# 12th Ts grewal 2021-22 Question 26 to 30 Accounting for partnership firm- fundamentals

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Question 26: A and B are partners in the ratio of 3:2. The firm maintains Fluctuating Capital Accounts and the balance of the same as on 31st March, 2020 amounted to R 1,60,000 and 1,40,000 for A and B respectively. Their drawings during the year were 30,000 each.

As per Partnership Deed, interest on capital@ 10% p.a. on opening capitals had been provided to them.

Calculate opening capitals of partners given that their profit was 90,000. Show your workings clearly.

#### 1,31,636

Working Notes:

 Total Capital of A and B (1,60,000+1,40,000) Add: Drawings (30,000×2) = = 3,00,000 60,000 Less: Profits (Including Interest on Capital) = 3,60,000 90,000 Total opening Capital Including Interest on Capital = 2,70,000

Interest on Capital @10 p.a. 2,70,000 is 27,000

Divisible Profits= 90,000 - 27,000 = 63,000

Distribution of profits

A = 63,000×3/5=37,800

B = 63,000×2/5=25,200

#### Question 27:

Following is the extract of the Balance Sheet of Neelkant and Mahadev as on 31st March, 2021.

 BALANCE SHEET as at 31st March, 2021 Liabilities ` Assets ` Neelkant's Capital 10,00,000 Sundry Assets 30,00,000 Mahadev's Capital 10,00,000 Neelkant's Current A/c 1,00,000 Mahadev' Current A/c 1,00,000 Profit and Loss Appropriation A/c (2020-21) 8,00,000 30,00,000 30,00,000

During the year, Mahadev's drawings were  ` 30,000. Profits during the year ended 31st March, 2021 is  ` 10,00,000. Calculate interest on capital @ 5% p.a. for the year ending 31st March, 2021.

Interest on Capital

 Neelkant’s = 10,00,000×5/100=50,000 Mahadev’s = 10,00,000×5/100=50,000

Note: In this question, as the balances of both Partner's Capital Account and of Partner's Current Account are mentioned, so it is clear 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).

#### Question 28:

From the following Balance Sheet of Long and Short, calculate interest on capital @ 8% p.a. for the year ended 31st March, 2021.

 BALANCE SHEET as at 31st March, 2021 Liabilities ` Assets ` Long's Capital A/c 1,20,000 Fixed Assets 3,00,000 Short's Capital A/c 1,40,000 Other Assets 60,000 General Reserve 1,00,000 3,60,000 3,60,000

During the year, Long withdrew  ` 40,000 and Short withdrew  ` 50,000. Profit for the year was  ` 1,50,000 out of which  ` 1,00,000 was transferred to General Reserve.

Calculation of Capital at the beginning (as on April 01, 2020)

 Particulars Long ( `) Short ( `) 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

Long’s Interest on capital= 1,35,000×8/100=10,800

Short’s Interest on capital= 1,65,000×8/100=13,200

#### Question 29:

Amit and Bramit started business on 1st April, 2020 with capitals of  ` 15,00,000 and  ` 9,00,000 respectively. On 1st October, 2020, they decided that their capitals should be  ` 12,00,000 each. The necessary adjustments in capitals were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on capital for the year ended 31st March, 2021.

Calculation of Interest on Amit’s Capital

 Date Capital × Period = Product April 01, 2020 to Sept. 30, 2020 15,00,000 × 6 = 90,00,000 Oct. 01, 2020 to March 31, 2021 12,00,000 × 6 = 72,00,000 Sum of Product 1,62,00,000

#### Interest on Capital =1,62,00,000×8/100×1/12  =1,08,000

Calculation of Interest on Bramit’s Capital

 Date Capital × Period = Product April 01, 2020 to Sept. 30, 2020 9,00,000 × 6 = 54,00,000 Oct. 01, 2020 to March 31, 2021 12,00,000 × 6 = 72,00,000 Sum of Product 1,26,00,000

#### Question 30:

Moli and Bholi contribute  `20,000 and  `  10,000 respectively towards capital. They decide to allow interest on capital @ 6% p.a. Their respective share of profits is 2 : 3 and the net profit for the year is `1,500. Show distribution of profits:
(i) where there is no agreement except for interest on capitals; and
(ii) where there is an agreement that the interest on capital as a charge.

Calculation of Interest on Capital

Interest on Moli's Capital= 20,000×6/100=1,200

Interest on Bholi's Capital=10,000×6/100=600

Total Amount of Interest on Capital=1,200+600=1,800

Case (a)

Where there is no clear agreement except for interest on capitals

Profit for the year ended =  `  1,500

Total amount of interest =  `  1,800

Here, total amount of interest on capital is more than the profit available for distribution. Therefore, profit of ` 1,500 is distributed between Moli and Bholi in the ratio of their interest on capital.

 Particulars Moli : Bholi Interest on Capital 1,200 : 600 or, Ratio of interest on Capital 2 : 1

Moli will get Interest on Capital=1,500×2/3=1,000

Bholi will get Interest on Capital=1,500×1/3=500

Case (b)

In case, there is a clear agreement that the interest on capital will be allowed even if the firm has incurred loss, then the whole amount of interest on capital is to be allowed to the partners.

Interest on Moli's Capital=20,000×6/100=1,200

Interest on Bholi's Capital=10,000×6100=600

Total Amount of Interest on Capital=(1,200+600)=1,800

Total Profit of the firm =  `  1,500

Therefore, loss to the firm amounts to  `300(`1,500-`1,800). This loss is to shared by Moli and Bholi in their profit sharing ratio that is 2 : 3.

Loss to Moli=300×2/5= 120

Loss to Bholi=300×3/5=180