Q1 and Q2 – 3 marks each, Q3 – 4 marks Time : 45 minutes

Q1. Kavita, Meenakshi and Gauri are partners doing a paper business in Ludhiana. After the accounts of
partnership have been drawn up and closed, it was discovered that for the years ending 31st March 2013
and 2014, Interest on capital has been allowed to partners @ 6% p. a. although there is no provision for
interest on capital in the partnership deed. Their fixed capitals were 2,00,000; 1,60,000 and 1,20,000
respectively. During the last two years they had shared the profits as under:

Ratio Year

3:2:1 31 March 2014

5:3:2 31 March 2013

You are required to give necessary adjusting entry on April 1, 2014.

Q2. X and Y are partnership sharing profits and losses in the ratio 2 : 1. They decided to admit Z, their
manager as partner giving him 1/5 th share in profit. Z while a manager, was receiving a salary of 25,000
per annum plus a commission of 10% of the net profit after charging salary and commission.

It was also agreed that any excess amount which Z receives as partner (over his salary and commission)
will be borne by X. Profit for the year 3,22,000 before payment of salary and commission. Prepare Profit
and Loss Appropriation Account.

Q3. X, Y, and Z are partners sharing profits and losses in the ratio 7 : 5 : 4. Their balance sheet as at 31 st
March, 2022 stood as follows :

Liabilities Amount Assets Amount

Capital Accounts : Sundry Assets 6,00,000
X 2,00,000
Y 1,50,000
Z 1,20,000 4,70,000
General Reserve 75,000
Profit and Loss A/c 15,000
Creditors 40,000
6,00,000 6,00,000
st
Partners decided that with effect from (w.e.f.) 1 April, 2022, they will share profits and losses in the ratio
3 : 2 : 1. For this reason goodwill of the firm was valued at 1,50,000. The partners do not want to record
the goodwill and also do not want to distribute the general reserve and profits.

Pass the necessary journal entry and prepare new balance sheet.