T. S. Grewal Solutions for Class 12-commerce Accountancy CBSE Chapter 2: Accounting For Partnership FIRMS - Fundamentals

Accounting For Partnership FIRMS - Fundamentals Exercise 2.80

Solution Ex. 1

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

Solution Ex. 2

a. P is bound to pay Rs.20,000 along with profit of Rs.5,000 to the firm. This is beacuse 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 beacuse, 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 mis-represented 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.

Accounting For Partnership FIRMS - Fundamentals Exercise 2.81

Solution Ex. 3

	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.

Solution Ex. 4

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.

Solution Ex. 5

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

Solution Ex. 6

Profit and Loss Appropriation Account for the year ended March 31, 2019
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

Solution Ex. 7

Total amount advanced by the partners = Rs.30,000

Profit sharing ratio = 3 :2

Accounting For Partnership FIRMS - Fundamentals Exercise 2.82

Solution Ex. 8

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, 2019
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, 2019
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, 2019
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, 2019
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

Solution Ex. 9

Profit and Loss Appropriation Account for the year ended March 31, 2019
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

Solution Ex. 10

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

Solution Ex. 11

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

Solution Ex. 12

Profit and Loss Adjustment Account
Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Manager's Commission A/c (3,00,000 × 5%)	15,000	By Profit and Loss A/c (Net Profit after Y's salary)	2,40,000
To Profit transferred to Profit and Loss Appropriation A/c:	2,85,000	By Y's salary A/c	60,000
	3,00,000		3,00,000

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Rs.	Particulars	Rs.
To Salary to Y's A/c		60,000	By Profit and Loss Adjustment A/c (After manager's commission)	2,85,000
To Interest on Capital A/c
----X	40,000
----Y	30,000	70,000
To Profit transferred to :
----X's Capital A/c	93,000
----Y's Capital A/c	62,000	1,55,000
		2,85,000		2,85,000

Working Notes :

1.

Calculation of Manager's Commission

Profit to calculate Managers' Commission = 2,40,000 + 60,000 (Y's Salary) = Rs.3,00,000

2.

Calculation of Interest on Capital

3.

Calculation of Profit Share of each Partner

Profit available for distribution = 2,85,000 - 60,000 - 70,000 = Rs.1,55,000

Solution Ex. 13

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

Accounting For Partnership FIRMS - Fundamentals Exercise 2.83

Solution Ex. 14

Profit and Loss Appropriation Account for the year ended 31^st March 2019
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.

Solution Ex. 15

Profit and Loss Appropriation Account for the year ended 31^st March 2019
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

Solution Ex. 16

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 :

Solution Ex. 17

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 2019
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:

Solution Ex. 18

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 2019
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

Solution Ex. 19

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

Accounting For Partnership FIRMS - Fundamentals Exercise 2.84

Solution Ex. 20

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 2019
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

Solution Ex. 21

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:

Solution Ex. 22

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

Solution Ex. 23

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Rs.	Particulars	Rs.
To Salary A/c			By Profit and Loss A/c	4,80,000
----Amar	1,20,000
----Bhanu	1,20,000	2,40,000
To Profit transferred to :
----Amar's Capital A/c	80,000
----Bhanu's Capital A/c	80,000
----Charu's Capital A/c	80,000	2,40,000
		4,80,000		4,80,000

Solution Ex.24

Net Profit for the year= Rs.1,10,000

Commission to A = 10% of on Net Profit

Solution Ex. 25

Net Profit before charging Commission = 2,20,000

Commission to Z = 10% of on Net Profit after charging such commission

Solution Ex. 26

Profit and Loss Appropriation Account for the year ended March 31, 2019
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

Accounting For Partnership FIRMS - Fundamentals Exercise 2.85

Solution Ex. 27

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr.					Cr.
Particulars			Rs.	Particulars	Rs.
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
To Profit transferred to :
	X's Capital A/c	1,12,500
	Y's Capital A/c	1,12,500	2,25,000
			4,20,000		4,20,000

Working Notes :

1.

Calculation of Commission

Commission to X = 10% of Net Profit after partner's salaries but before charging such commission Profit after Partner's Salaries = Rs.4,20,000 - Rs.1,45,000 = Rs.2,75,000

Commission to Y = 10% of Net Profit after charging Commission and Partner's Salaries

Profit after commission and partner's salaries = Rs.4,20,000 - Rs.1,45,000 - Rs.27,500 = Rs.2,47,500

2.

Calculation of Profit Share of each Partner

Profit available for distribution = Rs.4,20,000 - Rs.1,45,000 - Rs.50,000 = Rs.2,25,000

Profit sharing ratio = 1 : 1

Solution Ex. 28

Date of drawings made by the partners is not given. Therefore, interest on drawings is calculated on average basis for a period of six months.

Solution Ex. 29

Drawings are made evenly at the middle of every month, therefore, interest on drawings is calculated for a period of six months.

Solution Ex. 30

Solution Ex. 31

Solution Ex. 32

Solution Ex. 33

Total Drawings = 7,500 × 4 = Rs.30,000

Interest Rate = 10% p.a.

Case (a)

If equal amount is withdrawn in the beginning of each quarter:

Interest on drawings would be calculated for an average period of 7.5 months

Case (b)

If equal amount is withdrawn at the end of each quarter:

Interest on drawings would be calculated for an average period of 4.5 months

Case (c)

If equal amount is withdrawn in the middle of each quarter:

Interest on drawings would be calculated for an average period of 6 months

Solution Ex. 34

Interest on Kanika's Drawings = Rs.1,500

Interest on Gautam's Drawings = Rs.2,250

Working Notes :

1.

Calculation of Interest on Kanika's Drawings

By Product Method
Date	Rs. (I)	Months (II)	Product (I × II)
Apr. 01	10,000	12	1,20,000
June 01	9,000	10	90,000
Nov. 01	14,000	5	70,000
Dec. 01	5,000	4	20,000
Sum of Product			3,00,000

2.

Calculation of Interest on Gautam's Drawings

Gautam withdrew Rs. 15,000 in the beginning of every quarter.

Accounting For Partnership FIRMS - Fundamentals Exercise 2.86

Solution Ex. 35

Calculation of Interest on A's Capital

Date	Capital	×	Period	=	Product
April 01, 2018 to June 30, 2018	50,000	×	3	=	1,50,000
July 01, 2018 to March 31, 2019	60,000	×	9	=	5,40,000
Sum of Product					6,90,000

Calculation of Interest on B's Capital

Date	Capital	×	Period	=	Product
April 01, 2018 to June 30, 2018	40,000	×	3	=	1,20,000
July 01, 2018 to March 31, 2019	41,000	×	9	=	3,69,000
Sum of Product					4,89,000

Solution Ex. 36

Interest on capital is calculated on the opening balance of partner's capital.

Calculation of Capital balance at the beginning

Particulars	Ram	Mohan
Capital at the end	24,000	18,000
Less : Profit already credited	(8,000)	(8,000)
(1 : 1)
Add : Drawings already debited	4,000	6,000
Capital at the beginning	20,000	16,000

Solution Ex. 37

Calculation of Interest on Capital

Note: In this question, as the balances of both Partner's Capital Account and of Partner's Current Account are mentioned, so it has been assumed that the capital of the partners is fixed.

As we know, when the capital of the partners is fixed, drawings and interest on capital does not affect the capital balances of the partners. Rather, it would affect their current account balances. Therefore, in this case, capital at the beginning (i.e. opening capital) and capital at the end (i.e. closing capital) of the year would remain same.

Thus, the interest on capital is calculated on fixed capital balances (given in the Balance Sheet of the question).

Solution Ex. 38

Calculation of Capital at the beginning (as on April 01, 2018)
Particulars		Long Rs.	Short Rs.
Capital at the end		1,20,000	1,40,000
	Less : Adjusted Profit (1,50,000 - 1,00,000) in 1 : 1 ratio	(25,000)	(25,000)
	Add : Adjusted Drawings	40,000	50,000
Capital in the beginning		1,35,000	1,65,000

Solution Ex. 39

Calculation of Interest on Capital

Case (a)

Where there is no clean agreement except for interest on capitals

Profit for the year ended = Rs.1,500

Total amount of interest = Rs.1,800

Here, Interest on capital > the profits available for distribution. Therefore, profit of Rs. 1,500 is distributed between X and Y in the ratio of their interest on capital.

Particulars	X	:	Y
Interest on Capital or	1,200	:	600
Ratio of interest on Capital	2	:	1

Case (b)

In case, there is an agreement that the interest on capital as a charge., then the whole amount of interest on capital is to be allowed to the partners.

Total Profit of the firm = Rs.1,500

Total amount of Interest on Capital = Rs.1,800 (i.e. Rs.1,200 + Rs.600). Therefore, loss to the firm amounts to Rs. 300. This loss is to be shared by Moli and Bholi in their profit sharing ratio that is 2:3.

Solution Ex. 40

Calculation of Interest on Amit's Capital

Date	Capital	×	Period	=	Product
April 01, 2018 to Sept 30, 2018	15,00,000	×	6	=	90,00,000
Oct. 01, 2018 to March 31, 2019	12,00,000	×	6	=	72,00,000
Sum of Product					1,62,00,000

Calculation of Interest on Bramit's Capital

Date	Capital	×	Period	=	Product
April 01, 2018 to Sept 30, 2018	9,00,000	×	6	=	54,00,000
Oct. 01, 2018 to March 31, 2019	12,00,000	×	6	=	72,00,000
Sum of Product					1,26,00,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.87

Solution Ex. 41

Case A: Interest on Capital, (If Capitals are Fixed):

Case B: Interest on Capital, (If Capitals are Fluctuating):

Working Notes:

WN 1: Calculation of Opening Capital (When Capitals were Fixed)

Particulars	Simrat	Bir
Capital at the end	4,80,000	6,00,000
Add: Drawings (out of capital)	2,40,000	60,000
Less: Fresh Capital introduced	(1,20,000)	(3,00,000)
Opening Capital	6,00,000	3,60,000

WN 2: Calculation of Opening Capital (When Capitals are Fluctuating)

Particulars	Simrat	Bir
Capital at the end	4,80,000	6,00,000
Add: Drawings (out of capital)	2,40,000	60,000
Add: Drawings (out of profits)	1,20,000	60,000
Less: Fresh Capital introduced	(1,20,000)	(3,00,000)
Less: Profit already credited	(1,44,000)	(96,000)
Opening Capital	5,76,000	3,24,000

Solution Ex. 42

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr					Cr
Particulars			Rs.	Particulars	Rs.

To Interest on Capital A/c				By Profit and Loss A/c	80,000
	C	6,000		----(Net Profit)
	D	3,600	9,600
To Salary to D A/c (3,000 × 12)			36,000
To Profit transferred to :
	C's Capital A/c	17,200
	D's Capital A/c	17,200	34,400
			80,000		80,000

Working note

1.

Calculation of Interest on Capital

2.

Calculation of Profit Share of each Partner

Profit available for distribution =Rs.80,000 - Rs.9,600 -Rs.36,000 = Rs.34,400

Total amount received by C = Interest on Capital + Profit Share =Rs.6,000 + Rs.17,200 =Rs.23,200

Total amount received by D= Interest on Capital + Salary + Profit Share

= Rs.3,600 + Rs.36,000 + Rs.17,200

= Rs.56,800

Solution Ex. 43

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars		Rs.	Particulars		Rs.
To Interest on Capital A/c			By Profit and Loss A/c (Net Profit)		2,16,000
----Amit	20,000		By Interest on Drawings A/c
----Vijay	15,000	35,000	----Amit	2,200
Salary A/c to :			----Vijay	2,500	4,700
----Amit (2,000 × 12)	24,000
----Vijay (3,000 × 12)	36,000	60,000
To Profit transferred to :
----Amit's Capital A/c	75,420
----Vijay's Capital A/c	50,280	1,25,700
		2,20,700			2,20,700

Working Notes :

1.

Calculation of Interest on Capital

2.

Calculation of Profit Share of each Partner

Divisible Profit = 2,16,000 + 4,700 - 35,000 - 60,000 = Rs.1,25,700

Solution Ex. 44

Partner's Capital Account
Dr					Cr
Particulars	Sohan Rs.	Mohan Rs.	Particulars	Sohan Rs.	Mohan Rs.
To Drawings A/c	50,000	30,000	By Balance c/d	4,00,000	3,00,000
To Interest on Drawings A/c	1,250	750	By Interest on Capital A/c	20,000	15,000
To Balance c/d	4,69,750	3,37,250	By P and L Appropriation A/c	60,000	50,000
			By Partner's Salary A/c	36,000	-
			By Commission A/c	5,000	3,000
	5,21,000	3,68,000		5,21,000	3,68,000

Solution Ex. 45

Profit and Loss Account
Dr			Cr
Particulars	Rs.	Particulars	Rs.
To Interest on Kajal's loan @ 6% p.a.	1,800	By Profit b/d	70,260
To Profit transferred to P/L Appropriation A/c	68,460
	70,260		70,260

Profit and Loss Appropriation Account
Dr							Cr
Particulars			Rs.	Particulars			Rs.
To Interest on Capital A/c				By Profit and Loss A/c			68,460
	Sajal	2,500		By Interest on Drawings A/c
	Kajal	2,000	4,500		Sajal	300
To Reserve A/c			6,450		Kajal	240	540
To Profit transferred to :
	Sajal's Capital; A/c	38,700
	Kajal's Capital A/c	19,350	58,050
			69,000				69,000

Partner's Capital Account
Dr					Cr
Particulars	Sajal Rs.	Kajal Rs.	Particulars	Sajal Rs.	Kajal Rs.
To Drawings A/c	10,000	8,000	By Balance b/d	50,000	40,000
To Interest on Drawings A/c	300	240	By Interest on Capital A/c	2,500	2,000
			By P and L Appropriation A/c	38,700	19,350
To Balance c/d	80,900	53,110
	91,200	61,350		91,200	61,350

Working Note :

1.

Calculation of Interest on Capital

2.

Calculation of Interest on Drawings

3.

Calculation of Amount to be transferred to Reserve

Amount for Reserve = 10% of Divisible Profit

Divisible Profit = Profit + Interest on Drawings - Interest on Capital

=Rs. 68,460 + Rs.540 - Rs.4,500

= Rs.64,500

4.

Calculation of Profit Share of each Partner

Profit available for Distribution

= 68,460 + 540 - 4,500 - 6,450

= Rs.58,050

Profit sharing ratio = 2:1

Accounting For Partnership FIRMS - Fundamentals Exercise 2.88

Solution Ex. 46

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c				By Profit and Loss A/c	50,000
	A	3,000		--- (Net Profit)
	B	1,800	4,800
To B's Salary A/c(500 × 12)			6,000
To Partner's Commission A/c
	A	6,000
	B	1,581	7,581
To Profit transferred to :
	A's Capital A/c	23,714
	B's Capital A/c	7,905	31,619
			50,000		50,000

Partner's Current Account
Dr			Cr
Particulars	A Rs.	B Rs.	Particulars	A Rs.	B Rs.
To Drawings A/c	8,000	6,000	By Balance b/d	50,000	30,000
To Balance c/d	74,714	41,286	By Interest on Capital A/c	3,000	1,800
			By Commission A/c	6,000	1,581
			By Salary A/c		6,000
			By P/L Appropriation A/c	23,714	7,905
	82,714	47,286		82,714	47,286

Working Notes :

1.

Calculation of Interest on Capital

2.

Calculation of Commission

Commission to B = 5% on Profits after all expenses (including Commission)

Profits after all expense

= Rs.50,000 - Rs.4,800 - Rs.6,000 - Rs.6,000

= Rs.33,200

3.

Calculation of Share of Profit of each Partner

Profit available for Distribution

= Rs.50,000 - Rs.4,800 - Rs.6,000 - Rs.7,581

= Rs.31,619

Profit sharing ratio = 3 :1

Solution Ex. 47

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Rs.	Particulars	Rs.
To Interest on Capital			By Profit and Loss A/c (Net Profit)	1,72,000
-----A	5,000
-----B	5,000
-----C	10,000	20,000
To Salary to C A/c		12,000
To Profit transferred to :
-----A's Capital A/c	50,000
-----B's Capital A/c	44,000
-----C's Capital A/c	46,000	1,40,000
		1,72,000		1,72,000

Journal Entries
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Interest on Capital A/c	Dr.		20,000
	-----To A's Current A/c				5,000
	-----To B's Current A/c				5,000
	-----To C's Current A/c				10,000
	(Being Interest on partner's capital allowed to partners)
	Salary A/c	Dr.		12,000
	-----To C's Current A/c				12,000
	(Being Salary Allowed to C)
	Profit and Loss Appropriation A/c	Dr.		1,40,000
	-----To A's Current A/c				50,000
	-----To B,s Current A/c				44,000
	----- To C's Current A/c				46,000
	(Being profit available for distribution transferred to partners' current account)

Working Notes :

1.

Calculation of Interest on Capital

2.

Calculation of share of Profit of each Partner

Profits available for Distribution = 1,72,000 - 20,000 - 12,000 = Rs. 1,40,000

i. Distribution of first Rs. 20,000 in the Capital ratio i.e. 1:1:2

ii. Distribution of Next Rs. 30,000 in the ratio of 5: 3: 2

iii. Remaining profit available for distribution = 1,40,000 - 20,000 - 30,000 = Rs.90,000

This profit of Rs.90,000 is to be shared equally by the partners.

Therefore,

Total Profit Share of A = 5,000 + 15,000 + 30,000 = Rs.50,000

Total Profit Share of B = 5,000 + 9,000 + 30,000 = Rs.44,000

Total Profit Share of C = 10,000 + 6,000 + 30,000 = Rs.46,000

Solution Ex. 48

Profit and Loss Account
Dr			Cr
Particulars	Rs.	Particulars	Rs.
To Manager's Commission A/c ----(5% of 15,000)	750	By Profit b/d (before B's Salary) ----(12,500 + 2,500)	15,000
To Profit transferred to Profit and Loss Appropriation A/c	14,250
	15,000		15,000

Profit and Loss Appropriation Account
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c				By Profit and Loss A/c	14,250
	A	3,000
	B	1,800	4,800
To B's Salary A/c			2,500
To Profit transferred to
	A's Capital A/c	4,170
	B's Capital A/c	2,780	6,950
			14,250		14,250

Partner's Capital Account
Dr					Cr
Particulars	A Rs.	B Rs.	Particulars	A Rs.	B Rs.
To Balance c/d	57,170	37,080	By Balance b/d	50,000	30,000
			By Interest on Capital A/c	3,000	1,800
			By Salary A/c		2,500
			By PandL Appropriation A/c	4,170	2,780
	57,170	37,080		57,170	37,080

Working Note :

1.

Calculation of Manager's Commission

Manager's Commission = 5% on Net Profit (before Salary)

Profit before Salary = Profit after Salary + Salary = Rs.12,500 + Rs.2,500 = Rs.15,000

2.

Calculation of Interest on Capital

3.

Calculation of share of profit of each Partner

Profit available for distribution = Rs.12,500 - Rs.750 - Rs.3,000 - Rs.1,800 = Rs.6,950

Profit sharing ratio = 3 : 2

Solution Ex. 49

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Interest on capital A/c			By Profit b/d	21,000
-----P	2,000		----(after Salary)
-----Q	1,500
-----R	1,500	5,000
To Profit transferred to
-----P's Capital A/c	7,000
-----Q's Capital A/c	5,000
-----R's Capital A/c	4,000	16,000
		21,000		21,000

Partner's Capital Account
Dr				Cr
Particulars	P	Q	R	Particulars	P	Q	R
To Drawings A/c	10,000	10,000	10,000	By Balance b/d	40,000	30,000	30,000
To Balance c/d	39,000	32,500	29,500	By Salaries A/c	-	6,000	4,000
				By Interest Capital A/c	2,000	1,500	1,500
				By P/L Appropriation A/c	7,000	5,000	4,000
	49,000	42,500	39,500		49,000	42,500	39,500

Working Notes :

1.

Calculation of Interest on Capital

2.

Calculation of share of profit of each Partner

Profit available for distribution = Rs.21,000 - Rs.5,000 =Rs. 16,000

i. Distribution of first Rs.10,000 (50% 30% and 20%)

ii. Distribution of Reaming Profits in equal ratio i.e. Rs.6,000 (Rs.16,000 - Rs.10,000)

Accordingly,

Total Profit Share of P = Rs.5,000 + Rs.2,000 = Rs.7,000

Total Profit Share of Q = Rs.3,000 + Rs.2,000 = Rs.5,000

Total Profit Share of R = Rs.2,000 + Rs.2,000 = Rs.4,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.89

Solution Ex. 50

Profit and Loss Appropriation Account
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on capital A/c				By Profit and Loss A/c	45,000
	A	2,500
	B	1,500
	C	1,000	5,000
To Salary A/c to:
	B	5,000
	C	5,000	10,000
To Profit transferred to:
	A's Current A/c	15,000
	B's Current A/c	9,000
	C's Current A/c	6,000	30,000
			45,000		45,000

Partner's Capital Account
Dr				Cr
Particulars	A Rs.	B Rs.	C Rs.	Particulars	A Rs.	B Rs.	C Rs.
				By Balance b/d	50,000	30,000	20,000
To Balance c/d	50,000	30,000	20,000
	50,000	30,000	20,000		50,000	30,000	20,000

Partner's Current Account
Dr				Cr
Particulars	A Rs.	B Rs.	C Rs.	Particulars	A Rs.	B Rs.	C Rs.
To Drawings A/c	10,000	7,500	6,000	By Balance b/d	4,500	1,500	1,000
To Balance c/d	12,000	9,500	7,000	By Interest on Capital A/c	2,500	1,500	1,000
				By Salaries A/c	-	5,000	5,000
				By P/L Appropriation A/c	15,000	9,000	6,000
	22,000	17,000	13,000		22,000	17,000	13,000

Working Notes

1.

Calculation of Interest on Capital

2.

Calculation of share of profit of each Partner

Profit available for Distribution = Rs.45,000 - Rs.15,000 = Rs.30,000

Solution Ex. 51

Partner's Capital Accounts
Dr					Cr
Particulars	Ali	Bahadur	Particulars	Ali	Bahadur
To Balance c/d	25,000	20,000	By Balance b/d	25,000	20,000

	25,000	20,000		25,000	20,000

Partner's Current Accounts
Dr					Cr
Particulars	Ali	Bahadur	Particulars	Ali	Bahadur
To Drawings A/c	3,500	2,500	By Interest on Capital A/c	1,250	1,000
To Balance c/d	19,642	10,883	By Bahadur's Salary A/c		3,000
			By P/L Appropriation A/c	21,892	9,383
	22,775	13,225		22,775	13,225

Working Notes

1.

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c				By Profit and Loss A/c	40,000
	Ali	1,250
	Bahadur	1,000	2,250
To Reserve A/c			3,475
To Bahadur's Salary A/c			3,000
To Profit transferred to
	Ali's Capital A/c	21,892
	Bahadur's Capital A/c	9,383	31,275
			40,000		40,000

2.

Calculation of Interest on Capital

3.

Calculation of Amount to be transferred to Reserve

4.

Calculation of share of profit of each partner

Profit available for distribution

=Rs. 40,000 - Rs.2,250 - Rs.3,475- Rs.3,000

= Rs.31,275

Solution Ex. 52

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c				By Profit and Loss A/c	33,360
	Amal	2,000		----(Net Profit)
	Bimal	1,500
	Kamal	1,250	4,750
To Salary to Amal A/c -----(250 ×12)			3,000
To Commission A/c (Bimal)			985
To General Reserve A/c			2,462
To Profit transferred to :
	Amal's Capital A/c	7,388
	Bimal's Capital A/c	7,388
	Kamal's Capital A/c	7,387	22,163
			33,360		33,360

Partner's Current Account
Dr				Cr
Particulars	Amal	Bimal	Kamal	Particulars	Amal	Bimal	Kamal
To Balance c/d	52,388	39,873	33,637	By Balance b/d	40,000	30,000	25,000
				By Interest on Capital A/c	2,000	1,500	1,250
				By Salary A/c	3,000	-	-
				By Commission	-	985	-
				By P/L Appropriation A/c	7,388	7,388	7,387
	52,388	39,873	33,637		52,388	39,873	33,637

Working Note :

1.

Calculation of Interest on Capital

2.

Calculation of Commission to Bimal

Commission to Bimal = 4% on Net Profits after Commission

Profit after expenses = Rs.33,360 - Rs.4,750 - Rs.3,000 = Rs.25,610

3.

Calculation of Amount to be transferred to General Reserve

Amount for General Reserve

= 10 % of Profit

4.

Calculation of share of profits to each partner

Profit available for Distribution

= Rs.33,360 - Rs.4,750 - Rs.3,000 - Rs.985 - Rs.2,462

= Rs.22,163

Solution Ex. 53

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c				By Profit and Loss A/c (Net Profit)	5,00,000
	Amit	5,000
	Binita	10,000
	Charu	15,000	30,000
To Salary to Amit A/c (10,000 ×12)			1,20,000
To Commission A/c (Binita)			23,810
To General Reserve A/c			50,000
To Profit transferred to :
	Amit's Capital A/c	92,063
	Binita's Capital A/c	92,063
	Charu's Capital A/c	92,064	2,76,190
			5,00,00		5,00,000

Partner's Capital Account
Dr				Cr
Particulars	Amit	Binita	Charu	Particulars	Amit	Binita	Charu
To Balance c/d	3,17,063	3,25,873	4,07,064	By Balance b/d	1,00,000	2,00,000	3,00,000
				By Interest on Capital A/c	5,000	10,000	15,000
				By Salary A/c	1,20,000
				By Commission		23,810
				By P/L Appropriation A/c	92,063	92,063	92,064
	3,17,063	3,25,873	4,07,064		3,17,063	3,25,873	4,07,064

Working Note :

1.

Calculation of Interest on Capital

2.

Calculation of Commission to Binita

3.

Calculation of Amount to be transferred to General Reserve

Amount for General Reserve 10 % of Profit

4.

Calculation of Share Profit of each Partner

Profit available for Distribution

= Rs.5,00,000 - Rs.30,000 - Rs.1,20,000 - Rs.23,810 - Rs.50,000

= Rs.2,76,190

Solution Ex. 54

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr.					Cr.
Particulars			Rs.	Particulars	Rs.
To Interest on Capital				By Profit and Loss A/c	5,00,000
	Anita	5,000		(Net Profit)
	Bimla	10,000
	Cherry	15,000	30,000
To Salary to Anita A/c (5,000 ×12)			60,000
To Commission A/c (Bimla)			23,810
To General Reserve A/c			38,619
To Profit transferred to :
	Anita's Capital A/c	1,15,857
	Bimla's Capital A/c	1,15,857
	Cherry's Capital A/c	1,15,857	3,47,571
			5,00,000		5,00,000

Partner's Capital Account
Dr				Cr
Particulars	Anita	Bimla	Cherry	Particulars	Anita	Bimla	Cherry
To Balance c/d	2,80,857	3,49,667	4,30,857	By Balance b/d	1,00,000	2,00,000	3,00,000
				By Interest on Capital A/c	5,000	10,000	15,000
				By Salary A/c	60,000
				By Commission A/c		23,810
				By P/L Appropriation A/c	1,15,857	1,15,857	1,15,857
	2,80,857	3,49,667	4,30,857		2,80,857	3,49,667	4,30,857

Working Note :

1.

Calculation of Interest on Capital

2.

Calculation of Commission to Bimla

Commission to Bimla = 5% on Net Profits after Commission

3.

Calculation of Amount to be transferred to General Reserve

Amount for General Reserve 10 % of Divisible Profit

Divisible Profit = Rs.5,00,000 - Rs.30,000 - Rs.23,810 - Rs.60,000

= Rs.3,86,190

4.

Calculation of Share of Profit of each Partner

Profit available for Distribution

= Rs.5,00,000 - Rs.30,000 - Rs.60,000 - Rs.23,810 - Rs.38,619

= Rs.3,47,571

Accounting For Partnership FIRMS - Fundamentals Exercise 2.90

Solution Ex. 55

Profit and Loss Appropriation Account for the year ended March 31, 2019
Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Interest on Anshul's Capital A/c	20,000	By Profit and Loss A/c	32,000
To Anshul's Salary A/c	12,000
	32,000		32,000

Working Note

Salary to Asha = Rs.24,000

Total appropriation to be made = Rs.40,000 + Rs.24,000 = Rs.64,000

Profit earned during the year = Rs.32,000

Here, profit available for distribution (i.e. Rs.32,000) is less than the sum of total of interest on Capital and Salary (i.e. Rs.64,000)

Therefore, profit will be distributed in the ratio of interest on Capital and Salary.

Ratio of Interest on Anshul's Capital to Asha' Salary is 40,000 : 24,000, i.e. 5 : 3.

Solution Ex. 56

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr.						Cr.
Particulars			Rs.	Particulars		Rs.
To Interest on Capital A/c				By Profit and Loss A/c		4,59,500
	X	24,000		(4,61,000 - 1,500)
	Y	18,000	42,000	By Interest on drawings
To X's Capital A/c (Commission)				-----X's A/c	5,000
(3,50,000×5%)			17,500	-----Y's A/c	6,250	11,250
To Salary A/c
-----X		60,000
-----Y		90,000	1,50,000
To Reserve A/c			50,000
To Profit transferred to :
	X's Capital A/c	1,18,125
	Y's Capital A/c	93,125	2,11,250
			4,70,750			4,70,750

Partner's Capital Account
Dr						Cr
Particulars	X	Y	Particulars	X	Y
To Drawings A/c	1,00,000	1,25,000	By Balance b/d	2,00,000	1,50,000
To Interest on drawings A/c	5,000	6,250	By Interest on Capital A/c	24,000	18,000
To Balance c/d	3,14,625	2,19,875	By Salary A/c	60,000	90,000
			By Commission A/c	17,500
			By P/L Appropriation A/c	1,18,125	93,125
	4,19,625	3,51,125		4,19,625	3,51,125

Working Note :

1.

Calculation of Reserve

Profit before charging Interest on Drawings but after making appropriations

= Rs.4,59,500 - Rs.42,000 - Rs.17,500 - Rs.60,000 - Rs.90,000

= Rs.2,50,000

2.

Division of Profits

Partners	Up to Rs.1,75,000	Rs.36,250 (Above Rs.1,75,000)	Total
X	1,00,000	18,125	1,18,125
Y	75,000	18,125	93,125

Solution Ex. 57

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
Nisha's Capital A/c	Dr.		55,000
-----To Reya's Capital A/c				55,000
(Being adjustment of profit made)

Working Note :

Total Profits for Last 3 years

= 1,40,000 + 84,000 + 1,06,000

= 3,30,000

Statement Showing Adjustment
Particulars	Reya Rs.	Mona Rs.	Nisha Rs.	Total Rs.
Right Distribution of Profit (3 :2 :1)	1,65,000	1,10,000	55,000	3,30,000
Less: Wrong Distribution of Profit (1:1:1)	(1,10,000)	(1,10,000)	(1,10,000)	(3,30,000)
Net Effect	55,000	NIL	(55,000)	NIL

Solution Ex. 58

Journal Adjustment entry
Particulars		L.F.	Debit Rs.	Credit Rs.
P's Current A/c	Dr.		6,000
-----To Q's Capital A/c				6,000
(Being adjustment of omission of interest on capital)

Working Note:

Statement Showing Adjustment
	P	Q	Total
LessNet Effect (Profit Sharing)	(6,000)	6,000	NIL

Accounting For Partnership FIRMS - Fundamentals Exercise 2.91

Solution Ex. 59

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Anu's Capital A/c	Dr.		1,000
	----To Pankaj's Capital A/c				1,000
	(Being adjustment of commission of Interest on Capital)

Working Note :
Statement Showing Adjustment
Particulars	Pankaj Rs.	Anu Rs.	Total Rs.
Interest on Capital to be credited	3,000	1,000	4,000
Less: Profit wrongly distributed	(2,000)	(2,000)	(4,000)
Net Effect	1,000 (Credit)	1,000 (Debit)	NIL

Solution Ex. 60

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Azad's Current A/c	Dr.		1,000
	----To Benny's Current A/c				1,000
	(Being adjustment of Profit made)

Working Note:

Statement Showing Adjustment
	Azad	Benny	Total
LessNet Effect (Profit Sharing)	(1,000)	(1,000)	NIL

Solution Ex. 61

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
Ram's Capital A/c	Dr.		300
-------- To Sohan's Capital A/c				300
(Being Interest on Capital was wrongly credited now adjusted)

3.
Statement Showing Adjustment
Particulars	Ram Rs.	Mohan Rs.	Sohan Rs.	Total Rs.
Reversal of Interest on Capital wrongly credited at 6% p.a.	(7,200)	(5,400)	(3,600)	(16,200)
Interest on Capital credited at 5% p.a.	6,000	4,500	3,000	13,500
Wrong Distribution	(1,200)	(900)	(600)	(2,700)
Less: Right Distribution of 2,700 (1:1:1)	900	900	900	2,700
Net Effect	(300)	NIL	300	NIL
Net Effect

Solution Ex. 62

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
Shyam's Current A/c	Dr		200
Mohan's Current A/c	Dr		400
-------- To Ram's Current A/c				600
(Being Interest on Capital adjusted)

3
Statement Showing Adjustment
Particulars	Ram Rs.	Mohan Rs.	Sohan Rs.	Total Rs.
Interest on Capital wrongly credited at 10% p.a.	30,000	10,000	20,000	60,000
Less: Reversal of Interest on Capital Wrongly credited at 9% p.a.	(27,000)	(9,000)	(18,000)	(54,000)
Right Distribution	3,000	1,000	2,000	6,000
Wrong distribution of 6,000 (2:1:2)	(2,400)	(1,200)	(2,400)	(6,000)
Net Effect	600	(200)	(400)	NIL
Net Effect

Solution Ex. 63

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
Usha's Capital A/c	Dr.		6,816
-------- To Mita's Capital A/c				6,816
(Being Interest on Capital adjusted)

3
Statement Showing Adjustment
Particulars	Mita `	Usha Rs.	Total Rs.
Interest on Capital wrongly credited at 6% p.a.	8,400	7,200	15,600
Interest on Drawing	(480)	(360)	(840)
Commission to Mita	8,000		8,000
Wrong distribution of (2:3)	9,104	13,656	22,760
Right distribution	(15,920)	(6,840)	(22760)
Net Effect	(6,816)	6,816	NIL
Net Effect

Solution Ex. 64

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Anil's Capital A/c	Dr.		550
	-------- To Mohan's Capital A/c				550
	(Being Interest on Capital and inters on drawings was omitted, now adjusted)

Working Notes
1 Calculation of Capital at the beginning
Particulars	Mohan Rs.	Vijay Rs.	Anil Rs.	Total Rs.
Capital at the end	30,000	25,000	20,000	75,000
-------Add : Drawings	5,000	4,000	3,000	12,000
-------Less : Profit (1:1:1)	(8,000)	(8,000)	(8,000)	(24,000)
Capital in the beginning	27,000	21,000	15,000	63,000

3
Statement Showing Adjustment
Particulars	Mohan Rs.	Vijay Rs.	Anil Rs.	Total Rs.
Interest on Capital to be credited	2,700	2,100	1,500	6,300
-----Less : Interest on Drawings	(250)	(200)	(150)	(600)
Right Distribution of Net Rs.5,700	2,450	1,900	1,350	5,700
Less: Wrong Distribution of Rs.5,700 (1:1:1)	(1,900)	(1,900)	(1,900)	(5,700)
Net Effect	550	NIL	(550)	NIL

4 Calculation of Final Share of Profits

Total Corrected Profit Available for Distribution

= Profit - Interest On Capital + Interest on Drawings

= Rs.24,000 - Rs.6,300 + Rs.600

= Rs.18,300

Solution Ex. 65

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bina's Capital A/c	Dr.		5,856
	-------- To Piya's Capital A/c				5,856
	(Being Interest on Capital adjusted)

Working Notes:

Adjusting Table
Particulars	Piya	Bina	Total
Interest on Capital to be credited @ 12% (Cr.)	1,920	(480)	1,440
Salary to A (Cr.)	12,000	-	12,000
Profit to be credited (Cr.)	63,936	42,624	1,06,560
Profit wrongly credited (Dr.)	(72,000)	(48,000)	(1,20,000)
Difference	5,856 (Cr.)	5,856 (Dr.)	Nil

Particulars		Piya	Bina
Capital at the end		80,000	40,000
	Less : Profit already credited	72,000	48,000
	Add : Drawings already debited	8,000	4,000
Capital at the beginning		16,000	(4,000)

Accounting For Partnership FIRMS - Fundamentals Exercise 2.92

Solution Ex. 66

Journal
Particulars		L.F.	Debit. Rs.	Credit Rs.
Harry's Capital A/c	Dr.		50,000
Porter's Current A/c	Dr.		50,000
-------- To Ali's Current A/c				1,00,000
(Being Internet On Capital wrongly credited now adjusted)

Working Notes :


	Harry	Porter	Ali	=	Total Rs.
Total profit of 3 years (old Ratio) (2:2:1)	(3,00,000)	(3,00,000)	(1,50,000)	=	(7,50,000)
Distribution of Profit (New Ratio) (1:1:1)	2,50,000	2,50,000	2,50,000		7,50,000
Adjusted Profit	(50,000)	(50,000)	1,00,000	=	NIL
Adjusted Profit	Dr.	Dr.	Cr.

Adjustment of Profit old Ratio:(2:2:1)

Adjustment of Profit	Harry	Porter	Ali
For 2015 - 2016	88,000	88,000	44,000
For 2016 - 2017	96,000	96,000	48,000
For 2017 - 2018	1,16,000	1,16,000	58,000
Net Effect	3,00,000	3,00,000	1,50,000

Solution Ex. 67

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
P's Current A/c	Dr.		300
-------- To Q's Capital A/c				8
-------- To R's Capital A/c				292
(Being interest on capital was omitted, now adjusted)

Working Notes :
1 Calculation of Capital at the beginning (as on April 01,2018)
Particulars	P Rs.	Q Rs.	R Rs.
Capital as in March 31,2017 (Closing)	40,000	30,000	20,000
Add : Drawings	10,000	7,500	4,500
Less : Profit 60,000 (3 :2 :1)	(30,000)	(20,000)	(10,000)
Capital as on April 01, 2018 (Opening)	20,000	17,500	14,500
Capital as on April 01, 2018 (Opening)

3
Statement Showing Adjustment
Particulars	P Rs.	Q Rs.	R Rs.	Total
Interest on Capital (to be credited)	1,000	875	725	2,600
For Sharing above Loss (3 :2 :1)	(1,300)	(867)	(433)	(2,600)

Net Effect	(300)	8	292	NIL
Net Effect

Solution Ex. 68

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
A's Current A/c	Dr		3,675
-------- To B's Current A/c				2,895
-------- To C's Current a/c				780
(Being Adjustment of profit made)

Working Notes :

1 Calculation of Interest on Capital

2 Salary to B = 500 × 12 = 6,000

3 Calculation of Commission to C

Commission to C = 5% on Profit after interest on capital but before salary

Profit after Interest on Capital but before Salary = Rs.30,000 - Rs.3,000 = Rs.27,000

4 Calculation of Share of Profit of each Partner

Profit available for Distribution = Rs.30,000 - Rs.3,000 - Rs.6,000 - Rs.1,350 = Rs.19,650

5
Statement Showing Adjustment
Particulars	A Rs.	B Rs.	C Rs.	Total
Interest on Capital (to be credited	1,500	1,00	500	3,000
Salary Commission (to be credited)	-	6,00	1,350	7,350
Profit (to be credited)	9,825	5,895	3,930	19,650
Right Distribution	11,325	12,895	5,780	30,000
Wrong Distribution of 30,000 (3 :2:1)	(15,000)	(10,000)	(5,000)	(30,000)
Net Effect	(3,675)	2,895	780	NIL
Net Effect

Solution Ex. 69

Adjusting entry
Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.

	LessLessAdjusted Profit	288	(288)	NIL

Solution Ex. 70

Table for Partners' Capital Adjustments:

Firm's		Particulars	Mudit's		Sudhir's		Uday's
Dr	Cr		Dr	Cr	Dr	Cr	Dr	Cr
	1,00,000	Profits Given	60,000		20,000		20,000
17,000		Interest on Capital		10,000		4,000		3,000
18,000		Salary		18,000
15,000		Commission		3,000				12,000
50,000		Profit to be credited		30,000		10,000		10,000
			60,000	61,000	20,000	14,000	20,000	25,000

Entry to be passed for rectification:

Journal

Date

Particulars

L.F.

Dr.

Cr.

Sudhir's Current A/c …Dr.

To Mudit's Current A/c

To Uday's Current A/c

(Being partners' account balances adjusted for interest on capital, salary to partners and commission, not recorded earlier)

6,000

1,000

5,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.93

Solution Ex. 71

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	A's Capital A/c	Dr.		2,520
	C's Capital A/c	Dr.		2,740
	-------- To B's Capital A/c				5,260
	(Being Adjustment of Profit Made)

Working Note

1 Calculation of Interest on Capital

2 Interest on drawing

For A - Rs.350

For B - Rs.250

For C - Rs.150

3 Salaries

To A - Rs.5,000, and

To B - Rs.7,500

4 Commission to A Rs.3,000

5 Calculation of Profit share of each partner

Profit available for distribution

= Rs.30,000 - Rs.7,200 + Rs.750 - Rs.12,500 - Rs.3,000

= Rs.8,050

6
Statement Showing Adjustment
Particulars	A Rs.	B Rs.	C Rs.	Total
Interest On Capital (to be credited)	3,000	2,400	1,800	7,200
Interest on Drawings (to Be debited	(350)	(250)	(150)	(750)
Salaries to A and B (to be credited)	5,000	7,500		12,500
Commission to A (to be credited)	3,000			3,000
Profits to be credited	4,830	1,610	1,610	8,050
Correct Distribution of Profits	15,480	11,260	3,260	30,000
Less: Wrong Distribution of Profits (3:1:1)	(18,000)	(6,000)	(6,000)	(30,000)
Net Effect	2,520 Debit	5260 Credit	2,740 Debit	-
Net Effect

Solution Ex. 72

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Saroj's Capital A/c	Dr.		2,350
	Mahinder's Capital A/c	Dr.		1,300
	-------- To Umar's Capital A/c				3,650
	(Being Profits wrongly distributed without providing interest on capital and drawings, now adjusted)

Working Note
1 Calculating of Opening Capital
Particulars	Saroj Rs.	Mahinder Rs.	Umar Rs.
Closing Capital	80,000	60,000	40,000
Add : Drawings	24,000	24,000	24,000
Less : Profits (80,000 in 4:3:1)	(40,000)	(30,000)	(10,000)
Opening Capital	64,000	54,000	66,000

3: Calculation of Share of Profits to be credited

Profit available for distribution among partners = Rs.80,000 - Rs.18,400 + Rs.2,000 = Rs.63,600

4: Statement showing adjustment
Statement Showing Adjustment
Particulars	Saroj Rs.	Mahinder Rs.	Umar Rs.	Total
Interest on Capital	6,400	5,400	6,600	18,400
Interest on Drawings	(550)	(550)	(900)	(2,000)
Profits to be distributed	31,800	23,850	7,950	63,600
Total (A)	37,650	28,700	13,650	80,000
Less : Profits wrongly distributed	(40,000)	(30,000)	(10,000)	(80,000)
Net Effect (A - B)	(2,350) Dr	(1,300) Dr	3,650 Cr	NIL

Solution Ex. 73

Journal
Particulars		L.F.	Debit Rs.	Credit Rs.
A's Capital A/c	Dr.		66,000
-------- To B's Capital A/c				30,000
-------- To C's Capital a/c				36,000
(Being Adjustment of profit made)

Working Note :
1: Calculation of Opening Capital
Particulars	A Rs.	B Rs.	C Rs.
1. Closing Capital	90,000	3,30,000	6,60,000
2. Add : Drawings	3,60,000	3,60,000	3,60,000
	4,50,000	6,90,000	10,20,000
3. Less: Profit already credited (4:1:1)	(1,20,000)	(30,000)	(30,000)
4. Opening Capital with interest on capital	3,30,000	6,60,000	9,90,000
Less: Interest on Capital (4. × 10/110)	(30,000)	(60,000)	(90,000)
Opening Capital	3,00,000	6,00,000	9,00,000

3 : Statement showing adjustment
Particulars	A Rs.	B Rs.	C Rs.	Total Rs.
Interest on Capital 10%	30,000	60,000	90,000	1,80,000
Profits to be distributed	1,20,000	30,000	30,000	1,80,000
Less: Interest on Capital 12%	(36,000)	(72,000)	(1,08,000)	(2,16,000)
Less: Share profit ratio(1:1:1)	(48,000)	(48,000)	(48,000)	(1,44,000)
Net Effect	66,000 Dr.	30,000 Cr.	36,000 Cr.	NIL

Solution Ex. 74

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Pand:L Adjustment A/c	Dr.		29,200
	-------- To A's Capital A/c				16,400
	-------- To B's Capital A/c				12,800
	(Being Interest on capital omitted, now provided)

	A's Capital A/c	Dr.		900
	B's Capital A/c	Dr.		450
	-------- To Pand L Adjustment A/c				1,350
	(Being Interest on drawings omitted, now charged)

	A's Capital A/c	Dr.		16,710
	B's Capital A/c	Dr.		11,140
	-------- To PandL Adjustment A/c (29,200 - 1,350)				27,850
	(Being Loss on adjustment is distributed between the partner)

Partner's Current Account
Dr			Cr
Particulars	A Rs.	B Rs.	Particulars	A Rs.	B Rs.
To B's Capital A/c	1,210		By Balance b/d	4,00,000	3,00,000
To Balance c/d	3,98,790	3,01,210	By A's Capital A/c	-	1,210
	4,00,000	3,01,210		4,00,000	3,01,210

Working Notes :
1 Calculation of Capital as on April 01,2016 (Opening Capital)
Particulars	A Rs.	B Rs.	Total Rs.
Capital as on March 31,2017 (Closing)	4,00,000	3,00,000	7,00,000
------Add : Drawings	48,000	36,000	84,000
------Less : Profit	(1,20,000)	(80,000)	(2,00,000)
Capital as on April 01,2016 (Opening)	3,28,000	2,56,000	5,84,000

In Case only Adjustment Entry is to be passed
Journal
Date	Particulars	L.F.	Debit Rs.	Credit Rs.
	A's Capital A/c		1,210
	--------To B's Capital A/c			1,210
	(Being amount of interest on Capital and interest on drawings adjusted)

Working Notes :
Statement Showing Adjustment
Particulars	A Rs.	B Rs.	Total Rs.
Interest on Capital (to be credited)	16,400	12,800	29,200
----Less : Interest on Drawings	(900)	(450)	(1,350)
Right distribution of 27,850	15,500	12,350	27,850
----Less : Wrong Distribution of 27,850 (3:2)	(16,710)	(11,140)	(27,850)
Net Effect	(1,210)	1,210	NIL

Accounting For Partnership FIRMS - Fundamentals Exercise 2.94

Solution Ex. 75

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Z's Loan A/c	Dr.		2,00,000
	-------- To Z's Capital A/c				2,00,000
	(Being Z's Loan transferred to his Capital Account)

	X's Capital A/c	Dr.		3,600
	Y's Capita; A/c	Dr.		2,400
	------- To Z's Capital A/c				6,000
	(Being Z's excess credit balance paid to him by X and Y in the ratio of 3 : 2)

Working Notes :
1 Profit before Z's Salary and Interest on Loan
Year	Profit/Loss	+	Salary	+	Interest on Z's loan	=	Profit before Z's Salary and Interest on Loan
2012 - 2013	5,90,000	+	90,000	+	18,000	=	6,98,000
2013 - 2014	6,26,000	+	90,000	+	18,000	=	7,34,000
2014 - 2015	(40,000)	+	90,000	+	18,000	=	68,000
2015 - 2016	7,80,000	+	90,000	+	18,000	=	8,88,000
Profit before Interest on Z's Capital (for 4 years)

3 Calculation of Z's Share of Profit as a Partner

Profit after Interest on Z's Capital = Profit before Interest on Z's Capital - Interest on Z's Capital = Rs.23,88,000 - Rs.48,000 = Rs.23,40,000

Z's Profit Share as a Partner for 4 years

∴ Z's Share of Interest on Capital and Profit Share as a Partner = Rs.48,000 + Rs.3,90,000 = Rs.4,38,000

Z's Salary and Interest on Loan as Manager = Rs.72,000 + Rs.3,60,000 = Rs.4,32,000

Adjusting Table
Z's Share as a Partner	4,38,000
Less : Z's Share as a Manager	(4,32,000)
Z will get from X and Y in their profit sharing ratio	6,000

Solution Ex. 76

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr.				Cr.
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	6,44,000
----A's Capital A/c	3,35,200
----B's Capital A/c	1,80,000
----C's Capital A/c	1,28,800	6,44,000
		6,44,000		6,44,000

Working Notes:

1.

Calculation of Remuneration to C as a Manager

Salary to C Rs.50,000

Commission to C 10% salary and Commission After Net Profit

= Rs.6,44,000 - Rs.50,000 = Rs.5,94,000

Remuneration to C as a Manager = Salary + Commission = 50,000 + 54,000 = Rs.1,04,000

2.

Calculation of Profit Share of C as a Partner

Total Profit = Rs.6,44,000

Part of C's share to be borne by A = 1,28,000 - 1,04,000= 24,800

Profits available for distribution = 6,44,000 - 1,04,000=5,40,000

Profit Share of A = 5,40,000 ×2/3 = 3,60,000

Profit Share of B = 5,40,000 ×1/3 = 1,80,000

Final Share of A after adjusting C's Deficiency = 3,60,000 - 24,800 = 3,35,200.

Solution Ex. 77

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	31,500
----A's Capital A/c	16,000		(Net Profit)
----B's Capital A/c	8,000
----C's Capital A/c	7,500	31,500
		31,500		31,500

Working Notes :

Profit for the year = Rs.31,500

Profit sharing ratio = 4:2:1

Minimum profits guaranteed to C Rs.7,500

- Rs.- Rs.7,500

Solution Ex. 78

Profit and Loss Appropriation Account
Dr				Cr
Particulars		Amount Rs.	Particulars	Amount Rs.
To Profit transferred to :			By Profit and Loss A/c	54,000
----A's A/c	26,400		---- (Net Profit)
----B's A/c	17,600
----C's A/c	10,000	54,000
		54,000		54,000

Solution Ex. 79


Profit and Loss Appropriation Account as on 31^st March 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Interest on Capital A/c			By Net Profit b/d	1,60,000
----X	15,000
----Y	10,000
----Z	7,500	32,500

To Profit transferred to :
----X's A/c (51,000 - 1,750)	49,250
----Y's A/c (38,250)	38,250
----Z's A/c (38,250 + 1,750)	40,000	1,27,500
		1,60,000		1,60,000

Note: Z is admitted on 1^st October, 2018 and Profit is ascertained on March 31, 2019. Therefore, interest on Capital is to be calculated for 6 months and guaranteed amount is considered as Rs.40,000, i.e. half of the total amount.

Solution Ex. 80

Profit and Loss Appropriation Account For the year ended 2018
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	40,000
----A's Capital A/c	16,000		---- (Net Profit)
----B's Capital A/c	14,000
----C's Capital A/c	10,000	40,000
		40,000		40,000

Profit and Loss Appropriation Account For the year ended 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	60,000
----A's Capital A/c	24,000		---- (Net Profit)
----B's Capital A/c	24,000
----C's Capital A/c	12,000	60,000
		60,000		60,000

Working Notes :

1.

Distribution of Profit for the year 2018

Profit for 2018 = Rs.40,000

Profit sharing ratio = 2 : 2 :1

C is a given a guarantee of minimum profit of Rs.10,000

Deficiency in C's Profit Share = Rs.10,000 - Rs.8,000 = Rs.2,000

This deficiency is to be borne by B

Therefore

Final Profit Share of A =Rs. 16,000

Final Profit Share of B = Rs.16,000 - Rs.2,000 = Rs.14,000

Final Profit Share of C = Rs.8,000 + Rs.2,000 = Rs.10,000

2.

Distribution of Profit for the year 2019

Profit for 2019

Profit sharing ratio = 2:2 : 1

C is given a guarantee of minimum profit of Rs.10,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.95

Solution Ex. 81

Profit and Loss Appropriation Account For the year ended March 31, 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	40,000
----A's Capital A/c	19,500		---- (Net Profit)
----B's Capital A/c	15,500
----C's Capital A/c	5,000	40,000
		40,000		40,000

Solution Ex. 82

Profit and Loss Appropriation Account for the year ended 31^st March 19
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	9,00,000
----Vikas's Capital A/c	4,50,000
----Vivek's Capital A/c	3,00,000
----Vandana's Capital A/c	1,50,000	9,00,000
		9,00,000		9,00,000

Working Notes:

1.

Remaining Profit = Rs.9,00,000 - Rs.1,12,500 = Rs.7,87,500

Minimum Guaranteed Profit Vandana = Rs.1,50,000

Deficiency = 37,500 (1,50,000 - 1,12,500)

Deficiency to borne by Vikas and Vivek in the ratio =2:3

Profit of Vikas after adjusting after deficiency = Rs.4,72,500 - Rs.22,500 = Rs.4,50,000

Profit on Vivek after adjusting after deficiency = Rs.3,15,000 - Rs.15,000 = Rs.3,00,000

Solution Ex. 83

Profit and Loss Appropriation Account for the year ended March 31, 2013
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	90,000
----Pranshu's Capital A/c	30,000		---- (Net Profit)
----Himanshu's Capital A/c	30,000
----Anshu's Capital A/c	30,000	90,000
		90,000		90,000

Solution Ex. 84

Case (a)
Profit and Loss Appropriation Account
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Net Profit b/d	30,000
----A's Capital A/c	14,400
----B's Capital A/c	9,600
----C's Capital A/c	6,000	30,000
		30,000		30,000

Case (b)
Profit and Loss Appropriation Account
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	30,000
----A's Capital A/c	14,000
----B's Capital A/c	10,000
----C's Capital A/c	6,000	30,000
		30,000		30,000

Working Notes :

Deficiency in C's Profit Share = Rs.6,000 - Rs.5,000 = Rs.1,000

This deficiency is to be borne by A only

Therefore,

Final Profit Share of A = Rs.15,000 - Rs.1,000 = Rs.14,000

Final Profit Share of B = Rs.10,000

Final Profit Share of C = Rs.5,000 + Rs.1,000 = Rs.6,000

Case (c)
Profit and Loss Appropriation Account
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	30,000
----A's Capital A/c	15,000
----B's Capital A/c	9,000
----C's Capital A/c	6,000	30,000
		30,000		30,000

Working Notes :

Deficiency in C's Profit Share = Rs.6,000 - Rs.5,000 = Rs.1,000

This deficiency is to be borne by B only

Therefore,

Final Profit Share of A = Rs.15,000

Final Profit Share of B = Rs.10,000 - Rs.1,000 = Rs.9,000

Final Profit Share of C = Rs.5,000 + Rs.1,000 = Rs.6,000

Case (d)
Profit and Loss Appropriation Account
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	30,000
----A's Capital A/c	14,250
----B's Capital A/c	9,750
----C's Capital A/c	6,000	30,000
		30,000		30,000

Solution Ex. 85

Profit and Loss Appropriation Account for the year and March 31, 2019
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	2,25,000
----A's Capital A/c	96,750
----B's Capital A/c	72,000
----C's Capital A/c	56,250	2,25,000
		2,25,000		2,25,000

Working Notes

1.

Calculation of Remuneration to C as a Manager

Salary to C = Rs.27,000

Commission to C = 10% of Net Profit after Salary and Commission

Net Profit after Salary and Commission

= Rs.2,25,000 - Rs.27,000

= Rs.1,98,000

C's remuneration as Manager

= Salary + Commission

= Rs.27,000 + Rs.18,000

= Rs.45,000

2.

Calculation of Profit Share of C as a Partner

Profit = Rs.2,25,000

Part of C's Profit Share to be borne by A = Rs.56,250 - Rs.45,000 =Rs. 11,250

Profit available for distribution between A and B = Rs.2,25,000 - Rs.45,000 = Rs.1,80,000

A's Profit Share after adjusting C's deficiency = Rs.1,08,000 - Rs.11,250 = Rs.96,750

Solution Ex. 86

Profit and Loss Appropriation Account for the year ended March 31, 2018
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital A/c :				By Profit and Loss A/c	4,24,000
	Asgar	48,000		---- (Net Profit)
	Chaman	40,000
	Dholu	32,000	1,20,000

To Salary to Chaman A/c ---- (7,000 × 12)			84,000
To Salary to Dholu A/c ---- (10,000 × 4)			40,000

To Profit transferred to :
	Asgar Capital A/c	70,000
	Chaman Capital A/c	40,000
	Dholu Capital A/c	70,000	1,80,000
			4,24,000		4,24,000

Working Notes :

Profit available for distribution

= Rs.4,24,000 - (Rs.1,20,000 + Rs.84,000 + Rs.40,000)

= Rs.1,80,000

Profit sharing ratio = 4:2:3

Dholu's Minimum Guaranteed Profit = Rs.1,10,000 (excluding interest on capital but including salary)

Dholu's Minimum Guaranteed Profit (excluding salary) = Rs.1,10,000 - Rs.40,000 = Rs.70,000

But, Dholu's Actual Profit Share = Rs.60,000

Deficiency in Dholu's Profit Share = Rs.70,000 - Rs.60,000 = Rs.10,000

This deficiency is to be borne only by Asgar

Therefore, Asgar New Profit Share

= Rs.80,000 - Rs.10,000

= Rs.70,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.96

Solution Ex. 87

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
2015 - 16	P's Capital A/c	Dr.		3,600
	Q's Capital A/c	Dr.		2,400
	-------- To R's Capital A/c				6,000
	(Being deficiency adjust)

2017 - 18	P's Capital A/c	Dr.		32,400
	Q's Capital A/c	Dr.		21,600
	-------- To R's Capital A/c				54,000
	(Being deficiency adjust)

Working Notes:

Calculation of amount of deficiency of R's

Deficiency in R's Profit = 30,000 + 24,000 = 54,000

Deficiency to borne by P and Q in the ratio =12:8

Solution Ex. 88

Profit and Loss Appropriation Account for the year ended March 31, 2018
Dr					Cr
Particulars			Rs.	Particulars	Rs.
To Interest on Capital to :				By Profit and Loss A/c (Net Profit)	9,50,000
	Ankur	84,000
	Bhavna	36,000
	Disha	24,000	1,44,000

To Salary to Bhavna			50,000
To Commission to Disha (3,000 × 12)			36,000

To Profit transferred to :
	Ankur	4,14,000
	Bhavna	1,80,000
	Disha	1,26,000	7,20,000
			9,50,000		9,50,000

Working Notes :

Profit available for distribution

= Rs.9,50,000 - (Rs.1,44,000 + Rs.50,000 + Rs.36,000)

= Rs.7,20,000

Profit sharing ratio = 7 : 3 :2

Bhavna's Minimum Guaranteed Profit = Rs.1,70,000 (excluding interest on capital)

But, Bhavna's Actual Profit Share = Rs.1,80,000

Disha's Minimum Guaranteed Profit = Rs.1,50,000 (including interest on capital but excluding salary)

Disha's Minimum Guaranteed Profit (excluding interest) = Rs.1,50,000 - Rs.24,000 = Rs.1,26,000

But, Disha's Actual Profit Share = Rs.1,20,000

Deficiency in Disha's Profit Share = Rs.1,26,000 - Rs.1,20,000 = Rs.6,000

This deficiency is to be borne by Ankur alone

Therefore,

Ankur's New Profit Share = Rs.4,20,000 - Rs.6,000 = Rs.4,14,000

Solution Ex. 89

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Ankur's Capital A/c	Dr.		4,80,000
	Bobby's Capital A/c	Dr.		3,20,000
	Rohit's Capital A/c	Dr.		2,00,000
	-------- To Profit and Loss A/c				10,00,000
	(Being Loss debited to Partner's Capital Accounts)

	Ankur's Capital A/c	Dr.		3,20,000
	Bobby's Capital A/c	Dr.		80,000
	-------- To Rohit's Capital A/c				4,00,000
	(Being Deficiency borne by Ankur and Bobby in ratio of 4:1)

Solution Ex. 90

Journal
Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Ajay's Capital A/c	Dr.		6,400
	Binay's Capital A/c	Dr.		2,000
	-------- To Chetan's Capital A/c				8,400
	(Being adjustment entry)

53,600

58,000

38,400

1,50,000

(6,400)

(2,000)

8,400

Nil

Solution Ex. 91

Table for Partners' Capital Adjustments:

Firm's		Particulars	Alia's		Bhanu's		Chand's
Dr	Cr		Dr	Cr	Dr	Cr	Dr	Cr
	80,000	Profits Given	30,000		30,000		20,000
36,000		Salary		18,000				18,000
4,000		Commission				4,000
40,000		Profit to be credited		35,000		5,000
			30,000	53,000	30,000	9,000	20,000	18,000

Entry to be passed for rectification:

Journal

Date

Particulars

L.F.

Dr.

Cr.

Bhanu's Capital A/c …Dr.

Chand's Capital A/c …Dr.

To Alia's Capital A/c

(Being partners' account balances adjusted for interest on capital, salary to partners and commission, not recorded earlier)

21,000

2,000

23,000

Accounting For Partnership FIRMS - Fundamentals Exercise 2.97

Solution Ex. 92


Profit and Loss Appropriation Account
Dr				Cr
Particulars		Rs.	Particulars	Rs.
To Profit transferred to :			By Profit and Loss A/c	75,000
----A's Capital A/c	41,400		By B's Capital A/c
----B's Capital A/c	27,600		---- (Deficiency in Revenue)	9,000
----C's Capital A/c	15,000	84,000
		84,000		84,000

Working Notes :

Deficiency in revenue guaranteed by B = 25,000 - 16,000 = 9,000

∴ Profit to be distributed among Partners

= 75,000 + B's deficiency

= Rs.75,000 + Rs.9,000 = Rs.84,000

Profit Sharing ratio = 3:2:1

- Rs.-Rs.- Rs.9,000 that was guaranteed by B to the firm would not be deducted from his share as he is bearing it in form of profit.

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Class 12-commerce T S GREWAL Solutions Accountancy Chapter 2: Accounting For Partnership FIRMS - Fundamentals

Accounting For Partnership FIRMS - Fundamentals Exercise 2.80

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.81

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.82

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.83

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.84

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.85

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.86

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.87

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.88

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.89

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.90

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.91

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Accounting For Partnership FIRMS - Fundamentals Exercise 2.92