T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.79
In the absence of Partnership Deed, the provisions of Indian Partnership Act, 1932 are applicable. Accordingly,
a. No Salary is to be allowed to a partner
b. No Interest on Partner's Capital is to be allowed
c. Interest on Partner's Loan to be allowed at 6% p.a.
d. Distribution of Profit to be done in equal ratio
e. No Interest on Partner's Drawings to be charged
a. P is bound to pay Rs.20,000 along with profit of Rs.5,000 to the firm. This is because this because this amount belongs to the firm and according to the principal and agent relationship, P is principal as well as agent to the firm, to Q and to R. And as per the rule, any profit earned by an agent (P) by using the firm's property is attributable to the firm.
b. Q is liable to pay Rs.5,000 to the firm. This is because, as per the Partnership Act, every partner of a partnership firm is liable to the firm for any loss caused by his/her wilful negligence which is clearly evident from the fact that he used the property of the firm and also misrepresented himself as a principal rather than an agent to the other partners and to the firm.
c. As per the Partnership Act, 1932, a partner has a right to buy and sell goods without consulting the other partners unless a Public Notice has been given by the partnership firm to restrict the partners to buy and sell. Accordingly, P and Q may buy goods from A Ltd.
d. No, C will not be admitted as one of the partners, P, has not agreed to admit C. And as per the Partnership Act, 1932 a new partner cannot be admitted into a firm unless all the existing partners agree on the same decision.

Disputes 
Possible Judgements 
a. 
A wants that interest on capital should be allowed to the partners, but B and C do not agree. 
According to the Partnership Act, no interest on capital will be allowed as there is no partnership agreement among A, B and C mentioning payment of interest on capital. 
b. 
B wants that the partners should be allowed to draw salary, but A and C do not agree. 
No salary will be allowed to any partner until and unless there is an agreement to the contrary. 
c. 
C wants that the loan given by him to the firm should bear interest @ 10% p.a., but A and B do not agree. 
Interest on C's loan will be allowed at 6% p.a. in the absence of a partnership agreement mentioning the said amount of interest. 
d. 
A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution, but C does not agree. 
Profit will be shared equally if there is no agreement between the partners mentioning such distribution. 
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.80
In case there is no partnership deed entered between partners or if deed is silent on few of the aspects, then the provisions of Indian Partnership Act, 1932 are applicable. According to the Act, if there is no agreement regarding the ratio in which profits are to be shared, then profits (or losses) are to be shared equally among all the partners. Accordingly, Jaspal's view over distribution of profits in the capital ratio is not acceptable, and Rosy should convince Jaspal stating the provisions contained in the Partnership Act, 1932.
Harshad Claims:
(i) It cannot Claim interest on capital to Indian Partnership Act 1932, he is entitled only for 6% interest on loan.
(ii) In absence to any agreement profit are distributed equally, according to Indian Partnership Act 1932.
Dhiman Claims:
(i) It will be accepted, according to Indian Partnership Act 1932.
(ii) He is not entitled for any remuneration because there is no agreement on matter of remuneration.
(iii) It is no interest on capital is allowed whereas 6% interest for loan should be given.
Distribution Profits:
Profit and Loss Adjustment Account 

Dr 

Cr 

Particulars 
Rs. 
Particulars 
Rs. 

To Interest on Partner's Loan A/c 

By Profit and Loss A/c 
1,80,000 

Harshad [1,00,000 ×(6/100)× (6/12)] 
3,000 



To Profit and Loss Appropriation A/c 
1,77,000 




1,80,000 

1,80,000 

Profit and Loss Appropriation Account 

Dr 

Cr 

Particulars 
Rs. 
Particulars 
Rs. 

To Profit transferred to : 

By Profit and Loss Adjustment A/c 
1,77,000 


Harshad's Capital A/c 
88,500 




Dhiman's Capital A/c 
88,500 




1,77,000 

1,77,000 

Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 

Particulars 

Rs. 
Particulars 
Rs. 

To Interest on A's Loan A/c 

240 
By Profit b/d (before Interest) 
15,000 

To Profit transferred to : 






A's Capital A/c 
7,380 




B's Capital A/c 
7,380 
14,760 




15,000 

15,000 
Working notes :
1
Calculation of interest on Loan
Interest on loan to be provided at 6% p.a.
Amount of Loan = Rs.8,000
Period (from October 01 to March 31) = 6 Months
2
Calculation of Profit Share of each partner
Equal distribution of profits
Profit after Interest on A's loan = Rs.15,000  Rs.240 = Rs.14,760
Total amount advanced by the partners = Rs.30,000
Profit sharing ratio = 3 :2
Interest Period (from Oct. 01, 2017 to Mar. 31, 2018) = 6 months
Interest rate = 6% p.a.
Calculation of Interest on Advances
Note: In the absence of a partnership deed, interest on loans and advances is provided at 6% p.a.
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.81
Total amount advanced: 30,000
Period (from Oct. 01, 2017 to Mar. 31, 2018) = 6 months
Interest rate = 6% p.a.
HTML Source EditorWord Wrap
Calculation of Interest on Loan for 6 months
Case 1 – When Profits before Interest amounted to Rs.21,000


Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 


Particulars 

Rs. 
Particulars 
Rs. 

To Interest on X’s Loan A/c 

2,400 
By Profit b/d (before interest) 
21,000 

To Interest on Y’s Loan A/c 

1,200 



To Profit transferred to 






X’s Capital A/c (17,400 ´ 2/5) 
6,960 





Y’s Capital A/c (17,400 ´ 3/5) 
10,440 
17,400 





21,000 

21,000 

Case 2 – When Profits before Interest amounted to Rs.3,000


Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 

Particulars 
Rs. 
Particulars 

Rs. 

To Interest on X’s Loan A/c 
2,400 
By Profit b/d (before interest) 

3,000 

To Interest on Y’s Loan A/c 
1,200 
By Loss transferred to 






X’s Capital A/c (600 ´2/5) 
240 




Y’s Capital A/s (600 ´ 3/5) 
360 
600 







3,600 


3,600 
Case 3 – When Profits before Interest amounted to Rs.5,000


Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 

Particulars 

Rs. 
Particulars 
Rs. 

To Interest on X’s Loan A/c 

2,400 
By Profit b/d (before interest) 
5,000 

To Interest on Y’s Loan A/c 

1,200 



To Profit transferred to 






X’s Capital A/c (1400 ´ 2/5) 
560 




Y’ Capital A/c (1400 ´ 3/5) 
840 
1,400 




5,000 

5,000 
Case 4 – When Losses before Interest were Rs.1,400


Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 

Particulars 

Rs. 
Particulars 
Rs. 

To Loss b/d (before interest) 

2,400 
By Loss transferred to: 


To Interest on X’s Loan A/c 

1,200 
X’s Capital A/c (1400 ´ 2/5) 
2,000 

To Interest on Y’s Loan A/c 

1,400 
Y’ Capital A/c (1400 ´ 3/5) 
3,000 
5,000 


5,000 


5,000 
Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr 

Particulars 
Rs. 
Particulars 

Rs. 

To Loss b/d (before interest) 
9,000 
By Loan transferred to : 



To Interest on Bat's Loan A/c 
7,200 

Bat's Capital A/c 
31,920 

To Interest on Ball's loan A/c 
3,600 

Ball's Capital A/c 
47,880 
79,800 
To Rent A/c (Bat's) 
60,000 





79,800 


79,800 
Working notes :
1.
Interest on Partner's Loan
3.
Distribution of Loss to the Partners
Profit and Loss Appropriation Account 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capital: 


By Profit and Loss (Net Profit) 
80,000 
A's A/c (6% of 1,00,000) 
6,000 



B's A/c(6% of 60,000) 
3,600 
9,600 


To Salary to B's A/c (3,000 × 12) 

36,000 


To Profit transferred to : 




A's Capital A/c 
17,200 



B's Capital A/c 
17,200 
34,400 




80,000 

80,000 
Working Notes :
WN 1 Calculation of Profit Share of each Partner
Divisible Profit = 80,000  9,600  36,000 = 34,400
Profit and Loss Appropriation Account 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capital A/c 


By Profit and Loss A/c 
4,00,000 
X (10% of 5,00,000) 
50,000 

 (Net Profit after Z's salary ) 

Y (10% of 5,00,000) 
50,000 



Z (10% of 2,50,000) 
25,000 
1,25000 


To Profit transferred to : 




X's Capital A/c 
1,10,000 



Y's Capital A/c 
1,10,000 



Z's Capital A/c 
55,000 
2,75,000 




4,00,000 

4,00,000 
Working Notes :
1.
Salary to Z will not be debited to Profit and Loss Appropriation Account as Profit of Rs.4,00,000 is already given after adjusting the Z's salary.
2.
Calculation of Profit Share of each Partner
Divisible of Profit after Interest on Capital = Rs.4,00,000  Rs.1,25,000 = Rs. 2,75,000
Profit sharing ratio = 2 : 2: 1
Profit and Loss Adjustment Account 

Dr. 

Cr. 

Particulars 
Rs. 
Particulars 
Rs. 
To Manager's Commission A/c (30,000 × 5%) 
1,500 
By Profit and Loss A/c (Net Profit after Y's salary) 
24,000 
To Profit transferred to Profit and Loss Appropriation A/c: 
28,500 
By Y's salary A/c 
6,000 

30,000 

30,000 
Profit and Loss Appropriation Account 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Salary to Y's A/c 

6,000 
By Profit and Loss Adjustment A/c (After manager's commission) 
28,500 
To Interest on Capital A/c 




X 
4,000 



Y 
3,000 
7,000 


To Salary to A/c 

12,000 


To Profit transferred to : 




X's Capital A/c 
9,300 



Y's Capital A/c 
6,200 
15,500 




28,500 

28,500 
Working Notes :
1.
Calculation of Manager's Commission
Profit to calculate Managers' Commission = 24,000 + 6,000 (Y's Salary) = Rs.30,000
2.
Calculation of Interest on Capital
3.
Calculation of Profit Share of each Partner
Profit available for distribution = 28,500  6,000  7,000 = Rs.15,500
Profit and Loss Appropriation Account 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 

Rs. 
To Salary to Prem (2,500 × 12) 

30,000 
By Profit and Loss A/c (Net Profit) 

90,575 
To Commission to Manoj 

10,000 
By Interest on Drawings A/c: 


To Interest on Capital A/c: 


Prem 
1,250 

Prem (5% of 2 Lacs) 
10,000 

Manoj 
425 
1,675 
Manoj (5% of 1.50 Lacs) 
7,500 
17,500 



To Profit transferred to: 





Prem's Capital A/c 
20,850 




Manoj's Capital A/c 
13,900 
34,750 





92,250 


92,250 
Working Notes :
1.
Calculation of Profit Share of each Partner
Profit available for distribution = 90,575 + 1,675  30,000 10,000  17,500 = Rs.34,750
Profit Sharing Ratio = 3 : 2
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.82
Profit and Loss Appropriation Account for the year ended 31^{st} March 2018 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 

Rs. 
To Profit and Loss A/c (Loss) 
1,00,000 
By Interest on Drawings A/c: 





 Reema 
3,000 




 Seema 
3,000 
6,000 









By Net Loss transferred to: 





 Reema Capital A/c 
47,000 




 Seema Capital A/c 
47,000 
94,000 


1,00,000 


1,00,000 
Working Notes :
1. Calculation of Interest on drawings of each Partner
In the no given of dates of drawings, interest thereon has been calculated for the average period.
2. Loss share of each partner Ratio 1:1.
3. Interest on capital is charge against profit.
Profit and Loss Appropriation Account for the year ended 31^{st} March 2018 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 

Rs. 
To Profit and Loss A/c (Loss) 
60,000 
By Interest on Drawings A/c: 



(1,20,000  1,80,000) 

 Bhanu Current A/c 
3,750 




 Partap Current A/c 
7,500 
11,250 









By Net Loss transferred to: 





 Bhanu Current A/c 
24,375 




 Partap Current A/c 
24,375 
48,750 


60,000 


60,000 
Working Notes:
1. Calculation of Interest on Drawing of each partner
In the no given of dates of drawings, interest thereon has been calculated for the average period.
2. Calculation of Interest on Capital of each partner
Interest on Capital is a charge against Profit. Thus, will be debited to Profit and Loss Account
Total interest = Rs.1,80,000
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

40,000 


To Amar's Current A/c 



15,000 

To Bimal's Current A/c 



25,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 




Working Notes :
Calculation of Interest on Capital :
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

1,00,000 


To Kamal's Current A/c 



55,000 

To Kapil's Current A/c 



45,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 




Profit and Loss Appropriation Account year ended 31^{st} March 2018 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capital 


By Profit and Loss A/c 
6,00,000 
Kamal A/c 
55,000 



Kapil A/c 
45,000 
1,00,000 


To Profit transferred to: 




Kamal's Capital A/c 
2,50,000 



Kapil's Capital A/c 
2,50,000 
5,00,000 




6,00,000 

6,00,000 
Working Notes :
Calculation of Interest on Capital:
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

20,000 


To Simran's Current A/c 



10,000 

To Reema's Current A/c 



10,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 











Profit and Loss Appropriation A/c 
Dr. 

2,80,000 


To Simran's Current A/c 



1,68,000 

To Reema's Current A/c 



1,12,000 

(Being profit transferred to Partners Current Account) 




Profit and Loss Appropriation Account year ended 31^{st} march 2018 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capitals: 


By Profit and Loss A/c 
3,00,000 
Simran's A/c 
10,000 



Reema's A/c 
10,000 
20,000 


To Profit transferred to : 




Simran's Current A/c 
1,68,000 



Reema's Current A/c 
1,12,000 
2,80,000 




3,00,000 

3,00,000 
Working Notes :
1
Calculation of Interest on Capital
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

90,000 


To Anita's Current A/c 



50,000 

To Ankita's Current A/c 



40,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 




Working Notes :
Calculation of Interest on Capital
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.83
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

1,35,000 


To Ashish's Capital A/c 



65,000 

To Aakash's Capital A/c 



70,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 











Profit and Loss Appropriation A/c 
Dr. 

3,65,000 


To Ashish's Capital A/c 



2,19,000 

To Aakash's Capital A/c 



1,46,000 

(Being profit transferred to Partners Capital Account) 




Profit and Loss Appropriation Account year ended 31^{st} march 2018 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capitals: 


By Profit and Loss A/c 
5,00,000 
Ashish's A/c 
65,000 



Aakash's A/c 
70,000 
1,35,000 


To Profit transferred to : 




Ashish's Capital A/c 
2,19,000 



Aakash's Capital A/c 
1,46,000 
3,65,000 




5,00,000 

5,00,000 
Working Notes :
1.
Calculation of Opening Capital:
Particulars 
Ashish 
Aakash 
Capital at the end 
5,00,000 
6,00,000 
Add: Drawings 
1,50,000 
1,00,000 
Opening Capital 
6,50,000 
7,00,000 
2.
Calculation of Interest on Capital
Journal Entries 

Date 
Particulars 

L.F. 
Debit Rs. 
Credit Rs. 

Profit and Loss Appropriation A/c 
Dr. 

82,500 


To Naresh's Capital A/c 



42,500 

To Sukesh's Capital A/c 



40,000 

(Being interest on capital transferred to Profit and Loss Appropriation Account) 











Profit and Loss Appropriation A/c 
Dr. 

1,17,500 


To Naresh's Capital A/c 



58,750 

To Sukesh's Capital A/c 



58,750 

(Being profit transferred to Partners Capital Account) 




Working Notes :
1.
Calculation of Opening Capital:
Particulars 
Naresh 
Sukesh 
Capital at the end 
3,00,000 
3,00,000 
Add: Out of Capital Drawings 
50,000 
 
Add: Against Profit Drawings 
1,00,000 
1,00,000 
Opening Capital 
4,50,000 
4,00,000 
2.
Calculation of Interest on Capital:
Profit and Loss Appropriation Account year ended 31^{st} march 2014 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Interest on Capitals: 


By Profit and Loss A/c 
7,800 
Jay A/c 
4,800 



Vijay A/c 
3,000 
7,800 




7,800 

7,800 
Working Notes :
1.
Calculation of Interest on Capital
2.
Calculation of Proportionate Interest on Capital
Profit and Loss Appropriation Account 

Dr. 

Cr. 

Particulars 

Rs. 
Particulars 
Rs. 
To Salary A/c 


By Profit and Loss A/c 
4,80,000 
A 
1,20,000 



B 
1,20,000 
2,40,000 


To Profit transferred to : 




A's Capital A/c 
80,000 



B's Capital A/c 
80,000 



C's Capital A/c 
80,000 
2,40,000 




4,80,000 

4,80,000 
Net Profit for the year= Rs.1,10,000
Commission to A = 10% of on Net Profit
Net Profit before charging Commission = 2,20,000
Commission to Z = 10% of on Net Profit after charging such commission
Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr 

Cr. 

Particulars 

Amount Rs. 
Particulars 
Amount Rs. 

To Partner's Commission 


By Profit and Loss A/c 
1,80,000 


A's A/c 
6,000 

(Net Profit) 



B's A/c 
9,000 





C's A/c 
6,000 





D's A/c 
9,000 
30,000 



To Profit transferred to : 






A's Capital A/c 
60,000 





B's Capital A/c 
45,000 





C's Capital A/c 
30,000 





D's Capital A/c 
15,000 
1,50,000 





1,80,000 

1,80,000 







Working Notes :
1.
Calculation of Partner's Commission
Partners Commission = 20 % On Net Profit after charging such commission
This Commission is to be shared by the partners in the ratio of 2 : 3 : 2 : 3
2.
Calculation of Profit Share of each Partner
Profit available for Distribution = 1,80,000  30,000 = Rs.1,50,000
Profit sharing ratio = 4 : 3 : 2 : 1
T. S. Grewal Solution for Class 12 Commerce Accountancy Chapter 1  Accounting for Partnership FIRMS – Fundamentals Page/Excercise 1.84
Profit and Loss Appropriation Account for the year ended March 31,2018 

Dr. 

Cr. 

Particulars 

` 
Particulars 
` 

To Partner’s Salary A/c 


By Profit and Loss A/c 
4,20,000 


X (10,000 ´ 12) 
1,20,000 

(Net Profit) 


Y 
25,000 
1,45,000 


To Partner’s Commission 






X’s A/c 
27,500 




Y’s A/c 
22,500 
50,000 