned

In such a case, the period of drawings will be taken as 6 months.

Example: When a partner withdraws Rs.20,000 and the rate of interest on drawings is 10% p.a., the interest of drawings will be Rs.1,000.

  

Case 2: Amount and rate of interest on drawings are given, but date and per annum rate of interest are not mentioned

In such a case, the interest will be charged annually. 

Example: When a partner withdraws Rs.20,000 and the rate of interest on drawings is 10%, the interest on drawings will be Rs.2000.

 

  

 

Situation 3: Fixed amount is withdrawn at regular intervals

Case 1: Fixed amount withdrawn at the beginning of each month

In this case, interest will be calculated for 6.5 months.

Example: When a partner withdraws Rs.500 in the beginning of each month and the interest on drawings is 10% p.a., the interest on drawings will be Rs.325.

  

 

Case 2: Fixed amount is withdrawn at the end of each month

In this case, the interest will be calculated for 5.5 months.

Example: When a partner withdraws Rs.500 at the end of each month and the rate of interest is 10% p.a., the interest on drawings amount to Rs.275.

 

  

 

Case 3: Fixed amount is withdrawn in the middle of every month

In this case, assume drawings are made on the 15th of every month and the interest on drawings is calculated for 6 months.

Example: When a partner withdraws Rs.500 on the 15th of every month and the rate of interest is 10% p.a., the interest on drawings amount to Rs.300.

  

Case 4: Fixed amount is withdrawn at the beginning of every quarter

In this case, the interest will be calculated for 7.5 months.

Example: When a partner withdraws Rs.500 at the beginning of every quarter and the rate of interest is 10% p.a., the interest on drawings will be Rs.375.

  

Case 5: Fixed amount is withdrawn at the end of every quarter

In this case, the interest on drawings will be calculated for 4.5 months.

Example: When a partner withdraws Rs.500 at the end of every quarter and the rate of interest is 10% p.a., the interest on drawings will be Rs.225.

  

 

Situation 4: Different amount is withdrawn at different intervals

When a different amount is withdrawn at different intervals of time by a partner, the interest on drawings will be calculated by the product method. The period of drawings is calculated from the date of withdrawal to the last date of the accounting year.

Example: A partner withdraws Rs.3,000 on 1 March, Rs.2,000 on 1 June, Rs.5,000 on 31 October and Rs.8,000 on 31 December, and the rate of interest on drawings is 10% p.a. The firm closes its books on 31 December.

Calculation of Interest on Drawings by Product Method 

 

Interest on Drawings

Date

Amount

Rs. 

Outstanding Period

Product

1 Mar.

3,000

10

3,000 × 10 = 30,000

1 Jun.

2,000

7

2,000 × 7 = 14,000

1 Oct.

5,000

2

5,000 × 2 = 10,000

31 Dec.

8,000

0

8,000 × 0 = 0

 

 

 

54,000

 

  

Solution LA 5

Profit-sharing ratio may be changed due to admission, retirement or death of a partner or due to a general agreement between partners. Adjustment such as goodwill, reserves and accumulated profits, profit or loss on the revaluation of assets and liabilities and adjustment of capitals are to be considered during the change in the profit-sharing ratio. The general reserves and accumulated profits (if any) and the profit on revaluation of assets and liabilities should be credited and the loss on revaluation of assets and liabilities should be debited from the Partner's Capital Account in their old profit-sharing ratio.

However, if the existing partners decide to change the profit-sharing ratio, then some partners gain (gaining partners) at the cost of other partners (sacrificing partners). Thus, the gaining partner should compensate the sacrificing partner. Therefore, the gaining Partners' Capital Accounts are debited to the extent of their gain and sacrificing Partners' Capital Accounts are credited to the extent of their sacrifice. The following journal entry is passed:

Gaining Partner's Capital A/c------------

Dr.

-------- To Sacrificing Partner's Capital A/c

 

(Being adjustment entry passed)

 

 

Example:

A, B and C are partners in a firm sharing profit and loss in a 3:2:1 ratio. They decide to share the profit and loss equally in the future. On that date, the books of the firm show Rs.2,40,000 as general reserve and profit due to revaluation of the building as Rs.90,000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.

Particulars

A

B

C

Share of profit as per 3:2:1

Profit on revaluation of building

1,20,000

45,000

80,000

30,000

40,000

15,000

 

Share of profit as per 1:1:1

1,65,000

1,10,000

1,10,000

1,10,000

55,000

1,10,000

Difference (Gain or loss)

55,000

(Loss)

-

55,000

(Gain)

 

Hence, in this example, C gains at the cost of A. So, partner A needs to be compensated by C with the amount of 55,000. The following adjustment entry is passed.

Adjustment entry

 

C's Capital A/c

Dr.

55,000

 

-------- To A's Capital A/c

 

 

55,000

(Being adjustment entry passed)

 

 

 

         

 

Solution NUM 1

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

 

Amount

Particulars

 

Amount

To Partner’s Salary

 

 

By Profit and Loss A/c

 

30,000

 

Tripathi (1,000 * 12)

12,000

 

By Interest on Drawings

 

 

 

Chauhan (1,000 * 12)

12,000

24,000

 

Tripathi

600

 

 

 

 

 

Chauhan

400

1,000

 

 

 

 

 

 

To Interest on Capital

 

 

 

 

 

 

Tripathi

3,000

 

 

 

 

 

Chauhan

2,000

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To Profit Transferred to

 

 

 

 

 

 

Tripathi’s Current

1,200

 

 

 

 

 

Chauhan’s Current

800

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,000

 

 

31,000

 

 

 

 

 

 

 

Partner’s Capital Account

Dr.

 

Cr

Particulars

Tripathi

Chauhan

Particulars

Tripathi

Chauhan

 

 

 

By Balance b/d

60,000

40,000

 

 

 

 

 

 

 

 

 

 

 

 

To Balance c/d

60,000

40,000

 

 

 

 

60,000

40,000

 

60,000

40,000

 

 

 

 

 

 

 

Partner’s Current Account

Dr.

 

Cr

Particulars

Tripathi

Chauhan

Particulars

Tripathi

Chauhan

To Drawings

12,000

8,000

By Partner’s Salaries

12,000

12,000

To Interest on Drawings

600

400

By Interest on Capital

3,000

2,000

To Balance c/d

3,600

6,400

By Profit and Loss Appropriation A/c

1,200

800

 

 

 

 

 

 

 

16,200

14,800

 

16,200

14,800

 

 

 

 

 

 

 

Note:

Treatment for Interest on Capitals, Salaries to partners and Interest on Drawings can be given using the following 2 methods:

a) Charge against profit

b) Distribution out of profits

If no information is given about the treatment of the above items then we usually follow Distribution Out Of Profits Method.

Solution NUM 2

Profit and Loss Appropriation Account

Dr.

 

Cr

Particulars

 

Amount

Particulars

 

Amount

To Partner’s Salary

 

 

By Profit and Loss A/c

 

45,000

 

Anubha

8,400

 

By Interest on Drawings

 

 

 

Kajal

6,000

14,400

 

Anubha

425

 

 

 

 

 

Kajal

325

750

To Interest on Capital

 

 

 

 

 

 

Anubha

4,500

 

 

 

 

 

Kajal

3,000

7,500

 

 

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

 

 

Anubha’s Capital

15,900

 

 

 

 

 

Kajal’s Capital

7,950

23,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,750

 

 

45,750

 

 

 

 

 

 

 

 

 

Partner’s Capital Account

Dr.

 

Cr

Particulars

Anubha

Kajal

Particulars

Anubha

Kajal

To Drawings

8,500

6,500

By Balance c/d

90,000

60,000

To Interest on Drawings

425

325

By Partner’s Salaries

8,400

6,000

 

 

 

By Interest on Capital

4,500

3,000

 

 

 

By Profit and Loss Appropriation A/c

15,900

7,950

 

 

 

 

 

 

To Balance c/d

1,09,875

70,125

 

 

 

 

1,18,800

76,950

 

1,18,800

76,950

 

 

 

 

 

 

 

 

 

Note:

 

Treatment for Interest on Capitals, Salaries to partners and Interest on Drawings can be given using the following 2 methods:

 

a) Charge against profit

 

b) Distribution out of profits

If no information is given about the treatment of the above items then we usually follow Distribution Out Of Profits Method.

Solution NUM 3

DISTRIBUTION OF PROFITS

Harshad Claims: 

Decisions

  1. Harshad's claim is not justified on the matter of interest on capital and loan as there is no agreement between the partners. According to the Partnership Act, 1932, no interest on capital will be allowed to partners whereas; interest on loan will be allowed only upto 6% p.a.
  2. In the absence of Partnership agreement, profit shall be shared equally according to Partnership Act, 1932. Therefore, his claim cannot be justified.

 

Dhiman Claims:

  1. Dhiman claim is justified according partnership act 1932 if there is no agreement on the matter of profit distribution, profit shall be distributed equally
  2. No salary will be allowed to any partner as there is no agreement on matter of remuneration.
  3. Dhiman's claim is not justified on the matter of interest on capital but justified on the matter of interest on loan. If there is no agreement on interest on partner's loan. Interest oon loan shall be provided at 6% p.a.

 

Profit and Loss Adjustment Account

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Interest on Partner's Loan

 

By Profit and Loss A/c

1,80,000

Harshad [1,00,000 × 6% × 6/12]

3,000

 

 

 

 

 

 

To Profit and Loss Appropriation A/c

1,77,000

 

 

 

 

 

 

 

1,80,000

 

1,80,000

 

 

 

 

 

 

Profit and Loss Account

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss Adjustment A/c

1,77,000

 

Harshad's Capital

88,500

 

 

 

Shama's Capital

88,500

 

 

 

 

 

 

 

1,77,000

 

1,77,000

 

 

 

 

 

Accounting for Partnership : Basic Concepts Exercise 98

Solution NUM 4

Profit and Loss Adjustment Account

Dr.

 

 Cr.

Particulars

 

Amount

Rs. 

Particulars

Amount

Rs. 

To Interest on Partner's Loan

 

 

By Profit and Loss A/c

43,000

Aakriti (20,000 × 6% × 6/12)

 

600

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

Aakriti's Capital

21,200

 

 

 

Bindu's Capital

21,200

42,400

 

 

 

 

 

 

 

 

 

43,000

 

43,000

 

 

 

 

 

 

Note:

  1. In the absence of partnership agreement, interest on partner's loan shall be allowed at 6% p.a.
  2. In the absence of partnership agreement, interest on capital shall not be allowed.
  3. In the absence of partnership agreement, profit or loss will be shared equally.

Solution NUM 5

If interest on capital and Partner's salaries is provided even if there is a loss.

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particular

 

Amount

Rs. 

Particular

 

Amount

Rs. 

To Partner's Salaries

 

60,000

By Profit and Loss A/c

 

23,200

 

 

 

By Loss transferred to

 

 

To Interest on Capital

 

 

Rakhi Capital

34,720

 

Rakhi

20,000

 

Shikha Capital

52,080

86,800

Shikha

30,000

50,000

 

 

 

 

 

 

 

 

 

 

 

1,10,000

 

 

1,10,000

 

 

 

 

 

 

 

Partner's Capital Account

Dr.

 

Cr

Particulars

Rakhi

Shikha

Particulars

Rakhi

Shikha

To Drawings

7,000

10,000

By Balance b/d

2,00,000

3,00,000

To Profit and Loss Appropriation

34,720

52,080

By Partner's Salaries

 

60,000

 

 

 

By Interest on Capital

20,000

30,000

To Balance c/d

1,78,280

3,27,920

 

 

 

 

 

 

 

 

 

 

2,20,000

3,90,000

 

2,20,000

3,90,000

 

 

 

 

 

 

 

Solution NUM 6

 

Profit and Loss Appropriation Account

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Interest on Capital

 

 

By Profit and Loss  A/c

 

15,000

 

 

Lokesh

3,000

 

(12,500 + 2,500)

 

 

 

 

Azad

1,800

4,800

 

 

 

 

 

 

 

 

 

 

 

To Partner's Salary

 

 

 

 

 

 

 

Azad

 

2,500

 

 

 

 

 

 

 

 

 

 

 

To Provision for Manager's Commission [15,000 × 5%]

750

 

 

 

 

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

 

 

 

Lokesh Capital

4,170

 

 

 

 

 

 

Azad Capital

2,780

6,950

 

 

 

 

 

 

 

 

 

 

 

 

 

15,000

 

 

15,000

 

 

 

 

 

 

 

 

 

Partner's Capital Account

Dr.

 

Cr

Particulars

Lokesh

Azad

Particulars

Lokesh

Azad

 

 

 

By Balance b/d

50,000

30,000

 

 

 

By Interest on Capital

3,000

1,800

 

 

 

By Partner's Salaries

 

2,500

To Balance c/d

57,170

37,080

By Profit and Loss Appropriation A/c

4,170

2,780

 

 

 

 

 

 

 

57,170

37,080

 

57,170

37,080

 

 

 

 

 

 

 

 

Solution NUM 7

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

 

 

By Profit and Loss A/c

 

40,000

To Partner's Salary

 

 

Interest on Drawings

 

 

 

Maneesh

 

4,800

 

Maneesh

800

 

 

 

 

 

Girish

700

1,500

To Partner's commission

 

 

 

 

 

Girish [(40,000 - 4,800) × 10%]

 

3,520

 

 

 

 

 

 

 

 

 

To Interest on Capital

 

 

 

 

 

 

Mannesh

7,000

 

 

 

 

 

Girish

5,600

12,600

 

 

 

 

 

 

 

 

 

To Profit transferred to A/c

 

 

 

 

 

 

Maneesh's Current

10,290

 

 

 

 

 

Girish's Current

10,290

20,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,500

 

 

41,500

 

 

 

 

 

 

 

 

Accounting for Partnership : Basic Concepts Exercise 99

Solution NUM 8

 

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss A/c

40,000

 

Ram's Capital (WN 1)

18,750

(Net Profit)

 

 

Raj's Capital  (WN 1)

11,250

 

 

 

George's Capital

10,000

 

 

 

 

 

 

 

 

 

 

 

40,000

 

40,000

 

 

 

 

 

Working Note:

1. Calculation of Ram and Raj share in profit:

 

Rs. 

Profit for the year

40,000

Less: George share in profit

10,000

Remaining share in profit

30,000

 

The remaining share in profit should be shared between Ram and Raj in 5:3 (PSR) ratio.

  

Solution NUM 9

 

Profit and Loss Appropriation Account

for the year 31st March, 2016

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss A/c

40,000

 

Amann's Capital 16000

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 31st March, 2017

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss A/c

60,000

 

Amann's Capital

24,000

 

 

 

Babita's Capital

24,000

 

 

 

Suresh's Capital

12,000

 

 

 

 

 

 

 

 

 

 

 

60,000

 

40,000

 

 

 

 

 

 

Solution NUM 10

 

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

To Interest on Capital

 

 

By Profit and Loss A/c

 

1,50,000

 

Simmi

1,500

 

 

 

 

 

Sonu

3,000

4,500

By Interest on Drawings

 

 

 

 

 

 

Simmi

600

 

To Partner's Salary

 

 

 

Sonu

450

1,050

 

Simmi

12,000

 

 

 

 

 

Sonu

9,000

21,000

 

 

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

 

 

Simmi Current [1,25,550×3/4]

94,162

 

 

 

 

 

Sonu's Current [1,25,550×1/4]

31,388

1,25,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,51,050

 

 

1,51,050

 

 

 

 

 

 

 

Partner's Capital Account

Dr.

 

Cr

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

 

 

 

By Balance b/d

30,000

60,000

 

 

 

 

 

 

 

 

 

 

 

 

To Balance c/d

30,000

60,000

 

 

 

 

 

 

 

 

 

 

30,000

60,000

 

30,000

60,000

 

 

 

 

 

 

 

Partner's Current Account

Dr.

 

Cr

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

To Drawings

20,000

15,000

By Balance b/d

30,000

15,000

To Interest on Drawings

600

450

By Interest on Capital

1,500

3,000

 

 

 

By Partner's Salaries

12,000

9,000

To Balance c/d

1,17,062

42,938

By Profit and Loss Appropriation A/c

94,162

31,388

 

 

 

 

 

 

 

1,37,662

58,388

 

1,37,662

58,388

 

 

 

 

 

 

 

Accounting for Partnership : Basic Concepts Exercise 100

Solution NUM 12

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

To Interest on Capital

 

 

By Profit and Loss A/c

 

1,00,300

 

Ramesh 

9,600

 

 

 

 

 

Suresh

7,200

16,800

By Interest on Drawings

 

 

 

 

 

 

Ramesh 

2,000

 

To Partner's Salary

 

 

 

Suresh

2,500

4,500

 

Ramesh 

24,000

 

 

 

 

 

Suresh

36,000

60,000

 

 

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

 

 

Ramesh Capital [28,000 ×4/7]

16,000

 

 

 

 

 

Suresh Capital [28,000 × 3/7]

12,000

28,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,04,800

 

 

1,04,800

 

 

 

 

 

 

 

Partner's Capital Account

Dr.

 

Cr

Particulars

Ramesh 

Suresh

Particulars

Ramesh 

Suresh

To Drawings

40,000

50,000

By Balance b/d

80,000

60,000

To Interest on Drawings

2,000

2,500

By Interest on Capital

9,600

7,200

 

 

 

By Partner's Salaries

24,000

36,00

To Balance c/d

87,600

62,700

By Profit and Loss Appropriation A/c

16,000

12,000

 

 

 

 

 

 

 

1,29,600

1,15,200

 

1,29,600

1,15,200

 

 

 

 

 

 

 

Working Note:

1. Calculation of Profit-sharing Ratio.

Profit-sharing Ratio= Capital Ratio…. (Given)

Capital Ratio

=

Ramesh 

:

Suresh

 

 

80,000

:

60,000

 

 

4

:

3

Therefore, Profit-sharing Ratio= 4:3.

Solution NUM 13

 

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particular

 

Amount

Rs. 

Particular

 

Amount

Rs. 

To Interest on Capital

 

 

By Profit and Loss A/c

 

16,700

 

Sukesh 

2,000

 

(9,500+7,200)

 

 

 

Vanita 

2,000

4,000

 

 

 

 

 

 

 

 

 

To Partner's Salary

 

 

 

 

 

 

Vanita (600×12)

 

7,200

 

 

 

 

 

 

 

 

 

To Profit transferred to

 

 

 

 

 

 

Sukesh Capital [5,500×3/5]

3,300

 

 

 

 

 

Vanita Capital [5,500×2/5]

2,200

5,500

 

 

 

 

 

 

 

 

 

 

 

16,700

 

 

16,700

 

 

 

 

 

 

 

Partner's Capital Account

Dr.

 

Cr

Particulars

Sukesh 

Vanita 

Particulars

Sukesh 

Vanita 

 

 

 

By Balance b/d

40,000

40,000

 

 

 

 

 

 

 

 

 

 

 

 

To 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 

To Drawings

10,850

8,150

By Balance b/d

7,200

2,800

 

 

 

By Partner's Salaries

 

7,200

 

 

 

By Profit and Loss Appropriation A/c

3,300

2,200

To Balance c/d

1,650

6,050

By Interest on Capital

2,000

2,000

 

12,500

14,200

 

12,500

14,200

 

 

 

 

 

 

 

 

Solution NUM 14

  

Accounting for Partnership : Basic Concepts Exercise 101

Solution NUM 15

 

Simple Interest Method

Sunflower

Period

Capital

 

 

1st April, 2016 to 30th September, 2016

2,50,000

  

 

12,500

1st October, 2016 to 31st March, 2017

2,00,000

  

 

10,000

Interest on Sunflower's Capital

 

 

22,500

 

Pink Rose

Period

Capital

 

 

1st April, 2016 to 30th September, 2016

2,50,000

  

 

7,500

1st October, 2016 to 31st March, 2017

2,00,000

  

 

10,000

Interest on Pink Rose's Capital

 

 

17,500

 

Alternative Method,

Product Method

Sunflower

1st April, 2016 to 30th September, 2016

2,50,000 × 6

15,00,000

1st October, 2016 to 31st March, 2017

2,00,000 × 6

12,00,000

Sum of Product

 

27,00,000

 

Pink Rose

1st April, 2016 to 30th September, 2016

1,50,000 × 6

9,00,000

1st October, 2016 to 31st March, 2017

2,00,000 × 6

12,00,000

Sum of Product

 

21,00,000

 

  

Solution NUM 16

Generally, interest on Capital is calculated on opening balance of Capital. If additional capital is not given then opening balance will be calculated as follow:

 

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

 

  

Solution NUM 17

  

Note: In the question, both Partner's Capital Account and of Partner's Current Account is given, so it is clear that the capital of the partners is fixed. When capital account is fixed, interest on drawing, salary to partner, interest on capital, etc, will not affect the Partner's Capital Account. It will affect Partner's Current Account. Therefore, in this case, capital at the beginning (i.e. opening capital) and capital at the end (i.e. closing capital) of the year would remain constant. Thus, the interest on capital is calculated on fixed capital balances (given in the Balance Sheet of the question).

Solution NUM 18

 

Product Method

Period 

Months

Amount

Product= Drawing × Period

1st May, 2017 to 31st March, 2018

11

12,000

12,000 × 11 =

1,32,000

31st July, 2017 to 31st March, 2018

8

6,000

6,000 × 8 =

48,000

30th September, 2017 to 31st March, 2018

6

9,000

9,000 × 6 =

54,000

30th November, 2017 to 31st March, 2018

4

12,000

12,000 × 4 =

48,000

1st January, 2018 to 31st March, 2018

3

8,000

8,000 × 3 =

24,000

31st March, 2018 to 31st March, 2018

0

7,000

7,000 × 0 =

0

 

Sum of Product

3,06,000

 

  

Note: Interest on drawing is calculated by product method as drawings are made at different intervals and the amount of withdrawal is not uniform.

Accounting for Partnership : Basic Concepts Exercise 102

Solution NUM 19

Calculation of interest on drawings:

  

Profit and Loss Appropriation Account

Dr.

 

 Cr.

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

To Interest on Capital

 

 

By Profit and Loss Account

 

20,550

 

Moli 

4,000

 

(20,950-400*)

 

 

 

Goli 

2,000

6,000

 

 

 

 

 

 

 

By Interest on Drawings

 

 

 

 

 

Moli 

780

 

 

 

 

Golu 

660

1,440

To Profit transferred to

 

 

 

 

 

 

Moli's Capital [15,990 × 3/5]

9,594

 

 

 

 

 

Golu's Capital [15,990 × 2/5]

6,396

15,990

 

 

 

 

 

 

 

 

 

 

 

21,990

 

 

21,990

 

 

 

 

 

 

 

 

 

 

 

 

 

Partner's Current Account

Dr.

 

Cr

Particulars

Moli 

Golu 

Particulars

Moli 

Golu 

To Drawings

12,000

12,000

By Balance b/d

40,000

20,000

To Interest on Drawing

780

660

By Interest on Capital

4,000

2,000

To Balance c/d

40,814

15,736

By Profit and Loss Adjustment

9,544

6,396

 

 

 

 

 

 

 

53,594

28,396

 

53,594

28,396

 

 

 

 

 

 

 

Note: Interest on partner's loan is a charge against profit and therefore it is should be recorded in Profit and Loss Account. Hence, it is deducted from the profit transferred to Profit and Loss Appropriation Account.

  

Solution NUM 20

Rakesh 

Interest on Drawings

Period 

 Month

Amount of Drawing

Product= Drawings × Period

31st May, 2016 to 31st March, 2017

10

600

600 × 10 =

6,000

30th June, 2016 to 31st March, 2017

9

500

500 × 9 =

4,500

31st August, 2016 to 31st March, 2017

7

1,000

1,000 × 7=

7,000

1st November, 2016 to 31st March, 2017

5

400

400 × 5 =

2,000

31st December, 2016 to 31st March, 2017

3

1,500

1,500 × 3 =

4,500

31st January, 2017 to 31st March, 2017

2

300

300 × 2 =

600

1st March, 2017 to 31st March, 2017

1

700

700 × 1 =

700

 

Sum of Product

25,300

 

  

 

Rohan 

  

Solution NUM 21

  

Solution NUM 22

  

Accounting for Partnership : Basic Concepts Exercise 103

Solution NUM 23

Interest on Capital

Raj

 

 

 

Period 

Months

Capital × Period=

Product

1st April, 2017 to 30th June, 2017

3

2,50,000 × 3 =

7,50,000

1st July, 2017 to 31st March, 2018

9

1,00,000 × 9 =

9,00,000

 

 

Sum of Product

16,50,000

 

  

Neeraj 

 

 

 

Period 

Months

Capital × Period

Product

1st April, 2017 to 30th June, 2017

3

1,50,000 × 3 =

4,50,000

1st July, 2017 to 31st March, 2018

9

1,00,000 × 9 =

9,00,000

 

 

Sum of Product

13,50,000

Solution NUM 24

  

Solution NUM 25

 

Calculation of interest on Harish's drawings

Period

Month

Drawings × Period

Product

1st Feb, 17 to 31st Dec, 17

11

4,000 × 11 =

44,000

1st May, 17 to 31st Dec, 17

8

10,000 × 8 =

80,000

30th June, 17 to 31st Dec, 17

6

4,000 × 6 =

24,000

31st Oct, 17 to 31st Dec, 17

2

12,000 × 2 =

24,000

31st Dec, 17 to 31st Dec, 17

 

4,000 × 0 =

0

 

Sum of Product

1,72,000

Solution NUM 26

  

Solution NUM 27

Interest on capital is calculated on the opening balance of capital.

Therefore, opening Capital:

 

Ram

Shyam 

Mohan

Capital as on March 31, 2015 (closing)

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 as on April 01, 2014 (opening)

9,600

10,500

8,700

 

  

Solution NUM 28

Profit and Loss Adjustment Account

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit transferred to

 

 

By Profit and Loss A/c

 

36,000

 

 

Amit's Capital

18,000

 

 

 

 

 

 

Less : Guarantee to Samiksha

(1,200)

16,800

 

 

 

 

 

 

 

 

 

 

 

 

 

Sunit's Capital

12,000

 

 

 

 

 

 

Less : Guarantee to Samiksha

(800)

11,200

 

 

 

 

 

 

 

 

 

 

 

 

Samiksha Capital

6,000

 

 

 

 

 

 

Add : Deficiency received from:

 

 

 

 

 

 

 

Amit 

1,200

 

 

 

 

 

 

Sumit 

800

8,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,000

 

 

36,000

 

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner

 

Amit 

Sumit 

Samiksha 

Guarantee to Samiksha

 

 

8,000

Profit of Rs.36,000 (3:2:1)

18,000

12,000

6,000

Deficiency in Samiksha Share

 

 

2000

 

Deficiency in Samiskha share is to be borne by Amit and Sumit in 3:2 ratio (i.e., PSR).

  

Accounting for Partnership : Basic Concepts Exercise 104

Solution NUM 29

 

JOURNAL

 

Particulars

 

J.F.

Debit

Credit

1.

Profit and Loss A/c

Dr.

 

40,000

 

 

-----To Profit and Loss Appropriation A/c

 

 

 

40,000

 

(Being profit transferred from Profit and loss A/c)

 

 

 

 

 

 

 

 

 

 

2.

Profit and Loss Appropriation A/c

Dr.

 

40,000

 

 

-----To Pinki's Capital A/c

 

 

 

19,500

 

-----To Deepti's Capital A/c

 

 

 

15,500

 

-----To Kaku's Capital A/c

 

 

 

5,000

 

(Being profit distributed among Partner's)

 

 

 

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner

 

Pinki 

Deepti 

Kaku 

Guarantee to Kaku

 

 

5,000

Profit of Rs.40,000 (5:4:1)

20,000

16,000

4,000

Deficiency in Kaku Share

 

 

1000

 

Deficiency in Kaku's share is to be borne by Pinki and Deepti Equally.

  

After adjustment of deficiency,

Pinki gets Rs.20,000 -Rs.500=Rs.19,500

Deepti gets Rs.16,000-Rs.500=Rs.15,500

Solution NUM 30

 

Profit and Loss Appropriation Account

as on March 31,2016

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit transferred to

 

 

By Profit and Loss A/c

 

40,000

 

 

Abhay's Capital

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

Siddharth's Capital

12,000

 

 

 

 

 

 

Less : Guarantee to Kusum

(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

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss A/c

60,000

 

Abhay's Capital

30,000

 

 

 

Siddharth's Capital

18,000

 

 

 

Kusum's Capital

12,000

 

 

 

 

 

 

 

60,000

 

60,000




 

 

 

 

 

  

 

Working Note:

1. For the year 2016, calculation for guarantee to the partner:

 

Abhay 

Siddharth 

Kusum 

Guarantee to Kusum

 

 

10,000

Profit of Rs.40,000 (5:3:2)

20,000

12,000

8,000

Deficiency in Kusum share

 

 

2,000

 

Deficiency in Kusum's share is to be borne by Siddharth. Therefore, deficiency received from Siddharth is Rs.2,000

Solution NUM 31

 

Journal

 

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

1.

Profit and Loss A/c

Dr.

 

40,000

 

 

--------To Profit and Loss Appropriation A/c

 

 

 

40,000

 

(Being profit transferred from Profit and loss A/c)

 

 

 

 

 

 

 

 

 

 

2.

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

 

(Being profit distributed among Partner's)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner:

 

Radha 

Mary

Fatima

Guarantee to Fatima

 

 

5,000

Profit of Rs.35,000 (5:4:1)

17,500

14,000

3,500

Deficiency in Fatima's share

 

 

1,500

 

Deficiency in Fatima's share is to be borne by Radha and Mary in 3:2 ratio.  

  

After adjustment of deficiency,

Radha gets Rs.17,500 -Rs.900=Rs.16,600

Mary gets Rs.14,000 -Rs.600=Rs.13,400

Solution NUM 33

Case (i)

Profit and Loss Appropriation Account

as on March 31, 2015

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit transferred to

 

 

By Profit and Loss A/c

 

2,50,000

 

To Arun's Capital

1,00,000

 

 

 

 

 

 

Less : Chintu's deficiency

(10,000)

90,000

 

 

 

 

 

 

 

 

 

 

 

To Bobby's Capital

 

1,00,000

 

 

 

 

 

 

 

 

 

 

 

To Chintu's Capital

50,000

 

 

 

 

 

 

Add : Deficiency received from:

 

 

 

 

 

 

 

Arun 

10,000

60,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,50,000

 

 

2,50,000

 

 

 

 

 

 

 

 

 

Working Note:

1. For the year, Calculation for guarantee to the partner:

 

Arun 

Boby 

Chintu 

Guarantee to Chintu

 

 

60,000

Profit of Rs.2,50,000 (2:2:1)

1,00,000

1,00,000

50,000

Deficiency in Chintu's share

 

 

10,000

 

Deficiency in Chintu's share is to be borne by Arun. Therefore, deficiency received from Arun is Rs.10,000

Case (ii)

Profit and Loss Appropriation Account

as on March 31,2015

Dr.

 

 Cr.

Particulars

Amount

Rs. 

Particulars

Amount

Rs. 

To Profit transferred to

 

By Profit and Loss A/c

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

 

 

 

 

 

Solution NUM 32

 

Profit and Loss Appropriation Account

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit transferred to

 

 

By Profit and Loss A/c

 

30,000

 

 

X's Capital

15,000

 

 

 

 

 

 

Less : Z's Deficiency

(1,800)

13,200

 

 

 

 

 

 

 

 

 

 

 

 

Y's Capital

10,000

 

 

 

 

 

 

Less : Z's Deficiency

(1,200)

8,800

 

 

 

 

 

 

 

 

 

 

 

 

Z's Capital

 

 

 

 

 

 

 

Add: Share of Deficiency borne by

5,000

 

 

 

 

 

 

X

1,800

 

 

 

 

 

 

Y

1,200

8,000

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner:

 

X

Y

Z

Guarantee to Z

 

 

8,000

Profit of Rs.30,000 (3:2:1)

15,000

10,000

5,000

Deficiency in Z's share

 

 

3,000

 

Deficiency in Z's share is to be borne by X and Y in 3:2 ratio (i.e., PSR). 

  

Solution NUM 34

 

Profit and Loss Appropriation Account

as on March 31, 2017

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit transferred to

 

 

By Profit and Loss A/c

 

70,000

 

To Ashok Capital

28,000

 

 

 

 

 

 

Less : Cheena's deficiency

(3,000)

25,000

 

 

 

 

 

 

 

 

 

 

 

To Brijesh's Capital

28,000

 

 

 

 

 

 

Less : Cheena's deficiency

(3,000)

25,000

 

 

 

 

 

 

 

 

 

 

 

To Cheena's Capital

14,000

 

 

 

 

 

 

Add : Deficiency received from:

 

 

 

 

 

 

 

Ashok

3,000

 

 

 

 

 

 

Brijesh 

3,000

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

70,000

 

 

70,000

 

 

 

 

 

 

 

 

 

Working Note:

2. Calculation for guarantee to the partner:

 

Ashok

Brijesh 

Cheena 

Guarantee to Cheena

 

 

20,000

Profit of Rs.70,000 (2:2:1)

28,000

28,000

14,000

Deficiency in Cheena's share

 

 

6,000

 

Deficiency in Cheena's share is to be borne by Ashok and Brijesh in 2:2 ratio (i.e., PSR). 

  

Accounting for Partnership : Basic Concepts Exercise 105

Solution NUM 35

 

Profit and Loss Appropriation Account

as on March 31, 2017

Dr.

 

Cr

 

Particulars

 

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Interest on Capital

 

 

 

By Profit and Loss A/c

 

2,00,000

 

 

Ram

 

50,000

 

 

 

 

 

 

Mohan

 

25,000

 

 

 

 

 

 

Sohan 

 

20,000

95,000

 

 

 

 

 

 

 

 

 

 

 

 

To Profit Transferred to

 

 

 

 

 

 

 

 

Ram's Capital

52,500

 

 

 

 

 

 

 

Less : Share of deficiency

(4,500)

48,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mohan's Capital

35,000

 

 

 

 

 

 

 

Less : Share of deficiency

(3,000)

32,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sohan's Capital

17,500

 

 

 

 

 

 

 

Add : Deficiency received from

 

 

 

 

 

 

 

 

Ram

4,500

 

 

 

 

 

 

 

Mohan

3,000

25,000

1,05,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

2,00,000

 

 

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner:

 

Ram

Mohan

Sohan 

Guarantee to Sohan

 

 

25,000

Profit for distribution Rs.1,05,000 (3:2:1)

52,500

35,000

17,500

Deficiency in Sohan's share

 

 

7,500

 

Deficiency in Sohan's share is to be borne by Ram and Mohan in 3:2 ratio (i.e., PSR). 

  

Solution NUM 36

 

Profit and Loss Appropriation Account

as on March 31, 2017

Dr.

 

Cr

 

Particulars

 

Amount

Rs. 

Particulars

 

Amount

Rs. 

 

To Profit Transferred to

 

 

By Profit and Loss

 

75,000

 

 

Amit's Capital

42,000

 

By Babita's Capital

 

9,000

 

 

Less : Sona's share of deficiency

(600)

41,400

(Deficiency of Fees 25,000 - 16,000)

 

 

 

 

 

 

 

 

 

 

 

To Babita's Capital

28,000

 

 

 

 

 

 

Less : Sona's share of deficiency

(400)

27,600

 

 

 

 

 

 

 

 

 

 

 

 

To Sona's Capital

14,000

 

 

 

 

 

 

Add : Deficiency received from:

 

 

 

 

 

 

 

Amit 

600

 

 

 

 

 

 

Babita 

400

15,000

 

 

 

 

 

 

 

 

 

 

 

 

 

84,000

 

 

84,000

 

 

 

 

 

 

 

 

Working Note:

1. Calculation for guarantee to the partner:

 

Amit 

Babita 

Sona 

Guarantee to Sona

 

 

15,000

Profit for distribution Rs.84,000 (3:2:1)

42,000

28,000

14,000

Deficiency in Sona's share

 

 

1,000

 

Deficiency in Sona's share is to be borne by Amit and Babita in 3:2 ratio (i.e., PSR). 

  

Solution NUM 38

Old Ratio (2:2:1) Year

Harry

Porter

Ali

 

Total

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 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

 

Adjusting entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Harry's Capital A/c

Dr.

 

5,000

 

 

Porter's Capital A/c

Dr.

 

5,000

 

 

-------- To Ali's Capital A/c

 

 

 

10,000

 

(Being profit adjusted due to change in profit sharing ratio)

 

 

 

 

 

 

 

 

 

 

 

Solution NUM 37

 

Past Adjustment

 

X

Y

Z

 

Total

Interest on Capital

5,000

(700)

1,000

4,000

(500)

1,500

3,000

(300)

NIL

 

12,000

(1,500)

2,500

 

Less : Interest on Drawings

Add : Partner's Salaries

 

Right Distribution of 13,000

5,300

(7,800)

5,000

(2,600)

2,700

(2,600)

 

13,000

(13,000)

Less : Wrong distribution of 13,000 (3:1:1)

 

(2,500) Dr.

2,400 Cr.

100 Cr.

 

NIL

 

Explanation: 

Capital has credit balance if it decreases it will be debited and if it increases it will be credited.

Here X has wrongly taken excess Rs.2.500 and hence Rs.2.500 will be deducted from X capital Account i.e., debited. On the other hand, Y and Z have taken less than what they should have been taken hence capital account of Y and Z will be added i.e., credited.

Adjusting entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

X's Capital A/c

Dr.

 

2,500

 

 

-------- To Y's Capital A/c

 

 

 

2,400

 

-------- To Z's Capital A/c

 

 

 

100

 

(Being profit adjusted among partners)

 

 

 

 

 

 

 

 

 

 

 

 

Accounting for Partnership : Basic Concepts Exercise 106

Solution NUM 39

 

Adjustment of Profit

 

Mannu's 

Shrishti 

 

Total

Interest on Capital

1,500

(120)

500

(60)

 

2,000

(180)

 

Less : Interest on Drawings

Right distribution of 1,820

1,380

(1,092)

440

(728)

 

1,820

(1,820)

Less : Wrong distribution of 1,820 (3:2)

Adjusted Profit

288

(288)

 

NIL

           

 

Adjusting entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Shrishti Capital A/c

Dr.

 

288

 

 

-------- To Mannu's Capital A/c

 

 

 

288

 

(Being adjustment of Profit made)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Solution NUM 40

Calculation of opening capital:

 

Eluin 

Monu 

Ahmed

Closing Capital (as on 31 Mar 2017)

80,000

60,000

40,000

 

Add : Drawings

20,000

15,000

9,000

 

Less : Profit 1,20,000 (3:2:1)

(60,000)

(40,000)

(20,000)

Opening Capital (as on April 01, 2016)

40,000

35,000

29,000

 

Adjustment of Profit

 

 

 

 

 

 

Eluin 

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 Entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Eluin's Capital A/c

Dr

 

570

 

 

-------- To Monu's Capital A/c

 

 

 

10

 

-------- To Ahmed's Capital A/c

 

 

 

560

 

(Being adjustment of Profit made)

 

 

 

 

 

 

 

 

 

 

 

Solution NUM 41

Adjustment of Profit

 

Azad

Benny

 

Total

Interest on Capital

2,000

(3,000)

4,000

(3,000)

=

=

6,000

(6,000)

Less: Wrong distribution of Profit (1:1)

Adjusted Profit

(1,000)

1,000

=

NIL

 

Adjusting Entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Azad's Capital A/c

Dr

 

1,000

 

 

-------- To Benny Capital A/c

 

 

 

1,000

 

(Baing adjustment of Profit made)

 

 

 

 

 

 

 

 

 

 

 

Accounting for Partnership : Basic Concepts Exercise 107

Solution NUM 42

Calculation of opening capital: 

 

Mohan

Vijay

Anil

Closing Capital

30,000

5,000

(8,000)

25,000

4,000

(8,000)

20,000

3,000

(8,000)

 

Add : Drawings

 

Less : Profit (1:1:1)

Opening Capital

27,000

21,000

15,000

 

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

Less: Wrong distribution

(1,900)

(1,900)

(1,900)

=

(5,700)

 

550

NIL

(550)

 

NIL

 

Adjusting Entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Anil's Capital A/c

Dr.

 

550

 

 

-------- To Mohan's Capital A/c

 

 

 

550

 

(Being adjustment of Profit made)

 

 

 

 

 

 

 

 

 

 

 

Note: Book shows 450 but as per solution adjustment has been done for 550. 

Solution NUM 43

Adjustment of Profit

Year 2014

 

 

 

 

 

 

 

 

Anju 

 

Manju 

 

Mamta 

 

Total

Interest on Capital

500

 

400

 

300

 

1,200

Less: Wrong distribution of 1,200 (4:3:5)

(400)

 

(300)

 

(500)

 

(1,200)

 

100

 

100

 

(200)

 

NIL

 

Adjustment of Profit

Year 2015

 

 

 

 

 

 

 

 

Anju 

 

Manju 

 

Mamta 

 

Total

Interest on Capital

500

 

400

 

300

 

1,200

Less: Wrong distribution of 1,200 (3:2:1)

(600)

 

(400)

 

(200)

 

(1,200)

 

(100)

 

NIL

 

100

 

NIL

 

Adjustment of Profit

Year 2016

 

 

 

 

 

 

 

 

Anju 

 

Manju 

 

Mamta 

 

Total

Interest on Capital

500

 

400

 

300

 

1,200

Less: Wrong distribution of 1,200 (1:1:1)

(400)

 

(400)

 

(400)

 

(1,200)

 

100

 

NIL

 

(100)

 

NIL

 

Final Adjustment

 

 

 

 

 

 

Anju 

 

Manju 

 

Mamta 

2014

100

 

100

 

(200)

2015

(100)

 

NIL

 

100

2016

100

 

NIL

 

(100)

 

100

 

100

 

(200)

 

 

 

 

Adjusting Entry

Date

Particulars

 

L.F.

Dr.

Rs. 

Cr.

Rs. 

 

 

 

 

 

 

 

Mamta's Capital A/c

Dr.

 

200

 

 

-------- To Anju's Capital A/c

 

 

 

100

 

-------- To Manju's Capital A/c

 

 

 

100

 

(Being adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

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