# 12th Ts grewal 2021-22 Question 21 to 25 Accounting for partnership firm- fundamentals

#### Question 21:

Simran and Reema are partners sharing profits in the ratio of 3 : 2. Their capitals as on 31st March, 2020 were  `2,00,000 each whereas Current Accounts had balances of  `50,000 and  `25,000 respectively interest is to be allowed @ 5% p.a. The firm earned net profit of  `3,00,000 for the year ended 31st March 2021.
Pass the Journal entries for interest on capital and distribution of profit. Also prepare Profit and Loss Appropriation Account for the year.

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) Profit & Loss Appropriation A/c Dr. 20,000 To Simran’s Current A/c 10,000 To Reema’s Current A/c 10,000 (Interest on capital transferred to Profit & Loss Appropriation A/c) Profit & Loss Appropriation A/c 2,80,000 To Simran’s Current A/c 1,68,000 To Reema’s Current A/c 1,12,000 (Profit transferred to Partners’ Current A/c)

 Profit and Loss Appropriation Account for the year ended 31 March 2021 Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Interest on Capital A/c: Profit and Loss A/c 3,00,000 Simran’s Current A/c 10,000 Reema’s Current A/c 10,000 20,000 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:

WN1: Calculation of Interest on Capital
Simran's Interest on Capital = 2,00,000×5÷100=
` 10,000

Reema's Interest on Capital = 2,00,000×5÷100=` 10,000

#### Question 22:

Anita and Ankita are partners sharing profits equally. Their capitals, maintained following Fluctuating Capital Accounts Method, as on 31st March, 2020 were  ` 5,00,000 and  ` 4,00,000 respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. The firm earned net profit of  ` 2,00,000 for the year ended 31st March, 2021.
Pass the Journal entry for interest on capital.

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) 2021 March 31 Profit & Loss Appropriation A/c Dr. 90,000 To Anita’s Capital A/c 50,000 To Ankita’s Capital A/c 40,000 (Interest on capital transferred to Profit & Loss Appropriation A/c)

Working Notes:

WN1: Calculation of Interest on Capital

Anita's Interest on Capital = 5,00,000×10÷100=
` 50,000

Ankita's Interest on Capital = 4,00,000×10÷100=` 40,000

#### Question 23:

Ashish and Aakash are partners sharing profit in the ratio of 3 : 2. Their Capital Accounts showed a credit balance of  ` 5,00,000 and  ` 6,00,000 respectively as on 31st March, 2021 after debit of drawings during the year of  ` 1,50,000 and  ` 1,00,000 respectively. Net profit for the year ended 31st March, 2021 was  ` 5,00,000.

Interest on capital is to be allowed @ 10% p.a.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) 2021 March 31 Profit & Loss Appropriation A/c Dr. 1,35,000 To Ashish’s Capital A/c 65,000 To Aakash’s Capital A/c 70,000 (Interest on capital transferred to Profit & Loss Appropriation A/c) 3,65,000 Profit & Loss Appropriation A/c 2,19,000 To Ashish’s Capital A/c 1,46,000 To Akash’s Capital A/c (Profit transferred to Partners’ Capital A/c)

 Profit and Loss Appropriation Account for the year ended 31 March 2021 Dr. Cr. Particulars Amount ( `) Particulars Amount ( `) Interest on Capital A/c: Profit and Loss A/c 5,00,000 Ashish’s Capital  A/c 65,000 Aakash’s Capital  A/c 70,000 1,35,000 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:

WN1: Calculation of Opening Capital:

 Particulars Ashish Aakash Capital at the end 5,00,000 6,00,000 Add: Drawings made 1,50,000 1,00,000 Capital at the beginning 6,50,000 7,00,000

WN2: Calculation of Interest on Capital

Ashish's Interest on Capital = 6,50,000×10/100=
` 65,000

Aakash's Interest on Capital = 7,00,000×10/100=` 70,000

#### Question 24:

Naresh and Sukesh are partners with capitals of  ` 3,00,000 each as on 31st March, 2021. Naresh had withdrawn  ` 50,000 against capital on 1st October, 2020 and also  ` 1,00,000 besides the drawings against profit. Sukesh also had drawings of  ` 1,00,000.
Interest on capital is to be allowed @ 10% p.a.
Net profit for the year was
` 2,00,000, which is yet to be distributed.
Pass the Journal entries for interest on capital and distribution of profit.

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) 2021 March 31 Profit & Loss Appropriation A/c Dr. 82,500 To Naresh’s Capital A/c 42,500 To Sukesh’s Capital A/c 40,000 (Interest on capital transferred to Profit & Loss Appropriation A/c) Profit & Loss Appropriation A/c Dr. 1,17,500 To Naresh’s Capital A/c 58,750 To Sukesh’s Capital A/c 58,750 (Profit transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Opening Capital:

 Particulars Naresh Sukesh Capital at the end 3,00,000 3,00,000 Add: Withdrawal of capital 50,000 - Add: Drawings against profit 1,00,000 1,00,000 Capital at the beginning 4,50,000 4,00,000

WN2: Calculation of Interest on Capital
Naresh=(4,50,000×10/100×6/12)+(4,00,000×10/100×6/12)=` 42,500

Sukesh=4,00,000×10/100=` 40,000

#### Question 25:

On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipments to government schools situated in remote and backward areas. They contributed capitals of  `80,000 and  `50,000 respectively and agreed to share the profits in the ratio of 3 : 2. The partnership Deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of  `7,800. Showing your calculations clearly, prepare 'Profit and Loss Appropriation Account' of Jay and Vijay for the year ended 31st March, 2014.

 Profit and Loss Appropriation Account for the year ended March 2014 Dr. Cr. Particulars Amount ` Particulars Amount ` Interest on Capital A/c: Profit and Loss A/c 7,800 Jay’s Capital A/c 4,800 Vijay’s Capital A/c 3,000 7,800 7,800 7,800

Working Notes:

WN1: Calculation of Interest on Capital

Interest on Jay' s Capital=80,000×9/100=7,200

Interest on Vijay' s Capital=50,000×9/100=4,500

Total interest = 7,200+4,500 =11,700 (Which is more than the profit)

WN2: Calculation of Proportionate Interest on Capital

Jay' s proportion of interest =7,800×7,200/11,700=4,800

Vijay's proportion of interest =7,800×4,500/11,700=3,000

Note: Interest on capital is to be treated as an appropriation of profits and is to be provided to the extent of available profits i.e. ` 7,800.