You are on page 1of 24

Print Instructions CA.

Naresh Aggarwal’s
Step-2
ACADEMY
(i) Put the printed paper back of
into theACCOUNTS
source paper tray
Accounts Costing
(ii) Press• Print • Taxfrom
button • FM Maths
the•tool Stats • English • E conomics
bar •again
Step-1 West Patel Nagar, New Delhi. Ph:8010444896. Website: www.academyofaccounts.org
(iii) Select ‘Print : Even Pages Only’ from the Print dialog box

Step-3 : Leave Instruction Page and Center Stapple all the other pages... All Done.
(i) Press Print button from the tool bar +
(ii) Select ‘Print : Odd Pages Only’ from the Print dialog box Check ‘Reverse Pages’ from printer dialog box
(iii) Press OK / Print and you will get half of your document printed (iv) Press OK / Print

CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics
West Patel Nagar, New Delhi. Ph:8010444896. Website: www.academyofaccounts.org

Blank Page Blank Page

org . Website: www. Ph:8010444896. New Delhi.org Class XII Fundamentals of Partnership CA. Naresh Aggarwal’s ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics West Patel Nagar.academyofaccounts. Naresh Aggarwal’s ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics West Patel Nagar. New Delhi. CA. Website: www.academyofaccounts. Ph:8010444896.

* Very Important Questions •••••••••••••••••••••• Price: 30/- . Website: www. Q-12: Give two items appearing on the credit side of partners’ capital accounts when capitals are fixed.toNaresh (a) Salary payable a partner. Q-15: List any two items appearing on the credit side of a partner’s current account. Q-14: List any two items appearing on the debit side of a partner’s current account. where will you record the following: CA. when capitals are fluctuating. (c) Fresh capital introduced by a partner. Ph:8010444896. Practice in Accountancy 41 Q-10: If the Partners capital Accounts are fixed.org Q-11: List any two circumstances under which the fixed capital of partners may change. Aggarwal’s Assignment . West Patel Nagar. when capitals are fluctuating. Q-16: List any three items appearing on the credit side of a partner’s capital account. Accounts • Costing (d) Share • Tax of profit • FMby•aMaths earned • Stats • English • E conomics partner. Q-13: List the items that may appear on the debit side of a partner’s fixed capital account. Q-17: List any three items appearing on the debit side of a partner’s capital account. New Delhi.1 ACADEMY of ACCOUNTS (b) Drawings made by a partner.academyofaccounts.

there is an agreement which is silent on a specific matter then for only that Q-9: List any four essential elements of Partnership. responsibilities and duties of partners. Ph:8010444896. Interest on loan will be 6% p. Any remuneration (e. B. Y and Z are partners in a firm.46. Profit sharing Ratios.  Theoretical Questions to be borne personally by X. way of settlement of disputes etc. Minimum Two and Maximum 50 Members 2.Rs. 1. Sharing of Profits 4.500] ACADEMY of ACCOUNTS  Preparation of Profit and Loss Appropriation Account  Preparation Accounts of Profit • Costing • &Tax Loss Appropriation • FM A/c and • Maths • Stats Partners • English • Capital A/cs E conomics Q-75: X. Q-5*: State the main provisions of the Partnership Act related to accounting.000 after charging Z’s salary. plus a commission of 5% on the profits  Adjustment Entry after charging such salary and commission or 1/5th of the profits of the firm.g.19. Q-8: State any three items that may be included in the partnership agreement 4. Management Related Matters: e.2012 amounted to Rs. C. Prepare the Appropriation Account showing the division of the profits of What is Partnership ? the year.84. (whether loan is given to firm or taken from firm) 3. Interest on Loans. whichever  Guarantee in Partnership is larger.Rs.000. Y. Naresh Aggarwal’s C’s salary. It may be oral or written. The written and Q-1*: What is meant by partnership ? registered version of the agreement is also called partnership deed. Money Related Matters: e. Capitals of Partners.500. Q-2*: What is meant by partnership deed ? 2. Prepare the Appropriation Account showing the division of the profits of Contents the year.Rs. [Share of Profit: A. Interest Q-3*: List any four contents of a partnership deed. Agreement 5.800. nature of the business. What happens if there is no agreement ? If there is no agreement at all then following provisions of Law will apply.a.org Calculation of Interest on Capital and Capital Ratios and Z receiving a salary of Rs.g. If.Rs.a. particular matter above rules will apply.2012 amounted to Rs. Name of the business.03.200] business carried on by all or any of them acting for All. Q-6*: Name any six items which are shown in Profit & Loss Appropriation Account. The profits for the year ended 31. Z. Interest on capitals is not allowed.Rs. Remunerations to partners. under the partnership agreement. Profit sharing ratio of all partners will be equal (irrespective of any factor) Q-7: Why is Profit & Loss Appropriation Account prepared by partnership firm ? 2. Carrying on a Business (i. Method of valuation of Goodwill and Method of maintaining Books of Accounts etc. on Capital and Drawings. if there is no Partnership deed. 1. For accounting purpose. 5. Legal Objects What is Partnership Agreement / Deed ? Theoretical Questions Partnership agreement is the mutual understanding on which some people decide to do a legal business to earn profits. salary or commission) is not allowed to any partner. from accounting point of view.academyofaccounts. Q-4*: Distinguish between fixed capital and fluctuating capital.40 Fundamentals of Partnership The profits for the year ended 31..000 after charging CA.g. Partnership is the relation between persons who have agreed to share profits of a [Share of Profit: X. New Delhi. vocation with profit motive) 3. only money related matters are considered.Rs. Interest on drawings is not charged. Essentials of Partnership : 1. If an agreement is made then that is always followed.03. X and Y sharing profits in the ratio of 5 : 3  Calculation of Interest on Drawings  West Patel Nagar. .e. Website: www.44.12. or The Partnership Agreement / Deed may contains basically two type of matters: Define Partnership.12. Any excess of the later over the former is.000 p.000.21.16.30.

000 in which X contributed to extent of Rs. Y and Z are partners in the ratio of 3 : 2 : 1. B.200 3.33.10.000. B. At the end of year 2012 they and C receiving a salary of Rs. After the end of first year of partnership. The profit (after charging C’s salary and including B’s contribution Rs.3.Rs. X has personally guaranteed Y that his share of profit including his salary and interest on capital will not be less that Rs.000. Appropriation Account to show allocation of the profit.20.600 for Z. No interest on drawings should be charged.000] 5. You are required to show firm’s Profit & Loss Appropriation Account.000.000] Illustration-2: Hema and Jaya started business on 1st January 2012 with capitals of Rs.000.18. Website: www. [X.6.000. Any excess of the later over the former is.12.60. the above mentioned Profit and Loss from this guarantee will be borne by A and B in equal proportions. To Commission to A 3.000 in any year.20. B and C are partners in a firm. Due to further need of money Jaya gave Q-74: A.20.000. ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Particulars Amount Particulars Amount West Patel Nagar. not be less than Rs.Rs. Deficiency of B: Rs. You are required to draw their Profit and Loss after charging such salary and commission or 1/4th of the profits of the firm. C.000 in any year.000 24.100 p.000 for the firm’s profits.000 only.000 and Rs. 1.academyofaccounts.800 for Y and Rs.30.10. Another guarantee Appropriation Account contains the following errors: is given by B to the firm that he will earn at least Rs.10.24.Rs.000 respectively.000 provides for Rs.000 to the firm on 1st July 2012.org To Salary to : By Profit & Loss A/c 24.000) 2. B and C are partners sharing profit and losses in the ratio of 3 : 2 : 1.000.10. will and draw it in proper manner.000 (Net Profit) for X. whichever is larger.Rs. Commission should not be allowed to partner You are required to allocate the profit though proper accounts.000.000 (including A’s contribution A 6.000. Profit: A.42.Rs. If all the above mentioned errors are eliminated. firm earns a total profit of Rs. plus a commission of 10% on the profits earned a net profit of Rs. There should not be any interest on capital.6.000 Rs. . B 4.12. C.000.4.000 24.2 Fundamentals of Partnership Practice in Accountancy 39 Illustration-1: A and B form a partnership without any partnership agreement. Dr. B: 12. then correct account will appear Q-73: X.17. A draw the following Profit and Loss CA.Rs.000 A 4. under the partnership agreement.200 A: 12.400 B 150 400 partnership is as follows : B 1.1.Rs.000 7. B and C are partners sharing profits in the ratio of 3 : 2 : 1. 3. found in above account guaranteed by the firm that his share of profit including his salary of Rs. Rs. It is further decided that any loss arising Ans: As there is no any partnership deed. to be borne personally by A.400. Profit and Loss Appropriation Account Cr. Profit sharing ratio should be equal.20. C is You are required to point out any contravention of the law.3. Naresh Aggarwal’s Appropriation Account: Dr. New Delhi.18.a. To Profit transferred to : During the year. A and B sharing profits in the ratio of 3 : 2 a loan of Rs.600 (i) C’s share of profit will not be less than Rs.000. Y.2.000 The profit after charging partner’s salary and interest on capital is determined as 24. The terms of A 2.30.11.4. [A.000 [A’s Deficiency: Rs. Terms of the deed To Profit transferred to: By Profit & Loss A/c 24. 4.000 p.000 10.000 in any year.8. Ph:8010444896.m.000 in any year.7.400 Q-72: A.800 By Interest on Drawings : To Interest on Capital @ 6% A 250 Q-71: A.000.27.400 24. Deficiency of X: Rs. The partnership deed also provides that Z’s share of profit will not be less than Particulars Amount Particulars Amount Rs. Profit and Loss Appropriation Account Cr.000 (ii) A’s contribution in firm’s profit will not be less than Rs.15. to each partner as salary and interest comes to Rs. There should not be any salary to any partner.000] 24. Further. amounted to Rs.000 Rs.800 (Net Profit) B 3.600.Rs. Z.000.Rs. X gives guarantee to the firm as given bellow: that his contribution in firm’s profit would not be less than Rs.

Any deficiency arising on that account shall be met by P only.000.000.Rs. Pass Journal Entries in the Books of the firm.000 as share of profit every Ram (1/2) 13.300 = Rs.Rs.04.000.000 7.000. A.03.000 profits. and Shyam is to be allowed a commission at the rate of Rs. B. Calculate profits To Salary to Ram 12.000.2.00.4. losses in the ratio of 4 : 3 : 3.60.30. C.Rs. New Delhi.15.00.2012.000 Share of Profits(2012): P.23.04. You are to show a Profit and Prepare Profit and Loss Appropriation Account.m.250. B and C. A.38 Fundamentals of Partnership Practice in Accountancy 3 losses in the ratio of 4 : 3 : 3.75.000 By Profit & Loss A/c 50. Net Profit = Rs.000 Particulars Amount Particulars Amount p.2012 were Rs.2.10. Interest on capital is also allowed @ 5% p.Rs.00.850 3. Q.a.Rs.2011 Rs.000 CA.000. B and C are partners sharing profit and losses in the ratio of 5 : 4 : 1.00.000.1.3.000 x 6 x 6 . Show Hema 1. The capital contributions were : A. R. Loss Appropriation Account to allocate the profit and necessary Journal Entries. if any would be borne by A and B equally. Profits of the firm for the year are Rs. During the first year amount to C.700 [CBSE (Delhi) 2002] [Profits: A.50. B.2012 amounted to Rs.03.Rs.00. The firm earned a profit of Rs.00.700 Working Notes: Q-67: A.000 [Delhi 2002 Compartment] [Share of Profits(2011): P.000.20.3.700 Rs.000 Q-70: P.25.27.250.500.15.000.850 (Net Profit) the distribution of profits. C. All India 2002 Compartment] [Share of Profits: A.25. C is Interest on Loan @ 6% = 10.000 and Rs.500. B Rs.000 p.1. 300 year 2012 amounted to Rs.a. Deficiency.1. Q and R are partners in a firm.03. [Delhi 2004 Compartment] [Share of Profits: A. Q.75.Rs.000 p.000 year.000 . B. Naresh Aggarwal’s in any year.Rs.50. C.5.000 (Net Profit) [Delhi 1997 Compartment] To Interest on Capitals: [Share of Profits: A Rs.15.000. B. personally guaranteed that C’s share of profit after charging interest on capitals at 5% p.000. ACADEMY of ACCOUNTS The profit for the year ended on 31.38.40.000 respectively.000.Rs.2011 to share profits and Dr. B.000] Solution: Dr. Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Show the Profit and Loss Appropriation Account.35.Rs. On 01. B.Rs.50.12. R.a.000] Ram 5. B and C entered into a partnership on 01.academyofaccounts. 2011 and 2012 were Rs.1.000 Shyam : 2. R is guaranteed a minimum amount of Rs.10.Rs.49.500] . would not be less than Rs.40. West Patel Nagar.000.00.000.1. C Rs.000 50.40.000 26. Any deficiency arising Particulars Amount Particulars Amount due to gaurantee to be contributed by A and B in the ratio of 4 : 1. would not be less than Rs.Rs.000.000 and C.000. Website: www.000 for the year ended 31.000.45.40. 50.1.25.000] Solution: Q-66: A. According to the deed Ram is entitled to they decided to admit C for 1/5 share in profits with a guaranteed amount of salary of Rs. however personally guaranteed that C’s share of profit after charging interest on capitals @ 5% p.37.Rs.000] Illustration-3: Ram and Shyam start business on 1st January 2012 with capital of Q-68: A and B are partners in a firm sharing profits in the ratio of 2 : 1.000 and Rs.Rs.1. The capital contributions were A.000 two years ending December 31. To Profit transferred to: However. The profits for Shyam (1/2) 13. Q-69: A and B sharing profits and losses in the ratio of 3 : 2 admit C for 1/10 share in the firm.Rs.20. however.Rs.19. Their profit sharing ratio is 3 : 2 : 1.000.Rs.a.Rs.40. The profits for the = Rs.org [CBSE (Delhi)] [Profits: A.20. Profit and Loss Appropriation Account Cr.500.a.Rs.700 3. given a guaranteed that his share of profit in any year would not be less than (for 6 months only) 100 12 Rs. Profit and Loss Appropriation Account Cr. Ph:8010444896.000] 3. of partnership they earn a net profit of Rs.Rs.3.000 and C- To Profit transferred to : By Profit & Loss A/c 3.Rs. A undertook to meet the liability arising out of the guaranteed 10% of net profit.700 [Delhi 2001 Compartment .000 of A.40. C. The profits for the year ended 31.Rs.000.5.000 respectively.Rs. Prepare Profit and Loss Appropriation Account for the two years. To Commission to Shyam 5. Jaya 1. He is guaranteed a minimum of Rs.15.

000.23.000 after charging Seeta’s salary but before making other adjustments.10.15.000 Profit and Loss Appropriation Account to allocate the profits. Debit Credit ____________________________________________________________________ CA. if : Particulars Amount Particulars Amount (i) The profit for the year amounted to Rs.643. amounted to Rs.11.Rs.)] To Interest on Capital 7.40. C’s Profit . firm earns a profit of Rs.Rs.000 [CBSE (Delhi)] [Profits: A.Rs. R.15.1.857.16. C is Prepare an account showing distribution of profits. B Rs.10.500 p.18. 7.80.000 2012 amounted to Rs.32.10. Q. Y.7.3. Dr. Naresh Aggarwal’s (i) Partner’s Salary A/c To Ram’s Capital A/c Dr.Rs. You are required to allocate the profit though proper accounts.000 12. B’s Profit .Rs. Y and Z are partners sharing profit and losses in the ratio of 5 : 3 : 2. The profit.academyofaccounts.a.Rs.000.500. 26. (iv) Profit and Loss Appropriation A/c Dr.Rs. (iv) Remaining profits is to be shared by Seeta and Geeta in the ratio of 3 : 2.000.Rs.Rs. To Interest on Capital to : By Profit & Loss A/c (Profit) 7.60. B and C are partners sharing profit and losses in the ratio of 5 : 4 : 1.000 for C. It is further decided that any loss arising from the guarantee will be (i) Interest on capital is allowed at the rate of 6% p. (v) Profit and Loss Appropriation A/c Dr.a.000 4 : 2 : 1 respectively It was provided that in no case C’s share in profit should be (Being commission allowed to Shyam) less than Rs. To Shyam’s Capital A/c 13.000.Rs.8. C. The terms of partnership deed is as follows: in any year. Z is ___________________________________________ given a guarantee that his share of profit in any year will not be less than Rs.10. Website: www. Q-64: A.2011 to share profits and .000 During the year 2012. To Partner’s Commission A/c 5.000 in any year.10.Rs. B and C are partners sharing profits in the ratio of 16 : 12 : 7 with a ___________________________________________ minimum profit of Rs. Show calculations clearly. C Rs.000.12.250.000] During the year they earned a profit of Rs. You are required to show To Ram’s Capital A/c 13. after charging R’s salary (ii) Salary is allowed to Seeta at Rs.000.000 [X.900. It is Solution: further decided that any loss arising from the guarantee will be borne by A only.000] Seeta 900 [(ii): A’s Profit . Profit of A Rs.39. B’s Profit .Rs. guaranteed that his share of profit will not be less than Rs.04. R is Illustration-4: Seeta and Geeta are partners with capital of Rs. Rs.38.000. 24.000] (Being remaining profit distributed to partners) Q-63: P.Rs. (iii) Commission to Geeta at the rate of 10% on net profit.000 ACADEMY of ACCOUNTS (Being salary allowed to Ram) Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics ___________________________________________ West Patel Nagar. The profits for the year 2012 amount to Rs.000] Geeta 600 1. Profit and Loss Appropriation Account Cr.12. You are ___________________________________________ required to show the appropriation amongst the partners.16.1. 5.31.200.12.000.10.000.org (ii) Partner’s Commission A/c Dr.750.000 To Shyam’s Capital A/c 5. [P. Ph:8010444896.000 Appropriation Account is not required.000 and guaranteed that his share of profit including his salary will not be less than Rs. The profit for the year ended December 31.Rs.000 (Being interest on capital allowed to partners) Q-61: A. Q and R are partners sharing profit and losses in the ratio of 3 : 2 : 1.500.000 firm for distributing the profit.000. Z.000. B and C entered into partnership on 01.000 respectively.000 Rs.F.000. You are required to allocate the profit though proper accounts.Rs.10. C’s Profit . Pass the journal entries in the books of the partnership To Partner’s Salary A/c 12.20.000] (Being remuneration of partner transferred to Profit and Loss Appropriation A/c) Q-62: X.Rs. borne by other partners in equal proportions.500.Rs.9.000 [Adopted CBSE (Compt.7. 12. (ii) The profit for the year amounted to Rs.500 Q-65: A.7.500 [(i): A’s Profit . Profit and Loss (iii) Interest on Capital A/c Dr.500.48. B. To Ram’s Capital A/c 5.48.500.4 Fundamentals of Partnership Practice in Accountancy 37 Date Particulars L. New Delhi.500] To Shyam’s Capital A/c 2.000 [Deficiency met by: A. B.

000 it may be simplified as 3 : 2. Website: www.000 The profit for the year ended 31.21.500 7.000 According to the new agreement. as their capitals.000 had already been credited to partners in the proportion in which they shared profits.900 4. CA. Z’s loan shall be treated as his capital from the Prepare Profit and Loss Appropriation Account and Partners Capital Accounts beginning and similar to other partners. assuming that their capitals are : Record the necessary Journal Entries to give effect to the above arrangement. B and C were in partnership sharing profit and losses in the ratio of . Rs.000 expenses but it is an appropriation of profit.30.90.).03.2012. Correct profit: Rs. his deposit being = 7. the balance on their capital accounts being Rs. Vijay and Anil are partners.academyofaccounts.04.).) given to partner is not an 2012 Profit 78.000 (Anil) in 2012-2011.Rs.a.60.300] Seeta (3/5) : 2. New Delhi.240 (Dr.500 for B.2011.750 p.)] Solution: As Capital Ratio is the Profit Sharing ratio of the partners and Capitals are in GUARANTEE IN PARTNERSHIP proportions of 90.a. C had deposited Rs.000 + 500 considered as capital carrying interest at 6% p. i.12.750 Q-58: A and B are partners sharing profits and losses in the ratio of 3 : 2.a. Z.a.000 (iv) Sharing of profit or loss will be in the ratio of their capital contribution.2012 they decided to take their manager Z into partnership. Therefore.18. To Commission to Geeta 750 Make the necessary corrections through Profit and Loss Adjustment Account and To Salary to Sita 500 through a journal entry.440 (Cr.a.12. firm’s profits after adjusting salary to Z. At the end Illustration-5: A and B started a partnership business on 01. (ii) Interest on drawings (Mohan Rs. Their drawings were ACADEMY of ACCOUNTS Rs.g.250.Rs.850 Geeta (2/5) : 1.25.000 to the firm by way of a loan on which he is getting interest @ 10% p.550 (Cr.864 (Dr. 2011 Loss 4.24.7.500 x 10 = Rs.3. Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Subsequently the following omissions were noticed and it was decided to bring West Patel Nagar.000 and Rs.20. (i) fluctuating (ii) Fixed [X.Rs.20. if any calculation is Record the necessary Journal Entries to give effect to the above.000 on which interest was payable @ 9% p.550 (Dr.)] should be added back to determine the real ‘Net Profit’. commission etc.m.600 (Cr.30.000 was Rs. Mohan. before making the above appropriations 2012 Profit 1.000 Any remuneration (e. Naresh Aggarwal’s the profits for the year ended 31.000 (Vijay) and Rs. Rs.Rs. 2010 Profit 80. = 7. Q-59: X and Y are partners sharing profits and losses in the ratio of 3 : 2.36 Fundamentals of Partnership Practice in Accountancy 5 Q-57: Mohan.Rs.000 and Rs.5.000 and Rs. 2011 Loss 40. The terms of As manager Z was getting annual salary of Rs. Anil Rs.1. his capital will carry interest @ 6% p.000 100 2010 Profit 62.000 and Rs.).500 respectively During the three years. To Profit transferred to : [CBSE] [Anil.200. salary. At the end of 2012 Working Notes: (after division of the year’s profit).). B.000 for A and Rs.360 (Dr.150). like capitals of other partners.576 (Dr.500 employed C as their manager to whom they paid a salary of Rs. In arriving at these figures.Rs.500 The firms’s profits and losses after allowing interest on capitals were as follows: Geeta’s Commission = 7.000 (Mohan). contributed Rs. interest on loan and (ii) B is allowed a commission at the rate of 5% on Net Profit.org them into account: (i) Interest on capital at 10% p. Q-60: A.8.Rs.e.. (i) A and B to get a monthly salary of Rs.000 : 60. Y. Vijay Rs.000.2012.600  ‘Net profit’ is the profit earned by the business after debiting all expenses.). based on ‘Net Profit’ then such remuneration (if already given to partners) [Adapted SSC (All India)] [A. Interest on drawings amounted to Rs.80.4.000 and respectively. 1/5th share in the profits of the firm. it was decided that C should be treated as Net profit = Profit after Seeta’s Salary + Seeta’s Salary partner with effect from 1st January 2009 with 1/6 share of profits. They of the year.1.a.). C.20.1.000.Rs. Rs. The drawings of A and B were Rs. He had also advanced the partnership agreement are as under : Rs.000. They 7.1.000 respectively.000 respectively.03. on 31. Ph:8010444896.9. Z is to be given annual salary of Rs. interest on capital of partners were : (iii) Interest on capital and drawings will be at the rate of 10% p. 750 2009 Profit 59.60.20.

140 (Cr. By P&L App A/c (Profit) 20.1. 41.Rs. Profit and Loss Appropriation Account Cr.00.000 6.600 (Dr. [AlI India 2004 Compartment] [A: Rs.6 Fundamentals of Partnership Practice in Accountancy 35 Dr.400 [Delhi 2000 Compartment] [Ram: Rs. Partner’s Current Capital Accounts Cr.01.100 41. Rs.Rs.400 Rs.a.500 To Interest on Capital to : A 9.60.2.000 15.000 30.500 By Commission .80.org To Commission to B 4.000 fixed capitals were : Ram. was ignored.1.000 [All India 2003] [Ram: Rs.000 Q-55: Ram. CA. After accounts of the year are prepared. Mohan. Their fixed capitals were Rs.9.60 (Cr.).500 2.900 By Commission .000 profits for the year 2012. was allowed to each partner although no 1. After dividing the B 6.000 B 1. Partner’s Fixed Capital Accounts Cr.140 (Dr.000 1.100 1. it is discovered that interest at 7% p.80.Rs.1.000 and Rs. B and C are partners in a firm with capitals of Rs.5. It is decided to make an (ii) When capitals are Fixed : adjustment entry at the beginning of the next year.).400 1.900 By Interest on Capital 9.Rs. Website: www.100 1.1.000 Give the necessary journal entry.a.100 69.100 13.200 (Dr.000 18.000 respectively.1.60.000 60.90.000 Dr.a. To Cash (Drawings) 20.000 and Mohan.60 (Dr. Naresh Aggarwal’s Particulars Amount Particulars Amount To Salary to : By Profit & Loss A/c (Profit) 80.000.600 (Cr.5.000 90.40. pass the necessary adjustment journal entry. Shyam and Mohan are partners in a firm sharing profits in the ratio of 2 : 1 : 2. Dr.01.)] 82.01.). Their To Balance c/d 20.000 and By P&L App A/c (Profit) 20. Ph:8010444896.00.000 Q-52: A and B had been sharing profits and losses equally. instead of 10% p.000 and Rs.)] .000 By Cash 90.500 (i) When capitals are fluctuating : Q-53: Ram and Mohan are equal partners with capital of Rs. Interest on capital for the year 2012 was credited to them @ 9% Dr. B: Rs.600 (Dr.31.500 82.000 ACADEMY of ACCOUNTS A 12. Rs.000 it was agreed that they would share profits and losses from 01.000 Q-56: Ram and Mohan were partners in a firm sharing profits in 3 : 2 ratio.000 respectively.).000 By Salaries 12. Ram.000 1.000.400 interest on capital was credited to them at the rate of 6% instead 5%. To Interest on Drawings 1.500 Pass a single adjustment entry to adjust the accounts of the partners.)] To Cash (Drawings) 20. B (2 / 5 ) 13. Mohan: Rs. Rs.000 Q-54: A. Particulars A B Particulars A B [CBSE Outside] [Shyam. it is discovered that interest @ 8% p.).600 (Cr.)] To Balance c/d 1.000.000 A 1.000 By Cash 90.5.2012 in the ratio of 3 : 2. Give necessary adjusting entry for the rectification of the error.000 To Interest on Drawings 1.000 West Patel Nagar. 600 (Cr. Show also the working notes clearly.)] Particulars A B Particulars A B To Balance c/d 90. It Particulars A B Particulars A B is decided to make an adjustment entry at the beginning of next year.000 30. After the accounts of the firm for the year have been closed.000 60. Partner’s Fluctuating Capital Accounts Cr.000 60.Rs.academyofaccounts.00.31.100 13.000 90.100 41. Mohan: Rs.000 60.500 By Salaries 12.400 41. Pass necessary journal entry.3.000 6.00. 4.100 9.400 33. The fixed A (3 / 5 ) 20. [A: Rs.000 By Interest on Drawings: Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics B 18. 4.a. has not been credited to capital account before distribution of profits.). C: Rs.000 60. For the year 2012.20. New Delhi. At that time it was also found that while To Profit transferred to: preparing accounts for 2012 interest on capitals @ 5% p. Showing your working notes clearly.000 respectively.000 18.400 such agreement was made in the partnership agreement.100 capitals of A and B were Rs.000 30.000 and Rs.000 By Interest on Capital 9.10.400 (Dr. respectively.

During 2012. The profits for the year in arriving at the above figures Solution: of capitals amounted to Rs. Drawings of partners are Rs.000 and Rs.000.3.000.000.9.25. Naresh Aggarwal’s Show a journal entry to make adjustment in capital accounts.000.000.560 13.000.2. A provision of 5% of Net Profit is to be made in of A. R. therefore unless the question specifically recognize @ 10% p. capital invested to run P: Rs.).04.29.000.2012 after closing the capital accounts.)] . The firm has been in existence for many years.000. Deepak. Rs.Rs. had respectively.000 business) of partners.1.a. 2 : 1 : 1 respectively. You are required to calculate the capitals of P.20. Ashish.1. New Delhi.).000 stood at Rs.5.Rs. the profits of the year prior to calculation of interest on capital but after charging B’s Q-50: After including the profits for the year ended 31. The profit for the year was in regular intervals.500 (Cr. Q-49: P.600 (Dr. They shared profits and losses in the ratio of Dr.000 A (3 / 5 ) 8.34 Fundamentals of Partnership Practice in Accountancy 7 for Ram and Shyam are ascertained as under: Year 2012 . B (2 / 5 ) 5.1. Their drawings during the year were Rs. Website: www. Rs. CA.Rs.000 Subsequently. B is to be allowed an annual salary of Rs. transactions from Profit & Loss Appropriation A/c and ordinary drawings are [CBSE Compt.000. Z: Rs. Rs.9.] capital withdrawal (not ordinary drawings) of partners are shown in the Fixed Capital A/c. After  Difference between ‘Ordinary Drawings’ and ‘Capital Drawings’ : ‘Capital the division of the profits for the year ended 31.000 (Dr.)] To Salary to B 5.2012 the capital accounts Salary amounted to Rs.10.2.Rs. Y and Z A 6. while ‘Ordinary Drawings’ are withdrawn from the profits During the year they withdrew Rs. Mohan.20.15.1. inadvertently been ignored.).583 (Cr.Rs.16.org : 1.375 (Cr.80.). 28.).000 and Rs.000 By Profit & Loss A/c 28.00.500 [All India 1999] [Opening Capital of X.000. Partners share profits as 3 : 2 : 1.500 (Dr.12. Profit and Loss Appropriation Account Cr. it was discovered that interest on capitals at 10% p.000.000 respectively. Interest on capital is allowed at the [CBSE (Delhi) 2002] [Q.).17 (Cr. [Ram. Ashish and Deepak are partners sharing profits in the ratio of 3 : 2 West Patel Nagar.000 respectively. capitals of X. 60. They also decided that the change shall be carried out with retrospective effect from 2009.000 and Rs. on capitals at the beginning of the year was left To Profit transferred to : out. 2011 . respect of manager’s commission. Q and R were partners in a firm sharing profits in the ratio of 1 : 2 : 2.000 Cr.)] rate of 6% p. Y and Z are: Rs.academyofaccounts.40.000 Cr. R: Rs.000 Dr.2012 their capitals were: Drawings’ are the drawings from the contributions (i.250 (Dr.60. 1.12. Prepare Profit & Loss Appropriation A/c and Partners Capital A/c.000 respectively. P.10.19.2 : 1.Rs. Q: Rs.900 Give necessary adjustment entry and show the working notes.3. Show the adjustment of profits for the  When ‘Fixed Capital A/c’ and ‘Current Capital A/c’ is prepared then all last four years by means of a single journal entry. we should always assume that drawings given are ‘Ordinary Drawings’.20.15.340 respectively.000 each.a. 2010 .500 28. interest on Partner’s Capital was it.000. B: Rs. (Delhi) 2001] transferred to Current Account and only capital contribution of partner and [Jagdish. Now the partners decide to share profits in the ratio of 2 : 2 : 1. The Partnership Deed provided that interest on capital will be allowed makes ‘Capital Drawings’. Give the necessary journal entry to rectify the above.000.Rs.000 (Loss).).50.Rs.12.000 respectively.60. Profit for the year was Rs. with partners are transferred in that Account only.4 : 1.000 and Rs. Ph:8010444896. 2012 .20. Q and R on 01.X: Rs.10.000. Show Illustration-6: A and B are partners sharing profits in the ratio of 3 : 2 with capitals your working clearly. In the normal circumstances owner of business never Rs.000. Year 2011 . not allowed. Particulars Amount Particulars Amount [Modified Foreign 2003] [A: Rs.15.a. Y: Rs.80.500 To Interest on Capital to : (Net Profit) Q-51: On 31. 1. While preparing the final accounts.125 (Dr. 5..14. It was subsequently B 3. Rs. Year 2010 .Rs.1. Adjustment entry:.000 (Cr.03.4. 2009 .1.2011 and pass the necessary adjustment entry for providing interest on capitals. B and C stood at Rs.a.Rs.)] ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Q-48: Jagdish.e.600 discovered that interest @ 5% p. C: Rs.600 9.000 (Dr.35.Rs..2 : 3.000 and Rs. of Rs. The profit and loss during the last  When ‘Fluctuating Capital A/c’ is prepared then all transactions related few years have been: 2008 .000 and Rs.40.Rs.Rs.

= 25. therefore his salary or commission profit of Rs.000 5 5.160 By Interest on Capital 6. we should not show his (i) Commission was given to X and Y as Rs.000 + 5.5.000= 30.3.600 Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics By Salaries .14.000 You are required to pass a single journal entry to give effect to new agreement.000 in their current capital account.000 at the beginning of each month.6.25.000 x 5 = Rs.4. CA.5. Pass an adjustment entry to rectify the above error.9.000 Year 2012: Rs.500 [A: Rs.30. Website: www.000 Q-47: Ram and Mohan are partners in a firm sharing profit and loss equally.Rs.1.)] 100 Net Profit = Profit before manager’s commission . Partner’s Fluctuating Capital Accounts Cr. Ph:8010444896.000 . C: Rs. 1st January 1. Working Notes: The net profit for the year 2012 of Rs. ratio 1st September 1.000. From the capital accounts of the partners.02. At the end of the year 2012.000 was divided equally without providing Profit for manager’s commission = Profit after B’s Salary + B’s Salary for the above terms.000 and Rs.000 11 11..000 respectively.18. Interest on drawings is calculated only when it is specifically mentioned in the (iii) Interest on drawings of Rs.000 ACADEMY of ACCOUNTS To Balance c/d 1. Calculate his interest on drawings. Year 2010: Rs.000 effect for last two completed years. their fixed capital accounts = 30. first we generate a statement indicating the made in the partnership deed.000 and Rs. 4. Y.Rs. Naresh Aggarwal’s Particulars A B Particulars A B To Cash (Drawings) 12.a.15. though no agreement was 1.000 By Balance b/d 1. B: Rs.Manager’s Commission Q-45: X and Y are partners.000 7 7. Z.500 for X and Rs. (c) Profits were to be shared in the ratio of capitals.000 . 1st May 1. After crediting the  Manager is an employee of the business.3.3.000 4 4.000 9.Rs. During the year.160 1. they noticed the following should be shown in Profit and Loss Account itself.500 shows the balance of Rs.300 for Y has not been recorded.1.).000 which is INTEREST ON DRAWINGS not yet provided.000 [AlI India 1999] Manager’s Commission = 30. (ii) There was an agreement for allowing Y an annual salary of Rs.000 Now all partner decide to share profits in their capital ratios with retrospective 1st August 1. amount.000 [X.000.1.2. instead of Rs.000 During the Last three years they were distributed following profits : 1st June 1.340 5.50.2. 1st February 1.). commission in the Profit and Loss Appropriation A/c. During the 1st year of partnership Rs. date of drawings. New Delhi.000 10 10.33. His remuneration can not errors: be called as appropriation of the profits.000. Y and Z are partners for the last three years and till now they were sharing Illustration-7: Ajay is a partners in a firm. Rs. 5.000 respectively. Partnership Deed. Year 2011: Rs. Then amount of interest is determined by the following formula : [X.3.100 (Cr.340 74.Rs.000 and Rs. Solution: Now they decide to share profit or losses in equal proportions with effect form the Date Amount Months Product beginning of the partnership.250 (Cr.560 1.000 respectively.).000 60.000 (Cr.000 1st April 1.000 8 8.000 3.org By P&L App A/c (Profit) 8.000 West Patel Nagar.1.a.1.160 (b) Partners were entitled to interest on capital at 5% p.000 12 12.000 respectively.00. financial year) and product of drawings and months.)] Interest on Drawings = Total of Products x Rate x 1 .)] 1st March 1. 1st July 1.000 and Rs. Therefore.14. It may be calculated by using following methods: (iv) Interest on capital was allowed to them @ 5% p.500 (Dr.10.100 (Dr.340 74.000 6 6.28. 100 12 Q-46: X.500 = Rs.). Product Method : In this method.8 Fundamentals of Partnership Practice in Accountancy 33 Dr.000 (Dr. months (between date of drawings and ending date of You are asked to prepare a single journal entry to rectify the above mistakes. Working notes should also be shown clearly.000 but during 2nd and 3rd year they earned profits of rate of interest is 6% p.340 65. Ajay has withdrawn profits or losses in the ratio of 3 : 2 : 1 respectively.academyofaccounts.000 9 9.750 (Dr.a. if the they got a loss of Rs.

50.Rs. If amount withdrawn at the Middle of every month. then average months are: [B.000 1 1. Working 2 notes should also be shown clearly.a. Their capitals at the end of the year after division of profits were Rs.25. 2 (ii) Salary to B and C Rs.000.30.000 each.). The drawings of Ajay was Rs.3.5 .350] Interest on Drawings = Total of Products x Rate x 1 .000 respectively.000 p. 3.000 as further capital in the firm.000 respectively.000 which 2 was distributed among them in their profit sharing ratio without taking into If amount withdrawn at the end of every month.3.500 (Cr.4.a.5.Rs. ADJUSTMENT ENTRY If amount withdrawn at the beginning of every month.2.000 and relatively very low time.000 months of the financial year.2. amounts and in similar interwals during the year.32 Fundamentals of Partnership Practice in Accountancy 9 During the year partners withdrawn Rs.3.000 100 12 respectively.000. The profit of the year distributed to them in their profit sharing ratio = Rs.1. Website: www. The profit earned and distributed CA.2.academyofaccounts.5 Months 2 Q-44: A. [Ajay.000.000 and of Vijay was 1st November 1.Rs. During the year they earned a profit of Rs. C.1.000 Calculate interest on capital at the rate of 10% p.000.000.000 (Dr.27.390 was Rs.2. 1. 12. 100 12 (ii) : Ram’s Interest . B and C started a business with capital of Rs. A. Rs.000 and Mohan had got an 2.org Q-41: Ajay and Vijay are partners sharing profits in the ratio of 3 : 2.350. During the year Ajay and Vijay were got total salaries of Rs.400. Divisible profit of the year was Rs.000 respectively. then average months are : Q-43: A.a. Their capitals at the end of the year were Rs. 11. 100 12 . 100 12 Q-42: Ram and Mohan are partners sharing profits and losses in the ratio of 3 : 2 = 78.50.000 3 3.2.4. As per the provisions of the using the following alternative method : partnership deed : Interest on Drawings = Total Drawings x Rate x 6.000 2 2.1.25.000.Rs. respectively.5.30.15.000 and Rs.000 78 78.)] 12 + 3 = 7. But this method can not be used always. Mohan’s Interest . B and C were partners in a firm.5.750] Average Months will be counted by adding months from first and last drawings and dividing by two. (a) C was entitled for a salary of Rs.000. Mohan’s Interest . Vijay had also introduced Rs.000.5 + 0.a.20. Rs.50. ACADEMY of ACCOUNTS [Sonu.2012 their capitals stood at If we continue the previous illustration then we could have found the interest by Rs.000 each.Rs. During the year Ram’s drawings were Rs.50. Naresh Aggarwal’s between the partners was Rs.5 Months Rs.000.m. Vijay.000 Rs.Rs. Ph:8010444896.30. If amount withdrawn at the beginning of every quarter.2.400. You are required to calculate interest on capital @ 10% p.Rs. In the exact middle of the year Mohan had also for applicability of this method is that amount are constantly withdrawn in similar invested Rs.000 respectively.Rs. in the following cases: Interest on drawings may be calculated by using following formulae which depends (i) If the closing capital given in the above question is of fluctuating Capital A/c upon the time schedule of the drawings : (ii) If the closing capital given in the above question is of Fixed Capital A/c Interest on Drawings = Total Drawings x Rate x Average Months [(i) : Ram’s Interest . Monu. Further capital introduced by Monu during the middle of the year was Rs. then average months are : (iii) Special commission to A Rs. The conditions Mohan’s drawings were Rs.).000 and Rs.000 as new capital after the expiry of six 1st December 1. Calculate interest on capital to be allowed at the end of the year @ 10% p.000 Rs. New Delhi.000.1.000 x 6 x 1 . Ram had got an annual salary of Rs.15.000 and 12 + 1 = 6.000.200] Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics West Patel Nagar.Rs.2.2.01. Direct Method (Short-cut Method) : This method can calculate interest in annual salary of Rs.500.15. 11 + 0 = 5.4.Rs.5.000 and Rs.5.5 = 6 Months You are asked to prepare a single journal entry to rectify the above mistake.000 and 1st October 1. On 01.500 (Dr.Rs. then average months are : consideration the following matters of the Deed.5 Months (i) Interest on Capital at the rate of 5% p.

Aug.000 - Sept.000 8 8.Rs.000 respectively.500 and Rs. Their capital at the end of the year are Rs.000 0 0 12. They agree to share profits in the proportion to their capital after Interest on Drawings = Total of Products x Rate x 1 .6.a.6.a.1.000 .500 . Dec.academyofaccounts.000 taking into = 66.-31 . Naresh Aggarwal’s = Rs.000 6.Rs.000.000 Oct.500.000 and Rs. Calculate interest on drawings. Their capital at the end of the year were Rs. 3.000] 31st December 1.15. X has withdrawn Q-39: A and B are partners in equal ratio. if the rate of West Patel Nagar.500 - Interest on Drawings = Total Drawings x Rate x 5.10 Fundamentals of Partnership Practice in Accountancy 31 = 12.000 Aug. Solution: By Product method: Date Amount Months Product Q-37: From the following information related with A and B whose capital as on 31st January 1.000 - 30th November 1. 6.000 per month and Y has withdrawn as follows: Rs.000 June-1 6.1: Rs. You are required to calculate interest on capital @ 5% p.4.000 Dec.4.a.-31 4.000 - 31st July 1.Rs.500] As X has withdrawn similar drawings in regular manner in every month of the year.000 respectively. A is entitled to an annual Salary of Rs.000 [Capital Ratio.000 3 3.-1 . .24. B. 100 12 CA.30: Rs.000 at the end of each month.10.5 .000.000 30th June 1.000 Date Introduced Withdrawn Introduced Withdrawn 31st May 1.000.a.20.8. if the rate of interest is 6% p.000.3 : 2.2.000. Feb.000 respectively. 1. . During the year A has withdrawn Rs.3. after charging A’s Salary was Rs.000 A B 30th April 1.-31 7. You are to show proper accounts to allocate the net profit of Rs.000 9 9. Ph:8010444896. 3.2.000.22. June1: Rs. 2.000. 6.000 x x 100 12 March-1 3. 5.1.000 .000 and Rs.330 A B Date Introduced Withdrawn Introduced Withdrawn By Direct Method: July-1 .5 .000. 390 ACADEMY of ACCOUNTS Illustration-8: Bimal is a partner in a firm. therefore his interest on drawings may be calculated by Direct method in the Q-40: Sonu and Monu are partners in a firm sharing profits in the ratio of following way: 3 : 2.000 x x 100 12 consideration the following further information: = Rs.5 .500 . B. Bimal has withdrawn Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Rs. Website: www.a. Interest: A.000 and B Rs. You are required to 28th February 1. During the year. During the year.000 - 31st August 1. 6.4. 6.1: Rs. Calculate interest on drawings.4.2. 100 12 Nov.48.000 6 6.000 . if the rate of interest is 12% p.30. 8.2011 were Rs.Rs.000 = Rs.org interest is 6% p.27.000 66 66. The profit distributed Nov.000 4 4. 31st March 1.000 .000 . .000 - 31st October 1.000 calculate their capital ratio and interest on capital.-1 5. Divisible Profit Rs.000 respectively.000 Q-38: A and B start business on 1st April with capital of Rs. 10.000 March.000 Jan.000 30th September 1.500] Illustration-9: X and Y are partner in a firm.37.-31 .000 7 7.5.000 11 11.Rs. B.000.000 x 6 x 6.Rs. Solution: [A.04.750.1. April 1: Rs. Interest: A.-1 5. 3.31. 6 1 .000 01.000 1 1. 330 [Ratio.000 5 5.36. 2.000 and Rs.-30 4.000 . - = 12.000.000 - 6 5. .000 10 10.000 2 2. New Delhi. 100 12 allowing interest on capital at 12% p.000 .7 : 4.

2.10. Calculate the interest payable to A and B for the year ending 31.40.2012 with capitals of Rs.6. nor continuity of every month is maintained. Website: www.000. Sept-30: Rs.000 in complete year.a.500.000.20.a. to bring balance of his capital in 3 equal installments at the end of each quarter of [CBSE Delhi] [Interest on A’s Capital: Rs. Interest on B’s Capital: Rs. 1st June 6. R.25.1.255. Meena: Rs.000] the year.000 Calculate interest on drawings.500 at the beginning of the each month. Calculate interest on CA.2012. B: 1.org year 2012 it is ascertained that Reena had withdrawn regularly Rs. if the rate of interest is 12% p.500] The way of calculating products for interest on Capital is also similar to the way of calculating products in case of interest on drawings.5.40.000 4 20.20.200] 100 12 = 1. 1st February 4.440.) Q-36: A and B started business on 01.80. Dec-31: Rs.01.000 ‘S’ has withdrawn total Rs.Rs.4. to be charged at the end of the 100 12 year 2012. while Meena did not made any drawings upto 30th June and after that she started 100 12 a monthly drawing of Rs. Calculate interest on capital to be allowed at the end of the year 2012 to 100 12 each partner assuming that B kept his promise and the rate of interest is 6% p.Rs.000 11 44.2.000 x 12 x 1 . therefore his interest may be calculated only by product method: Q-33: P.12. (This is the same formula which we had used for calculating interest on Drawings. INTEREST ON CAPITAL / CAPITAL RATIOS Calculate interest on capital to be allowed at the end of the year 2012. Akber: Rs. = Rs. On additional capital on 01. S. [A: Rs. 1st April 2.000 to the firm as Illustration-10: A and B start business as equal partners on 1st January 2012.8. During the year. Calculate interest on drawings for both the partners.1. [P.500 at the end of every month upto 30th June but she did not withdraw anything after that date. [Ram: Rs.2012. if the rate of interest is 12% p.60.400. At the end of West Patel Nagar. R.000 but B could arrange only Rs. New Delhi. Interest on Drawings = Total Drawings x Rate x 6 .1.780. B.7. 30th August 5. if the rate of Interest on capital is calculated only when it is specifically mentioned in the interest is 10% p.105] As Y has neither withdrawn money in similar figures.academyofaccounts. = 24. then promise annum.1.1. partnership deed. Q.a.000 1.10. .2.2.000.a.500.000 ‘R’ has withdrawn Rs. Interest on Drawings = Total of Products x Rate x 1 .000 in each month.420. The formulae to calculate it is given as under : [Amar: Rs. T.24. Interest on capital is to be allowed @ 10% per that date A brings Rs. Ph:8010444896.400 of Ram and Rs.000.000 2 8.000 ‘T’ has withdrawn as follows : 1st November 4.000 Feb-1: Rs. S and T are partners having following drawings : Date Amount Months Product ‘P’ has withdrawn Rs. B.000 ‘Q’ has withdrawn Rs.320 and Rs.1.000 = Rs. On that date 100 A brings Rs.000 x 12 x 6 .5.Rs.320. Q.250] (i) If there is no change in the Capital throughout the period: Interest = Capital x Rate Q-35: A and B start business as equal partners on 1st January 2012.000 and Rs. A introduced Rs. Mohan: Rs.1. the year. INTEREST ON CAPITAL AND CAPITAL RATIO 100 12 Q-34: Amar and Akber start business on 1st January 2012 with capitals of Rs.Rs.000 9 18.000.000 but B could arrange only Rs. The drawings of partners during the current year were Rs.000 respectively.30 Fundamentals of Partnership Practice in Accountancy 11 Q-31: Ram and Mohan are partners in a firm. then promise to bring (ii) If there are frequent changes in the Capital throughout the period: balance of his capital in three equal installments at the end of the each quarter of Interest = Total of Products x Rate x 1 .000 of Mohan.10.6.32. Naresh Aggarwal’s drawings.Rs. On 1st July 2012 Akber brings more money to make his capital equal to Amar. May-31: Rs.32.720.300] ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Q-32: Reena and Meena are in partnership with profit ratio of 3 : 2.000 respectively.a. if the rate of interest is 10% p.440 [Reena: Rs.000 at the beginning of each month.07.000 at the end of each month.000 7 42.

5. Calculate interest on drawings.40.1.500.00. withdrawn Rs.org 100 Interest = 80.000 respectively.2012.000 x 6 = Rs. Vinod had Date Amount Months Product withdrawn the following amounts during the year ended 31.00.12.15.000.3.080. CA.academyofaccounts. During the year ending 31st March.80.000 at the end of each month and Chandan has withdrawn Rs.000 01. Y: Rs.21.000 [All India 2000 Compartment] [Rs. taking into Calculate interest on drawings. product method in the following way: [Net Divisible Profit: Rs.000 30th June 8. Bimal and Chandan are partners in a firm.000 12 9.000 Calculate interest on Vinod’s drawings. Website: www.20.000 3 (-) 15.01. You are to show proper accounts to allocate the net profit of Rs. if the rate of interest is 6% p.000 withdrawn Rs.1.000 5 50. 6.2012 10.-1 7.000 01.000 Date Amount (Rs.000 at the beginning of each month.00. Interest = Total of Products x Rate x 1 . April 30: Rs.390.50.800 100 Prepare Profit and Loss Appropriation Account showing the distribution of profit As B’s Capital is changing throughout the year.a.12 Fundamentals of Partnership Practice in Accountancy 29 Calculate interest on capital to be allowed at the end of year 2012 to each partner assuming that B kept his promise and rate of interest is 6% p.000 x 6 x 1 = Rs. 1st January 75.48.000.720.a.1. Sept.4. if the rate of interest is 12% p.000 Date Amount Months Product Closing Balance of Capital A/cs : A Rs.3.2. Aug. Chander has withdrawn Rs.12.-30 .1: Rs. A Rs.000 9 1. June1: Rs.a.000 3 60.000.12.4.840] .500 each month Calculate interest on drawings.07. Dec.000 31. B Rs. During the year ending 31st December. The partnership agreement Calculations for Silver: provided that interest on drawings was to be charged @ 12% p.1.000 100 12 Q-28: Chander and Dhanesh are partner in a firm. Nov.a. Dhanesh: Rs.000 6 48.000 31.000.03. New Delhi.) 1st April (-) 10. to their capital after allowing interest on capital at 10% p.31: Rs.000.00. X has April-1 . 12. Ajay has 30th September 20. 10.000 Q-27: Ajay. .-1 10.000 .500] 1st January 20.000 . During the year.000 12 2.000 and Rs.75.000 9 (-) 90. Ph:8010444896.-31: Rs.2. 13.17.1: Rs.000 1st August 10.000.000 and C Rs.000 while Y has withdrawn in the following manner: June-30 8.000 per month and Dhanesh has Illustration-11: Silver and Gold start business on 1st January with capital of withdrawn as follows : Rs. 9.900] Dec.000 Aug.a. They agree to share profits in the proportion Feb. May-1: Rs.000 12. his interest may be calculated as ACADEMY of ACCOUNTS follows: Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Interest = Capital x Rate West Patel Nagar. if the rate of interest is 9% p.000. Bimal: Rs.000 . [X: Rs.2012 20.000 .000 INTEREST ON DRAWINGS 30th June 20.500 6.30.000 .500 and C Rs.2012 4.000 . 100 12 [Ajay: Rs.000 1 7.1.2012 16. .10. his interest may be calculated by and the Capital Accounts of partners.000 1st December 7.650] Silver Gold Date Introduced Withdrawn Introduced Withdrawn Q-29: X and Y are partners in a firm.000 6 1.165. 5.2.97.000 30th September (-) 5.000.000.1.88.540] = 6. Aug.3.000. Bimal has withdrawn Rs. B Rs.000 31st March 20.000.-31: Rs.24. March-31: Rs.000 Solution: Q-30: Vinod and Mohan were partners in a firm. Naresh Aggarwal’s Solution: As A’s Capital is constant throughout the year. Chandan: Rs. consideration the following further information: [Chander: Rs.000 .5.a.

Rs.000 6 78. B and C are partners sharing profits and losses in the ratio of 2 : 2 : 1 after 1st January 30.000.1. During the year partners withdrawn Rs. after debiting partner's salaries. Show the Partners Capital Total of products of Silver’s Capital : Total of products of Gold’s Capital and Current Accounts after division of profits in accordance with the partnership i. A has drawn Rs. is allowed on capital at 5% per annum and is not charged on drawings.12. Their Capital Accounts.93. The profit for the year ended 31st introduced by B during the middle of the year was Rs.000 each p. amounted to Rs. B is Rs.000 5 60.1.500] Calculations for Gold: Date Amount Months Product Q-24: A.000 capitals were: Rs.)] Interest = Total of Products x Rate x 1 .000.80.90.60. was Rs.30.63.000 and C is 30th June 13. Solution: .000 p. respectively.50.15.000 : 6. B.13. C Rs.1. New Delhi.6.2.m.000 and Rs. Interest on Capitals: [Divisible Profit: Rs. Silver 7.000.000 and C Rs. interest and profit. Of the Their capital at the end of the year 2012.000 50.000 and Rs.10. Current Alcs: A Rs. before charging interest on capital and Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics annual salary of B at the rate of Rs. = Rs.000. B to 30% and C to 20%.10.Rs.000 37.000 x 10 x 1 .5.000. B Rs. Naresh Aggarwal’s partners are allowed 5% p.4.).000 or 3 : 2 agreement. During the year 2012.000. The profit earned March 2012.1.Rs.01.000] Silver (3/5) 22.000 1 (-) 6.500.Rs. B. Interest Illustration-12: A and B are partners in a firm sharing profits in the ratio of 3 : 2.e.1.21. Rs.000 each.84.a.000 and the partners had drawn Rs.000 Loss Account for the year ended 31.000 01.000 (iv) Charge interest on drawings as A. (iv) A and B are to get salaries of Rs. (ii) B will get 5% commission on trading profit. 9.000 p.Rs. Profit and Loss Appropriation Account Cr. On 6. You are required to prepare Profit & Loss Appropriation A/c and Partners Capital A/cs.200.12. as on 01.00.500 (Cr.00. The drawings of the partners during the year ended 31. Calculate interest on capital to be allowed at the end of the year @ 10% p.000 9 1.500 Q-26: A. 2011 their respective 50.a.3.01.000.40. were Rs.18. B and C are in partnership and as on 1st April.000.000 x 10 x 1 . 100 12 Q-25: A and B are partners sharing profits in the ratio of 3 : 2.28.000(Cr. Ph:8010444896. Divisible Profit: Rs.500(Cr.6.000 per annum. and Rs.81. Their capitals at the Silver’s Interest = 9.000 (Dr.500 [Commission of B: Rs.). The profit during the year. To Interest on Capital to : By Profit & Loss A/c (Profit) 50.000 to their salaries have drawn Rs.2.7. Prepare Profit and Loss 100 12 Appropriation Account. payable before division of Profit.).9.Rs.500(Cr.000 respectively.000 salary of Rs. Further capital over that amount of Profits are shared equally. Fixed Capital: A.28 Fundamentals of Partnership Practice in Accountancy 13 Q-23: A and B are partners in a firm sharing profits and losses as 3 : 2.000.500 beginning was Rs.500 (Cr. by way of interest on capitals. Website: www.90.000 and Rs.08. but before charging interest on capital and distributed between the partners was Rs.00.000 each on account of salaries. The Profit and 1st December (-) 6.65.500 (v) Drawings of A and B were Rs.000 and B.000 ACADEMY of ACCOUNTS respectively.2012 showed a net profit of Rs.20. Particulars Amount Particulars Amount (iii) Allow interest on capital @ 10% p.11.000 respectively.50.30.academyofaccounts.000 12.000 and B: Rs.2012.9.2012 stand as A: Rs. respectively.12.000. B is entitled to a salary of Rs.00. To Profit transferred to: Current Capital: A. the balances in the Current Account of the partners were: Capital ratio of Silver and Gold : A Rs.7. A’s Capital: 66.000.00.2.12.00.60.) and C Rs.1.000 respectively.000 and Rs.1.800. Capital of A is Rs.000 the information given as under : 100 12 (i) Profit shown by Profit and Loss Account is Rs.1. B’s Capital: 45.000 Rs.000.).90.a.000 and Rs.1.50.20. 10% of this profit West Patel Nagar.000 12 3.m.a.000 and B and C in addition 1st August 12. Fixed Capital Accounts and Current Capital Accounts from Gold’s Interest = 6.000.1. = Rs.000 divisible Profits A is entitled to 50% of the first Rs.000.000 providing for interest at 5% on their respective capitals and allowing B and C a 1st April 12.60. [Divisible profit: Rs.50. The CA.500 Gold (2/5) 15.000.35.000. Dr.00.2012 amounted to Rs. B Rs.1. Gold 5.45.000.000.7.000 and Rs.org is to be kept in a Reserve Account.00.30.

m. Fixed Capital: A.500.14 Fundamentals of Partnership Practice in Accountancy 27 Calculations for Opening Capital of the Partners : A B CA.Rs. B.000 60.02. ADJUSTMENT ENTRY (e) Drawings of A and B were Rs.000.000. 12.74. During 2012.000 18.000 and Rs.000 and Rs.000 commission. 100 12 10 1 Q-21: A and B are partners with capital of Rs.800.600 100 100 12 Q-20: A and B are partners sharing profits in the ratio of 3 : 2 with capitals of Alternative solution by product method for calculating B’s Interest on Capital: Rs. method (if there are frequent changes in capitals).000 prior to calculation of interest on capital but after charging B’s Salary amounted to 1st July 12.Rs.2012.30.000.a. According to the deed Interest on capital is to be allowed @ 10% p.200 p.20. A’s Interest = 75.000 interest on drawings from the partners as follows: A . Interest on capital is agreed @ 6% p.000 Rs.000 and Rs.050] may be drawn: Capital at the end of the current year xxxxx Add : Drawings xxxx Q-22: A and B are partners sharing profits in the ratio of 3 : 2.500 100 [Adopted All India] [Divisible Profit: 1. the profits of the year 1st January 60.4.15.170.000 respectively.300.6.000 78.000. Divisible Profit: Rs.000. Website: www.000 9.4.41. Prepare Profit & Loss Appropriation A/c and Partners Capital A/c.200.000 respectively. Interest on  If we are given closing balance of capital then first of all we will have to drawings is also charged which is calculated as Rs.15.2. B is Date Amount Months Product to be allowed an annual salary of Rs. B. B. Adjustment entry is made in accounts when some errors or omissions is noticed [Commission of B: Rs.Rs. Fixed Capital: A.4.000 9.600 100 12 on 01.4.200.000 West Patel Nagar.10.000 after closing the accounts of that year.13.000 and Rs. Capital at the beginning of year xxxxx (c) Allow interest on capital @ 10% p. Current Capital: A.000 respectively.92.350. [CBSE] [Commission: Rs.000 x x = Rs.000 81.800] B’s Interest = 60.37.5.000.org 1.250 for B.Rs. You are required to show profit and loss Appropriation Account and Partners Fixed and Current Capital Accounts. Fixed Capital Account and Current Capital Account from (only if it was already given to them) the information given as under : Add : Losses xxxx (a) Profit shown by Profit and Loss Account is Rs. Profit: Rs.000 ACADEMY of ACCOUNTS 1. (d) Charge interest on drawings as Rs.1.000 Capital at the beginning of year 2012 75.a.000 respectively.000 x 10 x 6 = Rs.000 12 7.02. Partners are interest can be calculated on the opening capital in simple way or by product agreed to share profits in the proportion of 7/10 for A and 3/10 for B. Their capitals at the Less : Further Capital xxxx beginning was Rs. Now interest on capital may be calculated as given bellow : Prepare Profit and Loss Appropriation Account and Partners Capital Accounts assuming that their capitals are fluctuating.57. B.000 Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Less : Further Capital .500.2.000 Less : Profits 27. Naresh Aggarwal’s Capital at the end of the current year Add : Drawings 93.000 for A and Rs.000 90. before considering the provisions of the deed is Rs.academyofaccounts.000 x 10 = Rs.Rs.000 and Rs.500 for B. Thereafter Total drawings of A and B were Rs.1. Ph:8010444896.Rs.000. B’s Capital: Rs. A provision of 5% of the net profit is to be made in respect of manager’s 7. 7. The trading profit earned during the year 2012.300 for A and Rs.50. Less : Profits xxxx (b) B will get 5% commission on trading profit.Rs.500.33.080] Interest = Total of Products x Rate x 1 .000. A’s Capital: Rs.90.500] . B.000 6 72.24. B . determine its opening balance by simply reversing the effects of all the transactions which took place in Capital A/c during that year.85. New Delhi.12. and B is entitled to a salary of Rs.92. = 7. It may also be required if a change occurred Current Capital: A.20.000 respectively.950.  For finding the opening balance of capital a statement in following way [Divisible Profit: 8.20.3.32. 6.01. Prepare Profit and Loss Less : Salary or other remuneration to Partners xxxx Appropriation Account.1.75.750.3.Rs. Capitals: A.a. 6.50.50.000 x 10 + 12.75.

000 .30.20.01. In this statement some mathematical calculations is (c) Vijay will get a salary of Rs. notes should also be shown clearly.2.80.000 agreement are as under : which was distributed among them in their profit sharing ratio without taking into (i) Interest on capital and drawings will be allowed @ 12% p. Net Profit before providing for partners salaries and commission CA.000.700] Calculations for Adjustment Entry : Particulars X Y Z Firm Q-19: A and B are partners in a firm sharing profits and losses in the ratio 3 : 2. [A's commission Rs.324.000.00. Solution: [Divisible Profit: Rs.500 for Y.000.a.000 balances standing to the credit of their capital accounts as on 01.40. it is subtracted in firm’s column. Working respectively.94.1.24. this.00. The terms of the partnership and Rs. (ii) Salary to Y and Z Rs.12.45. New Delhi.2.00.000 .000 respectively as their capitals. Naresh Aggarwal’s for the year 2012 was Rs. For (a) Interest on capital is to be allowed @ 6% per annum.00.000 each.000 + 6. terms of partnership are as follows: A single adjustment entry may adjust many errors.60.000 each.000 . The drawings of X and Y were Rs.000 respectively.00.8.600.300. During the year ended 31st March. omissions and changes.000. Rs.000 and Vijay Rs.000 and Rs.000 and Vijay Rs. Ph:8010444896. Divisible Profit: Ravi Rs.000 respectively. Preparation of Profit & Loss Appropriation A/c and Partners Capital A/cs Q-18: X and Y started a partnership business on 01.000 per annum. 2011.000. partners as per their profit sharing ratios.31.2.000. Turnover rectification it is subtracted from his column but at the same time firm gets a profit for the year was Rs.1.62. done to give effect to rectifications and changes. their capitals were: Ravi Rs.28. we have to make a statement to find out the amounts which are to be filled in (b) Ravi will get a commission of 2% on turnover. .8. Y’s Capital: Rs.8. Commission to X + 6.60.2011 were : Salary to partners .000 + 3.87. Prepare Profit and Loss Appropriation Account and Partners Capital Accounts assuming that their capitals are fluctuating.000 + 2. .000.000 . During the year they earned a profit of Rs. Now if partner’s balance is negative [Commission of Vijay Rs.000 Nil The profits of the firm for the year ended 31. Vijay Rs.8. The drawings of A and B were Rs.40.2012.857.000 for X and Rs. The in the partnership agreement with retrospective effect. ACADEMY of ACCOUNTS Net Profit Rs.000 .4. therefore it is added in firm’s column. After considering the above facts.2.academyofaccounts.000 .000 each] Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics West Patel Nagar.000.org Q-17: Ravi and Vijay are partners sharing profits and losses in the ratio of 3 : 1.000 and Rs.Rs.55.32. They contributed Illustration -13: X.40.000 + 7. B's commission Rs. Similarly if a partner’s capital decreases by Partners drawings for the year were: Ravi Rs. you are required to prepare the Profit and Loss After all adjustments are done the total of firm’s profit or loss is divided in all the Appropriation Accounts.6. B . 2012 they earned a Net profit of Rs. before making the above appropriations (iii) Special commission to X Rs.Rs. On 1st April.000 + 4.00.000 Rs. If a partner’s capital increases by (d) Vijay will get a commission of 5% on profit after deduction of all expenses rectification it is added in his column but at the same time firm gets a loss therefore including such commission. Loss Adjustment (1 : 1 : 1) .04.8.6.2.6.25.000 You are asked to prepare a single journal entry to rectify the above mistake. Website: www.2. The profit for the year ended 31.3.10. consideration the following matters of the Deed.1.000 (i) That the partners will be paid interest on their capitals @ 15% p. The Interest on capital + 5. X’s Capital: Rs.4.26 Fundamentals of Partnership Practice in Accountancy 15 together with a commission of 10% of Net Profit after charging all commission and partners salaries.2012.2.24.80.000 + 24. (iii) Sharing of profit or loss will be in the ratio of their capital contribution.000 The terms of the partnership deed provide for the following : Total + 11. A's and B's share Rs.000.2012. Show the distribution of profit. (ii) X and Y to get a monthly salary of Rs.000. Interest on drawings amounted to Rs.2. Y and Z started a business with capital of Rs.a.000 respectively. (i) Interest on Capital at the rate of 5% p.000 and Rs.40.000 . was Rs. Profit Sharing Ratio 4 : 3.03.000 A .50. Balance + 3. The firm decided to charge .50.1.000 .54. before making the above Journal Entry : appropriations and charging interest on capital were Rs.000.12.1.000.000.619] then it will be debited and if partner’s balance is positive then it will be credited in Adjustment Journal Entry.a.24. Adjustment Journal Entry. + 4.2.000 (ii) Both the partners to get a monthly salary of Rs.000.00.000 and Rs.

420.000.Rs. 50. [Divisible Profit: Rs.000 Calculations for Adjustment Entry : respectively.2. Show the To Ravi’s Capital A/c 6. Solution: Q-13: Mahesh and Ramesh are partners with capitals of Rs. Interest on Loan: Rs.03.6. Interest on Capital: Nil] Journal Entry : Date Particulars L.40.10.60.000. Debit Credit Q-14: X and Y contribute Rs. 6. B Rs. There is no partnership deed.4 : 1. 1 : 2 : 2.2012 their capitals (ii): Interest on capitals: A.000 . Net profit before charging commission is Rs. B.5. Q-16: A and B are partners in a firm.000 Show how the profits would be divided ? Give reasons. Prepare Profit and Loss Appropriation Account From the capital accounts of the partners.1.F.150.000. They decide to ____________________________________________________________________ allow interest on capital @ 6% per annum.16.50. therefore to calculate before charging any commission. The profits for the year ended 31.000 expect interest @ 10% p.2012 before making above appropriations Now all partner decide to share profits in their capital ratios with retrospective were Rs.2.03.a. Naresh Aggarwal’s Y’s Capital A/c Z’s Capital A/c Dr.00. Loss: A.000. to each partner.30.3.2 : 3.1.40.Rs.1. (ii) Amit to get salary of Rs.90. Dr.10.700. 2001 Compt. for Vijay. Amit’s: Rs.2. Their respective share of profits is 3 : 2 Vijay’s Capital A/c Dr.000 and Ramesh Particulars Ravi Vijay Firm introduced Rs.40. While preparing Loss Appropriation A/c.000 Nil [Delhi.Rs.000.F. During the Last three years they were distributed following profits : (iii) Profits are to be shared in the ratio of 3 : 2.4.000 as additional capital. Show your working clearly.500. the final accounts.m.75. Balance + 6.Rs. Website: www.000 .60.050.2. Year 2010:.m.16 Fundamentals of Partnership Practice in Accountancy 25 Date Particulars L.000 and Rs.000 + 24. Profit for the year ending 31st March Profit of year 2012 and year 2011 taken back in old ratio (1 : 1) .000 .000 + 20.25.500 per quarter interest on capital first of all we will have to determine Opening Capitals of partners: .2. Year 2012: Rs. 1.a.50.20.2 : 1. C: Rs.000 p. B and C are partners sharing profits and losses equally. Year 2011: Rs.000 Q-15: A.000 ACADEMY of ACCOUNTS To X’s Capital A/c 3.000.] [Divisible Profit: Rs.000 each and the profit of the year deed. and a salary of Rs.66. B in entitled to a salary of Rs. You [C’s Commission: Rs. After the division of the profits for the year ended 31. Interest on drawings amounted to Rs. B: Rs. Vijay’s: Rs. C is entitled to a commission of 10% on net profit after charging such was Rs.50.000 and Rs.500.60.000 per Solution: annum together with a commission of 10% of Net Profit after partners salaries but As we are given closing capital of partner for the year 2012-11. Year 2011:.000. Mahesh gives a loan of Rs.200 for Amit and Rs.000 .20. Show Profit and allowed @ 10% p. A is entitled to a salary of Rs.500 effect for last two completed years.000 respectively.000] are required to pass the necessary adjustment entry for providing interest on capitals.30.15.800. B and C were partners in a firm sharing profits in the ratio of [(i): Interest on capitals: A.academyofaccounts. Illustration-15: A. New Delhi. profit sharing ratio with retrospective effect) (ii) There is a clear agreement that the interest on capitals will be allowed even if it involves the firm in loss. Both Mahesh and Ramesh Profit Adjustment for year 2012 in ratio (2 : 1) + 40. Debit Credit ____________________________________________________________________ CA. Profit Adjustment for year 2011 in ratio (2 : 3) + 16.6.000 and the business profit (before interest) for the year is Rs.000 2.000 p. on the loan and additional capital advanced by them.60.000. Divisible Profit: Rs. Year 2010: Rs.3.000.org interest on capital. interest on Partner’s Capital and salary was not allowed.000. On 1st January.Rs. B.2.000 distribution of profits if : (Being adjustment entry recorded for change in (i) There is no agreement except for interest on capitals. 2012.000.50. As per partnership During the year 2012-11 they withdrew Rs.a.200.320] were: A: Rs.a.000 p.05.480.280] Show a journal entry to make adjustment in capital accounts. The Partnership Deed provided that interest on capital will be commission. Illustration-14: Ravi and Vijay are partners in a firm sharing profit and loss equally.15.000 2012 was Rs.1.000 Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics (Being adjustment entry recorded for omission of West Patel Nagar. salary and commission) (i) Interest on capital at 10% p.75. Ph:8010444896. ratio for Ravi and Vijay are ascertained [CBSE (Delhi)] as follows : Year 2012:.000 + 1.12. and Vijay Rs.

000] 2010 Profit 40.7.000. C is to be given annual salary of Rs.000 12.000 respectively. Y Rs.500 for the current year before interest and salary to B is Rs.000 .50.03.2011. Website: www.org Q-8: A and B are partners with capital of Rs.000 During the year they earned a profit of Rs.000 charging Q’s salary amounted to Rs. Capital at the beginning (as on 01.27.000 contributions were Rs. Naresh Aggarwal’s You are required to distribute the total profit of Rs. Debit Credit ____________________________________________________________________ Q-10: A and B are partners in a firm.000 respectively.3.400 .000 be made in respect of the manager’s commission.16.500 .000.300 p.000 and B’s capital is B’s Capital A/c Dr. He had also advanced Rs.2012 after debiting Z’s salary were Rs.500] Calculations for Adjustment Entry : Q-9: P and Q are partners sharing profits in proportion of 3 : 2 with capitals of Particulars A B C Firm Rs.38.000 2012 the profits for the year prior to calculation of interest on capital but after Total +12.000 p.30. and Z Rs.000 88.1.000.14.2011) 79.500 Nil Prepare an account showing the allocation of profits.300 .440.000 and Rs.40.16.3.1.2.4. The profit of of Rs.000 (iv) Remaining profits is to be shared by A and B in the ratio of 3 : 2.800 +15. which he was getting interest @ 10% p. Show calculations clearly.000 90.a.3. 1.15. adjusting salary to C. C’s loan shall be treated as his capital from the .3.300 -42.10. 3.900 8. 85.000 before making other adjustments. Divisible Profit: Rs.900] Date Particulars L.500.8.3. Particulars A B C (ii) Salary is allowed to A at Rs.000 1.m.30.30.000 (iii) Commission to B at the rate of 10% on net profit. [Adopted CBSE (Delhi)] Journal Entry : [Manager’s Commission: Rs. firm’s profits after Prepare Profit & Loss Appropriation A/c. Ph:8010444896.000 10. As a manager C was getting an annual salary rate of 5% p. A’s Share: Rs.8. Interest on Capital @ 10% p.000] Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics West Patel Nagar. ACADEMY of ACCOUNTS [Divisible Profit: Rs.04.00.6. The partnership According to the new agreement. During Salary to partners +5.a.500 between A and B.2012) 75.2.a. Interest is payable @ 6% p.2.12.24 Fundamentals of Partnership Practice in Accountancy 17 Rs.20.000 respectively.1. interest on loan and interest on capital of partners were : [Divisible profit: Rs.900 + 8.a.9. Divisible Profit: Rs.2. Profit C’s Capital A/c Dr.00.500 p.12.05.300 [B’s Commission: Rs.720] of interest on capital and salary) Q-11: X.1.900 +13.000 to allowed an annual salary of Rs.500.03.1.00. Capital at the end (as on 31. Distribute the profit To A’s Capital A/c 4.F.00.000 and Rs. The fixed Illustration-16: A and B are partners sharing profits and losses in the ratio of capitals of the partners were: X Rs. At the end of the year on 31. They are also allowed interest on capital @ 6% p.000.000 +5.95.2012 they decided to take their manager C The partnership deed provides that interest on capital should be allowed at the into partnership for past three years.2. Show proper accounts. A’s capital is Rs. and that Z should be allowed a salary of Rs. B is entitled to a salary of Rs.04. The terms of partnership deed is as follows: Calculations for Opening Capital : (i) Interest on capital is allowed at the rate of 6% p.000 respectively.25. CA.a.000.000.000 -15.000 2011 Loss 20. (Being adjustment entry recorded for omission [CBSE (Delhi)] [Divisible Profit: Rs. Balance + 4.000 1.500 and deed provided that : 1/5th share in the profits of the firm.000 to the firm by way of a loan on the firm for the year ended 31.000 10. A provision of 5% of this amount is to Loss Adjustment (1 : 2 : 2) .000 +5. 3 : 2.a.000 1.000 and Rs.a. During the three years.600.800 + 10.a. B’s Share: Rs.000 1.000 Q-12: Amit and Vijay started a partnership business on 01.m. Y and Z are partners in a firm sharing profits in the ratio of 2 : 2 : 1.000.1.03. Their capital 2012 Profit 60.00.4.000 after charging A’s salary but Less : Profit 6. New Delhi.800 10.000 Rs.3.50.academyofaccounts.720.800 + 42.800 .000 which has not been withdrawn. Interest on capital is agreed at 5% p.000 Prepare an account showing distribution of profits. 7. Q is Interest on capital + 7. Remaining profits is to be distributed in the ratio of 3 : 2.000 12.000 which is earned during the current financial year. Add : Drawings 10.

e.000 By Profit & Loss A/c 96.720 x 3 = Rs. Divisible Profit: Rs.20. Rs.13.8.000 To Profit transferred to: Revised Total profits of the firm for last 3 years after C is admitted as a partner with A (5/8) 50.500 5.25.500 Dr.000 B 1.000 99.600.org Salary Rs.60.720 x 2 = Rs.432 [Interest on Y’s Loan Rs. 6.000.000 for 3 years (3.18 Fundamentals of Partnership Practice in Accountancy 23 beginning and similar to other partners.6.320 (d) [Correct Interest on Loan: Rs.000] (Being adjustment entry for change in agreement) Q-7: A and B are partners in a business for last three years. = Rs.600 x 1 .40.000 and .000 80.40. 1/5 = 86.288 Q-6: Ram and Mohan start business on 01. found in above account 5 and draw it in proper manner.000 3. To C’s Capital A/c 10. Record the necessary Journal Entries to give effect to the above arrangement.a.15.e. 4.720 Rs.03. According to the deed Ram is entitled to salary of Rs.000 respectively.45.a.900 + 17.10.400] 5 B’s sacrifice = 10.7.500 p.45.000 retrospective effect = c + a .500 Total (a) 22.2012.500 To Salary to A 6.4.000 Year 2011 .m.900 To Interest on Capital to : (Net Profit) Total profits of the firm of 3 years when C was manager : A 3.a.500 By Interest on Drawings: Year 2010 40.000 B 1.000. During the first year of partnership A’s Capital A/c Dr. his capital will carry interest @ 6% p.a.000 x 3) 9.000 respectively. Ph:8010444896.400 Particulars Amount Particulars Amount Salary Rs.000 Year 2012 60. 3 : 2.000. Profit and Loss Appropriation Account Cr. 3.000 West Patel Nagar.320 . B. 30. 30.000.500 p. Debit Credit p.000 As C’s profit has been increased by Rs.30.600 99. C’s total remunerations (except share in profits) as a partner : Interest on Capital @ 6% on Rs.17.900 = Rs.000 To Interest on A’s Loan 8.500. At the end of year 2012 they earned a net profit of partners A and B in their profit sharing ratio i.20. You are to draw their Profit and Loss Appropriation Account to show Therefore. Naresh Aggarwal’s Solution: [Adapted SSC (Delhi)] ACADEMY of ACCOUNTS C’s total remunerations as a manager : Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Interest on loan @ 10% on Rs.000 and Rs. Correct Profit: A.academyofaccounts.Rs.6.b B (3/8) 30.432 they earn a net profit of Rs.2.000 and 5 Rs. Website: www.a. 4.720 [Mohan’s Commission: Rs.Rs.000 C’s Share in profit i.000 A 2. The balance in their capital accounts at he beginning of current year was Rs. for 3 years 10.000 (At the rate of 8% p.000] Net increase in C’s profit = b+d-a = 15.4.000 respectively. ____________________________________________________________________ Interest on capital is also allowed @ 5% p.20.F. You are to show a Profit and Loss Appropriation B’s Capital A/c Dr.000 + 22.) Total (c) 80.2011 with capital of Rs.500 Q-5: X and Y started business on 1st January 2012 with capital of Rs. A’s sacrifice = 10. A and B are allowed an annual remuneration of Rs. 86.500 .22. for 3 years 13.288 Account to allocate the profit for the year ended 31. allocation of the profit.04.000 Total (b) 15.000 for 3 years (1.500 Date Particulars L.50. Divisible Profit: Rs. You are required to point out any contravention of the law.800 x 3) 5. New Delhi.000 and = Rs. and Mohan is to be allowed a commission at the rate of 10% of net profit.720 therefore it will be sacrificed by old to the firm on 1st July 2012. CA.000 = 80.10. Due to further need of money Y gave a loan of Rs.

To Remunerations to: By Profit & Loss A/c 6.000.000 Z (1 / 6 ) 3.000 To Profit transferred to: less: for Z 2. Solution: Particulars Amount Particulars Amount Dr.000 2. In such case if the partner gets less than minimum amount then other To Commission to X 1.7.500 By Interest on Drawings: To X : 36. You are required to draw a correct Profit and Loss Appropriation Account form the CA. 5.500] are done in the same sequence as stated above.63.950 23700 Sometimes a partner is admitted in a firm with a guarantee of a minimum amount Z 1.15.800 Particulars Amount Particulars Amount Kapil 2. required to show the appropriation amongst the partners.a.500 6. You are required to allocate the profit though proper accounts for the two years : (i) The profit for the year 2011 amounted to Rs. Firm to Partner (when all remaining partners give guarantee to a partner) 3.22 Fundamentals of Partnership Practice in Accountancy 19 Q-2: X.) Dev 100 300 To Y : 18. Y and Z were in partnership sharing profit and losses in the ratio first year of partnership Kapil presents the following Profit and Loss Appropriation of 4 : 2 : 1 respectively.) 1.000 By Profit & Loss A/c 63.000 You are required to point out any contravention of the law. Profit and Loss Appropriation Account Cr. Divisible Profit: Rs. Profit and Loss Appropriation Account to his partner B. Partner to Firm (when a partner promise to earn a minimum amount for firm) To Salary to Y 3. You are Dr.000 may be of following types: (At the rate of 6% p. The profits for the year 2012 amounted to Rs.000.500 Y (2 / 6 ) 7.000 Add: from Y 2. Y and Z are in partnership where no partnership agreement is made.000 16.a.academyofaccounts.000 Dev (1/3) 900 2. C is guaranteed that his share of profit will not be less than Rs.100 63.500 By Loss transferred to: To Interest on Capital X (3/ 6) 11.500 3.700 Add: from X 4.000. Guarantee To Interest on Z’s Loan 3. Solution: .org To Profit & Loss A/c (Profit) 10.000 (Net Profit) Dev 1. Profit and Loss Appropriation Account Cr.200 partners have to contribute for him as per the guarantee agreement. B and C are partners sharing profit and losses in the ratio of [Correct Interest on Loan: Rs. Website: www.850 X 2.000 (Net Profit) (At the rate of 9% p. After the end of Illustration-17: X. ACADEMY of ACCOUNTS Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics Particulars Amount Particulars Amount West Patel Nagar. It was provided that in no case Z’s share in profit should be Account to his partner Dev : less than Rs.000 of profit.800 To Z : 9.000 7.000 Kapil (2/3) 1.100 7. (ii) The profit for the year 2012 amounted to Rs.200] 5 : 4 : 1. Illustration-18: A. Profit and Loss Appropriation Account Cr. found in above account and draw it in proper manner.000 To Interest on Dev’s Loan 900 Kapil 200 less: for Z 4. A presents the following A only.60.000 63.40. It is further decided that any loss arising from the guarantee will be borne by Q-4: A and B are partners in a firm without any agreement. Ph:8010444896.000.600.6. Naresh Aggarwal’s wrong Profit and Loss Appropriation Account given as : Dr.000 32.000 in any year.000 15. Partner to partner (when one partner gives guarantee to another partner) 23700 23700 If more than one type of guarantee are involved in a partnership deed then they all [Divisible Profit: Rs.900 GUARANTEE IN PARTNERSHIP Y 2. New Delhi. Q-3: Kapil and Dev are partners in a firm without any agreement.

200 B 75 200 B 600 1.48.800 Particulars Amount Particulars Amount To Interest on B’s Loan 2.200 14.000 C: 6.84.600 40.400 (Divisible Profit) To Commission to A 1.000 Add: from A 2.000 Note: B has been given a composite guarantee of Rs.000 (Deficiency) A 3.36. Profit and Loss Appropriation Account Cr.000 To C : 4.000 Excercise 60.000 96.400 Add: from A 5.000.2.20.600 for B and Rs. B and C are partners in the ratio of 3 : 2 : 1. New Delhi.600 Particulars Amount Particulars Amount = Rs. to each partner as salary and interest on capital was calculated as Rs. = 40.000 . A 1.000 5.500 3.600 36. Profit and Loss Appropriation Account Cr.000 A: 30.000 To Profit transferred to : By Profit & Loss A/c 60.m. After the end to the firm that his contribution in firm’s profit would not be less than Rs.000 less: for C 1.000 (Net Profit) B: 24.000 To Profit transferred to: To B : 32. The partnership deed also provides that C’s share of profit will not be Dr.000 and draw it in proper manner. Ph:8010444896.a.000 By Balance b/d 84. Naresh Aggarwal’s Particulars Amount Particulars Amount ACADEMY of ACCOUNTS To A : 20.400 You are required to point out any contravention of the law found in above account Add: from B 1. A has personally guaranteed B that his share of profit including his salary and interest on capital will not be less that Rs. A gives guarantee Q-1: A and B form a partnership without any partnership agreement.academyofaccounts.900 By Interest on Drawings: Solution: To Interest on Capital @ 6% A 125 Dr. CA.000 (ii) For the year 2012 Therefore.000 Accounts • Costing • Tax • FM • Maths • Stats • English • E conomics less: for C 1. Website: www.1.000 30.500 less: for B 5.000 The profit after charging partner’s salary and interest on capital is determined as A 2. Profit and Loss Appropriation Account Cr. therefore we will have to determine his only profit guarantee.000 To A : 48.Interest on Capital Dr.200 p.000 PREPARATION OF PROFIT AND LOSS APPROPRIATION ACCOUNT Illustration-19: A.1.400 (Net Profit) Rs.Salary .000 By Profit & Loss A/c 40.200 To C : 16. less than Rs.000 (At the rate of 6% p.000 40.000 including his salary Add: from A 1. To Salary to: By Profit & Loss A/c 14.40. Profit and Loss Appropriation Account Cr. B 1.2.400 for A.40.org To B : 16.12.000 and interest on capital.000 (Net Profit) West Patel Nagar.000] 96. Rs.400 .600 20. [Divisible Profit: Rs.000 19.000 60.) less: for C 2.000 .200 for C.36.600 B 2.000 in which A contributed to extent of Rs.000 5.000 14.000 in of first year of partnership A draw the following Profit and Loss Appropriation A/c : any year. 40.000 .000 By A’s Capital A/c 12.000.1.20 Fundamentals of Partnership Practice in Accountancy 21 (i) For the year 2011 Dr. B’s Profit = 40. Terms of Particulars Amount Particulars Amount the deed provides for Rs.000 This may be calculated by following way : B’s Profit + Salary + Interest on Capital = 40. Further.000 only.