# 12th Ts grewal 2021-22 Question 56 to 60 Accounting for partnership firm- fundamentals

#### Question 56:

P and Q were partners in a firm sharing profits and losses equally. Their fixed capitals were `2,00,000 and  `3,00,000 respectively. The Partnership Deed provided for interest on capital @ 12% per annum. For the year ended 31st March, 2016, the profits of the firm were distributed without providing interest on capital.
Pass necessary adjustment entry to rectify the error.

(Outside Delhi 2017)

#### Answer:

Adjusting Journal Entry

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) P’s Current A/c Dr. 6,000 To Q’s Current A/c 6,000 (Interest on capital omitted, now adjusted.)

Working Notes:

 Statement Showing Adjustment Particulars P Q Total Interest on Capital @ 12% 24,000 36,000 (60,000) Less: Profits wrongly distributed to the extent of interest amount (30,000) (30,000) 60,000 Net Effect (6,000) 6,000 NIL

#### Question 57:

Azad and Benny are equal partners. Their capitals are `40,000 and `80,000 respectively. After the accounts for the year had been prepared, it was noticed that interest @ 5% p.a. as provided in the Partnership Deed was not credited to their Capital Accounts before distribution of profits. It is decided to pass an adjustment entry in the beginning of the next year. Record the necessary Journal entry.

#### Answer:

Interest on Capital

 Azad = 40,000 × 5/100 =  `2,000 Benny = 80,000 × 5/100 =  `4,000

Adjustment of Profit

 Azad Benny Total Interest on Capital 2,000 4,000 = 6,000 Less: Wrong distribution of Profit ` 6,000 (1: 1) (3,000) (3,000) = (6,000) Adjusted Profit (1,000) (1,000) = NIL

Adjusting Journal Entry

 Date Particular L.F Debit Amount ( `) Credit Amount ( `) Azad's Current A/c Dr. 1,000 To Benny's Current A/c 1,000 (Adjustment of profit made)

#### Question 58:

Ram, Mohan and Sohan sharing profits and losses equally have capitals of  ` 1,20,000,  ` 90,000 and  ` 60,000 respectively. For the year ended 31st March, 2021, interest was credited to them @ 6% instead of 5%.
Give adjustment Journal entry.

#### Answer:

 Journal Particulars L. F. Debit Amount ( `) Credit Amount ( `) Ram’s Capital A/c Dr. 300 To Sohan’s Capital A/c 300 (Interest on Capital was wrongly credited, now adjusted)

Working Notes:

WN 1 Calculation of Interest on Capital at 6% p.a.

Interest on Ram’s capital=1,20,000×6/100=7,200

Interest on Mohan’s capital=90,000×6/100=5,400

Interest on Sohan’s capital=60,000×6/100=3,600

WN 2 Calculation of Interest on Capital at 5% p.a.

Interest on Ram’s capital=1,20,000×5/100=6,000

Interest on Mohan’s capital=90,000×5/100=4,500

Interest on Sohan’s capital=60,000×5/100=3,000

WN 3

 Statement Showing Adjustment Particulars Ram Mohan Sohan Total Interest on Capital wrongly credited at 6% p.a. reversed (7,200) (5,400) (3,600) (16,200) Interest on Capital credited at 5% p.a. 6,000 4,500 3,000 13,500 Wrong Distribution (1,200) (900) (600) (2,700) Right Distribution of ` 2,700 (1:1:1) 900 900 900 (2,700) Net Effect (300) NIL 300 NIL

#### Question 59:

Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at  ` 3,00,000,  ` 1,00,000,  ` 2,00,000. For the year ended 31st March, 2021, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was  ` 2,50,000.
Show your working notes clearly and pass necessary adjustment entry.

#### Answer:

 Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) 2020 March 31 Shyam’s Current A/c Dr. 200 Mohan’s Current A/c Dr. 400 To Ram’s Current A/c 600 (Interest on Capital adjusted)

Working Notes:

WN 1 Calculation of Interest on Capital 10% p.a.

Interest on Ram’s capital=3,00,000×10/100=30,000

Interest on Shyam’s capital=1,00,000×10/100=10,000

Interest on Mohan’s capital=2,00,000×10/100=20,000

WN 2 Calculation of Interest on Capital 9% p.a.

Interest on Ram’s capital=3,00,000×9/100=2,7000

Interest on Shyam’s capital=1,00,000×9/100=9,000

Interest on Mohan’s capital=2,00,000×9/100=18,000

WN 3

 Statement Showing Adjustment Particulars Ram Shyam Mohan Total Interest on Capital credited at 10% p.a. 30,000 10,000 20,000 60,000 Interest on Capital wrongly credited at 9% p.a. reversed (27,000) (9,000) (18,000) (54,000) Right distribution 3,000 1,000 2,000 6,000 Wrong distribution of ` 6,000 (2 : 1 : 2) (2,400) (1,200) (2,400) (6,000) Net Effect 600 (200) (400) NIL

#### Question 60:

Simrat and Bir are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2021 after closing the books of account, their Capital Accounts stood at  ` 4,80,000 and  ` 6,00,000 respectively. On 1st May, 2020, Simrat introduced an additional capital of  ` 1,20,000 and Bir withdrew  ` 60,000 from his capital. On 1st October, 2020, Simrat withdrew  ` 2,40,000 from her capital and Bir introduced  ` 3,00,000. Interest on capital is allowed at 6% p.a. Subsequently, it was noticed that interest on capital @ 6% p.a. had been omitted. Profit for the year ended 31st March, 2021 amounted to  ` 2,40,000 and the partners' drawings had been: Simrat –  ` 1,20,000 and Bir –  ` 60,000. Compute the interest on capital if the capitals are (a) fixed, and (b) fluctuating.

#### Answer:

Case 1: If Capitals are fixed:

Calculation of Interest on Capital

Interest on Capital Simrat=(6,00,000×6×1/100×12)+(7,20,000×6×5/100×12)+(4,80,000×6×6/100×12)=35,400

Interest on Capital Bir=(3,60,000×6×1/100×12)+(3,00,000×6×5/100×12)+(6,00,000×6×6/100×12)=27,300

Working Notes:

WN1: Calculation of Opening Capital:

 Particulars Simrat Bir Capital at the end 4,80,000 6,00,000 Add: Drawings out of capital 2,40,000 60,000 Less: Fresh capital introduced 1,20,000 3,00,000 Capital at the beginning 6,00,000 3,60,000

Case2: If Capitals are Fluctuating:

Calculation of Interest on Capital

Interest on Capital Simrat=(5,76,000×6×1/100×12)+(6,96,000×6×5/100×12)+(4,56,000×6×6/100×12)= 33,960

Interest on Capital Bir=(3,24,000×6×1/100×12)+(2,64,000×6×5/100×12)+(5,64,000×6×6/100×12)= 25,140

Working Notes:

WN1: Calculation of Opening Capital:

 Particulars Simrat Bir Capital at the end 4,80,000 6,00,000 Add: Drawings out of capital 2,40,000 60,000 Add: Drawings out of profit 1,20,000 60,000 Less: Fresh capital introduced 1,20,000 3,00,000 Less: Profit already credited 1,44,000 96,000 Capital at the beginning 5,76,000 3,24,000