Page No 2.89:
Question 46:
Sajal and Kajal
are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2020
their Capitals were: Sajal – `5,00,000 and Kajal – `4,00,000.
Prepare Profit and Loss Appropriation Account and the Partners' Capital
Accounts at the end of the year after considering the following items:
(a) Interest on Capital is to be allowed @ 5% p.a.
(b) Interest on the loan advanced by Kajal for the whole year, the amount of
loan being ` 3,00,000.
(c) Interest on partners' drawings @ 6% p.a. Drawings: Sajal ` 1,00,000 and Kajal ` 80,000.
(d) 10% of the divisible profit is to be transferred to Reserve.
Profit, before a effecting to the above, for year ended 31^{st},2021 is
7,02,600.
Answer:
Profit and Loss Account 

Dr. 


Cr. 
Particulars 
Amount ( `) 
Particulars 
Amount ( `) 
Interest on Kajal’s loan@ 6% p.a. 
18,000 
Profit 
7,02,600 
Profit transferred to P/L Appropriation A/c 
6,84,600 







70,260 

70,260 




Profit and Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Interest on Capital A/c: 

Profit and Loss A/c 
6,84,600 

Sajal’s Capital A/c 
25,000 




Kajal’s Capital A/c 
20,000 
45,000 
Interest on Drawings A/c: 




Sajal’s Capital A/c 
3,000 


Reserve 
64,500 
Kajal’s Capital A/c 
2,400 
5,400 

Profit transferred to: 




Sajal’s Capital A/c 
3,87,000 




Kajal’s Capital A/c 
1,93,500 
5,80,500 




6,90,000 

6,90,000 





Partners’ Capital Accounts 

Dr. 
Cr. 

Particulars 
Sajal 
Kajal 
Particulars 
Sajal 
Kajal 

Drawings A/c 
1,00,000 
8,000 
Balance b/d 
5,00,000 
4,00,000 

Interest on Drawings A/c 
3,000 
2,400 
Interest on Capital A/c 
25,000 
20,000 




P&L Appropriation A/c 
3,87,000 
1,93,500 

Balance c/d 
8,09,000 
5,31,100 





9,12,000 
6,13,500 

9,12,000 
6,13,500 








Working Notes:
WN 1 Calculation of Interest on Capital
Interest on Sajal’s
capital=5,00,000×5/100=25,000
Interest on Kajal’s
capital=2,00,000×5/100=20,000
WN 2 Calculation of Interest on Drawings
Interest on Sajal’s
Drawing=1,00,000×6/100×6/12=3,000
Interest on Kajal’s
Drawing=80,000××6/100×6/12=2,400
WN 3 Calculation of Amount to be transferred to Reserve
Amount for Reserve = 10% of Divisible Profit
Divisible Profit = Profit + Interest on Drawings ` Interest on Capital
= 6,84,600 + 5,400  45,000 = ` 6,45,000
Amount of reserve =6,45,000×10/100=64,500
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 6,84,600 + 5,400 ` 45,000 ` 64,500 = ` 5,80,500
Profit sharing ratio = 2 : 1
Sajal’s profit share = 5,80,500×2/3=3,87,000
kajal’s profit share = 5,80,500×1/3=1,93,500
Page No 2.89:
Question 47:
Ali the Bahadur
are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%.
Their respective capitals as at 1st April, 2020 stand as Ali ` 25,000
and Bahadur ` 20,000. The partners
are allowed interest on capitals @ 5% p.a. Drawings of the partners during the
year ended 31st March, 2020 amounted to ` 3,500 and ` 2,500 respectively.
Profit for the year, before charging interest on capital and annual salary of
Bahadur @ `3,000, amounted to ` 40,000, 10% of
divisible profit is to be transferred to Reserve.
You are asked to show Partners' Current Account and Capital Accounts recording
the above transactions.
Answer:
Partners’ Capital Accounts 

Dr. 
Cr. 

Particulars 
Ali 
Bahadur 
Particulars 
Ali 
Bahadur 



Balance b/d 
25,000 
20,000 
Balance c/d 
25,000 
20,000 




25,000 
20,000 

25,000 
20,000 






Partners’ Current Accounts 

Dr. 

Cr. 

Particulars 
Ali 
Bahadur 
Particulars 
Ali 
Bahadur 
Drawings A/c 
3,500 
2,500 
Interest on Capital A/c 
1,250 
1,000 



Bahadur’s Salary A/c 
 
3,000 
Balance c/d 
19,642 
10,883 
P/L Appropriation A/c 
21,892 
9,383 

23,142 
13,383 

23,142 
13,383 






Working Notes:
WN 1
Profit and Loss Appropriation Account for the year ended March 31, 2020 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Interest on Capital: 

Profit and Loss A/c 
40,000 

Ali 
1,250 




Bahadur 
1,000 
2,250 



Reserve 
3,475 



Bahadur’s Salary 
3,000 



Profit transferred to: 




Ali’s Capital A/c 
21,892 




Bahadur’s Capital A/c 
9,383 
31,275 




40,000 

40,000 






WN 2 Calculation of Interest on Capital
Interest on Ali’s capital=25,000×5/100=1,250
Interest on Bahadur’s capital=20,000×5/100=1,000
WN 3 Calculation
of Amount to be transferred to Reserve
Amount transferred to Reserve=10% of Divisible Profits =10%×(40,0002,2503,000)=` 3,475
WN 4 Calculation of Profit Share of each Partner
Profit available
for distribution = 40,000 ` 2,250 ` 3,000 ` 3,475 = ` 31,275
Ali's Profit Share=31,275×70/100=21,892
Bahadur's Profit Share=31,275×30/100=9,383
Page No 2.90:
Question 48:
A,
B
and C were partners in a firm having capitals of ` 50,000 ; ` 50,000 and ` 1,00,000 respectively. Their Current Account balances were A:
` 10,000; B:
` 5,000 and C:
` 2,000 (Dr.).
According to the Partnership Deed the partners were entitled to an interest on
Capital @ 10% p.a. C being the working partner was also entitled to a
salary of ` 12,000 p.a. The
profits were to be divided as:
(a) The first ` 20,000 in proportion to their capitals.
(b) Next ` 30,000 in the
ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm earned net profit of ` 1,72,000 before charging any of the above items.
Prepare Profit and Loss Appropriation Account and pass necessary Journal entry
for the appropriation of profits.
Answer:
Profit and Loss Appropriation Account 


Dr. 


Cr. 


Particulars 
Amount ( `) 
Particulars 
Amount ( `) 


Interest on Capital: 

Profit and Loss A/c (Net Profit) 
1,72,000 


A’s Current A/c 
5,000 





B’s Current A/c 
5,000 





C’s Current A/c 
10,000 
20,000 




Salary to C 

12,000 




Profit transferred to: 





A’s Current A/c 
50,000 





B’s Current A/c 
44,000 





C’s Current A/c 
46,000 
1,40,000 





1,72,000 

1,72,000 










Date 
Particulars 

L.F. 
Debit Amount ( `) 
Credit Amount ( `) 









Interest on Capital A/c 
Dr. 

20,000 



To A’s Current A/c 



5,000 


To B’s Current A/c 



5,000 


To C’s Current A/c 



10,000 


(Interest on partners’ capital allowed to partners) 













Salary A/c 
Dr. 

12,000 



To C’s Current A/c 



12,000 


(Salary allowed to C) 













Profit and Loss Appropriation A/c 
Dr. 

1,40,000 



To A’s Current A/c 



50,000 


To B’s Current A/c 



44,000 


To C’s Current A/c 



46,000 


(Profit available for distribution transferred to partners’ current
accounts) 











Working Notes:
WN 1 Calculation of Interest on Capital
Interest on A’s capital=50,000×10/100=5,000
Interest on B’s capital=50,000×10/100=5,000
Interest on C’s capital=1,00,000×10/100=10,000
WN 2 Calculation of Profit Share of each Partner
Profits available for Distribution = 1,72,000 ` 20,000  ` 12,000 = ` 1,40,000
1. Distribution of first ` 20,000 in the Capital Ratio i.e. 1:1:2
A’s profit share=20,000×1/4=5,000
B’s profit share=20,000×1/4=5,000
C’s profit share=20,000×2/4=10,000
2. Distribution of Next ` 30,000 in the ratio of 5:3:2
A’s profit share=30,000×5/10=15,000
B’s profit share=30,000×3/10=9,000
C’s profit share=30,000×2/10=6,000
3. Remaining Profit available for distribution
= `
1,40,000 `
20,000 `
30,000 = `
90,000
This profit of ` 90,000 is to be shared equally by the partners.
Profir Share of A,B,C each =90,000 ×1/3=30,000
Therefore,
Total Profit Share of A = 5,000 + 15,000 + 30,000 = ` 50,000
Total Profit Share of B = 5,000 + 9,000 + 30,000 = ` 44,000
Total Profit Share of C = 10,000 + 6,000 + 30,000 = ` 46,000
Page No 2.90:
Question 49:
A,
B and
C are partners sharing profits and losses in the ratio of A
1/2, B 3/10, C 1/5 after providing for interest @ 5% on their
respective capitals, viz., A ` 50,000; B ` 30,000 and C ` 20,000 and allowing B and C a salary of ` 5,000 each per annum. During the year ended 31st March, 2021,
A has drawn ` 10,000 and B and C
in addition to their salaries have drawn ` 2,500 and ` 1,000
respectively. Profit and Loss Account for the year ended 31st March, 2020
showed a net profit of ` 45,000. On 1st April, 2020,
the balances in the Current Accounts of the partners were A (Cr.)
`4,500;
B (Cr.) ` 1,500 and C (Cr.) ` 1,000. Interest is not charged on Drawings or Current
Account balances. Show Partners' Capital and Current Accounts as at 31st March,
2021 after division of profits in accordance with the partnership agreement.
Answer:
Profit and Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Interest on Capital: 

Profit and Loss A/c 
45,000 

A’s Current A/c 
2,500 




B’s Current A/c 
1,500 




C’s Current A/c 
1,000 
5,000 



Salary to: 




B’s Current A/c 
5,000 




C’s Current A/c 
5,000 
10,000 



Profit transferred to: 




A’s Current A/c 
15,000 




B’s Current A/c 
9,000 




C’s Current A/c 
6,000 
30,000 




45,000 

45,000 






Partners’ Capital Accounts 

Dr. 






Cr. 
Particulars 
A 
B 
C 
Particulars 
A 
B 
C 




Balance b/d 
50,000 
30,000 
20,000 
Balance c/d 
50,000 
30,000 
20,000 





50,000 
30,000 
20,000 

50,000 
30,000 
20,000 








Partners’ Current Accounts 

Dr. 






Cr. 
Particulars 
A 
B 
C 
Particulars 
A 
B 
C 
Drawings A/c 
10,000 
7,500 
6,000 
Balance b/d 
4,500 
1,500 
1,000 




Interest on Capital A/c 
2,500 
1,500 
1,000 




Salaries A/c 

5,000 
5,000 
Balance c/d 
12,000 
9,500 
7,000 
P/L Appropriation A/c 
15,000 
9,000 
6,000 

22,000 
17,000 
13,000 

22,000 
17,000 
13,000 








Working Notes:
WN 1 Calculation of Interest on Capital
Interest on A’s capital=50,000×5/100=2,500
Interest on B’s capital=30,000×5/100=1,500
Interest on C’s capital=20,000×5/100=1,000
WN 2 Calculation of Profit Share of each Partner
Profit available for Distribution = 45,000 ` 15,000 = ` 30,000
A’s profit share=30,000×1/2=15,000
B’s profit share=30,000×3/10=9,000
C’s profit share=30,000×1/5=6,000
Page No 2.90:
Question 50:
Amit, Binita and
Charu are three partners. On 1st April, 2020, their Capitals stood as: Amit `1,00,000,
Binita `2,00,000 and Charu
`3,00,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amit would get a salary of ` 10,000 per month,
(c) Binita would receive commission @ 5% of net profit after deduction of
commission, and
(d) 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended
31st March, 2021 was
`5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the
partners.
Answer:
Profit and Loss Appropriation Account for the year ended March 31, 2021 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Interest on Capital: 

Profit and Loss A/c (Net Profit) 
5,00,000 

Amit’s Capital A/c 
5,000 




Binita’s Capital A/c 
10,000 




Charu’s Capital A/c 
15,000 
30,000 



Salary to Amit (10,000 × 12) 
1,20,000 



Commission to Binita 
23,810 



General Reserve 
50,000 



Profit transferred to: 




Amit’s Capital A/c 
92,063 




Binita’s Capital A/c 
92,063 




Charu’s Capital A/c 
92,064 
2,76,190 




33,360 

33,360 






Partners’
Capital Accounts 

Dr. 
Cr. 

Particulars 
Amit 
Binita 
Charu 
Particulars 
Amit 
Binita 
Charu 





Balance b/d 
1,00,000 
2,00,000 
3,00,000 





Interest on Capital A/c 
5,000 
10,000 
15,000 





Salary A/c 
1,20,000 
– 
– 





Commission 
– 
23,810 
– 

Balance c/d 
3,17,063 
3,25,873 
4,07,064 
P/L Appropriation A/c 
92,063 
92,063 
92,064 


3,17,063 
3,25,873 
4,07,064 

3,17,063 
3,25,873 
4,07,064 










Working Notes:
WN 1 Calculation of Interest on Capital
Interest on Amit=1,00,000×5/100=5,000
Interest on Binita=2,00,000×5/100=10,000
Interest on Charu=3,00,000×5/100=15,000
WN 2 Calculation of Commission to Binita
Commission to
Binita = 5% on Net Profits after Commission
Commission to Binita=Net Profit ×Rate/100+Rate=5,00,000×5/105=` 23,810
WN 3 Calculation of Amount to be transferred to General Reserve
Amount for General Reserve = 10% of Profit
=5,00,000×10/100=` 50,000
WN 4 Calculation of Profit Share of each Partner
Profit available for Distribution = 5,00,000  30,000  1,20,000  23,810  50,000
= ` 2,76,190
Profit share of Amit, Binita and Charu each = 2,76,190×13= ` 92,063
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