# 12th Ts grewal 2021-22 Question 71 to 75 Accounting for partnership firm- fundamentals

#### Page No 2.95

Question 71;

On 31st March, 2018 the balance in the Capital Accounts of Abhir, Bobby and Vineet, after making adjustments for profits and drawings were `8,00,000, `6,00,000 and `4,00,000 respectively.

Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 10% p.a. and were to be charged interest on drawings @ 6% pa. The drawings during the year were: Abhir- `20,000 drawn at the end of each month, Bobby- `50,000 drawn at the beginning of every half year and Vineet- `1,00,000 withdrawn on 31st October, 2017.The net profit for the year ended 31st March, 2018 was `1,50,000.The profit-sharing ratio was 2 :2 : 1.

Pass necessary adjusting entry for the above adjustments in the books of the firm. Also, show your workings clearly.  (CBSE 2019)

 Date Particulars L.F. Dr. ` Cr. ` 31 March Bobby’s  Capital      A/c          To Abhir’s  Capital      A/c               To Vineet’s  Capital      A/c     (Being omission of salary , wrong interest on capital credited , now profit corrected) Dr. 14,402 10,112 4,290 Total 24,660 24,660

Working note;

Calculation of opening Capital ;

 Particulars Abhir Bobby Vineet Closing capital Add; drawings Less; Profit 8,00,000 2,40,000 60,000 6,00,000 1,00,000 60,000 4,00,000 1,00,000 30,000 Opening capital 9,80,000 6,40,000 4,70,000 Interest on Capital @10p.a. 98,000 64,000 47,000

Total Interest on Capital= 98,000+64,000+47,000=2,09,000

Calculation of opening Drawings;

Abhir= 20,000×12×6/100×5.5/12=6,600

Bobby= 50,000×2×6/100×9/12=4,500

Vineet = 1,00,000×6/100×5/12=2,500

Total interest on Drawing=13,600

Total profit after Interest on drawing=1,50,000+13,600=1,63,600

Interest on Drawing is `1,63,600 which is less than 2,09,000

therefore, Interest on capital can be given up to the extent of Profit In the ratio of Interest on Capital

Ratio of Interest on capital is 98,000:64,000:4,7000=98:64:47

Abhir= 1,63,600×98/209 = 76,712

Bobby= 1,63,600×64/209 = 50,098

Vineet = 1,63,600×47/209 = 36,790

 Statement Adjustment Particulars Abhir Bobby Vineet Interest on capital omitted Interest on Drawing omitted 76,712 6,600 50,098 4,500 36,790 2,500 Net amount to be Credited Net loss of above omission 70,112 60,000 45,598 60,000 34,290 30,000 Net effect 10,112 14,402 4,290 Cr, Dr, Cr.

#### Question 72:

On 31st March, 2014, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc., were  ` 80,000,  ` 60,000,  ` 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted.
(a) The profit for the year ended 31st March, 2014 was
` 80,000.
(b) During the year Saroj and Mahinder each withdrew a sum of
` 24,000 in equal instalments in the end of each month and Umar withdrew  ` 36,000.
(c) The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.
(d) The profit-sharing ratio among partners was 4 : 3 : 1.
Showing your workings clearly, pass the necessary rectifying entry.

(Delhi 2015)

 Journal Particular L.F. Debit Amount ( `) Credit Amount ( `) Saroj’s Capital A/c Dr. 2,350 Mahinder’s Capital A/c Dr. 1,300 To Umar’s Capital A/c 3,650 (Adjustment made)

Working Notes:

 Particular Saroj Mahinder Umar Closing Capitals 80,000 60,000 40,000 Add: Drawings 24,000 24,000 36,000 Less: Profit Share 40,000 30,000 10,000 Opening Capital 64,000 54,000 66,000

 Particular Saroj Mahinder Umar Total Interest on Capital @ 10% p.a. 6,400 5,400 6,600 (18,400) Interest on Drawings@ 5% p.a. (550) (550) (900) 2,000 Profit (80,000 – 18,400 + 2,000) 31,800 23,850 7,950 (63,600) Right Share 37,650 28,700 13,650 (80,000) Wrong Share (40,000) (30,000) (10,000) 80,000 Net Effect 2,350 (Dr.) 1,300 (Dr.) 3,650 (Cr.) Nil

#### Question 73:

Capitals of kajal, Neerav and Alisha as on 31st March, 2021 amounted to ` 90,000,  ` 3,30,000 and  ` 6,60,000 respectively. Profit of `1,80,000 for the year ended 31st March, 2021 was distributed in the ratio of 4 : 1 : 1 after allowing interest on Capital @ 10% p.a. During the year, each partner withdrew `3,60,000. The Partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12%.
Pass the necessary adjustment entry showing the working clearly.

 In the books of kajal, Neerav and Alisha Journal Date Particulars L.F. Debit Amount ( `) Credit Amount ( `) 2020 Mar.31 Kajal’s Capital A/c Dr. 66,000 To Neerav’s Capital A/c 30,000 To Alisha’s Capital A/c 36,000 (Being adjustment made for interest on capital and profits)

Note: Since, there is no provision of interest on drawings in the partnership deed so we will not provide it.

Calculation of Opening Capital of the Partners:

 Particulars Kajal ( `) Neerav ( `) Alisha ( `) Opening Capital x y z Interest on Capital @10%=10/100=0.1 0.1x 0.1y 0.1z Add: Profit 1,20,000 30,000 30,000 Less: Drawings 3,60,000 3,60,000 3,60,000 Closing Capital 90,000 3,30,000 6,60,000

Calculation of Opening Capital

 Kajal = x+0.1x+1,20,000-3,60,000=90,000 x = 90,000+3,60,000-1,20,000/1.1 x = 3,00,000 Neerav = y+0.1y+30,000-3,60,000=3,30,000 y = 3,30,000+3,60,000-30,000/1.1 y = 6,00,000 Alisha = z+0.1z+30,000-3,60,000=6,60,000 z = 6,60,000+3,60,000-30,000/1.1 z = 9,00,000

Note: Interest on Capital is always computed on the opening capitals.

 Particulars kajal’s Capital A/c Neerav’s Capital A/c Alisha’s Capital A/c Firm Dr. (  `) Cr. (  `) Dr. (  `) Cr. (  `) Dr. (  `) Cr. (  `) Dr. (  `) Cr. (  `) Profits wrongly credited in the ratio 4:1:1(Dr.) 1,20,000 30,000 30,000 1,80,000 Interest on Capital wrongly credited @10% p.a. (Dr.) 30,000 60,000 90,000 1,80,000 Interest on Capital to be provided @12% p.a. (Cr.) 36,000 72,000 1,08,000 2,16,000 Profits to be credited in the ratio 1:1:1 (Cr.) 48,000 48,000 48,000 1,44,000 1,50,000 84,000 90,000 1,20,000 1,20,000 1,56,000 3,60,000 3,60,000 Balance to be adjusted 66,000 (Dr.) 30,000 (Cr.) 36,000 (Cr.) NIL

Page No 2.95

#### Question 74:

Capital Accounts of A and B stood at  ` 4,00,000 and  ` 3,00,000 respectively after necessary adjustments in respect of the drawings and the net profit for the year ended 31st March, 2021. It was subsequently noticed that 5% p.a. interest on capital and also drawings were not taken into account in arriving at the distributable profit. The drawings of the partners had been: A  ` 12,000 drawn at the end of each quarter and B ` 18,000 drawn at the end of each half year.

The profit for the year as adjusted amounted to
` 2,00,000. The partners share profits in the ratio of 3 : 2. You are required to pass Journal entries and show adjusted Capital Accounts of the partners.

 Journal Date Particulars L. F. Debit Amount ( `) Credit Amount ( `) 2020 P&L Adjustment A/c Dr. 29,200 Mar.31 To A's Capital A/c 16,400 To B's Capital A/c 12,800 (Interest on capital omitted, now provided) A's Capital A/c Dr. 900 B's Capital A/c Dr. 450 To P&L Adjustment A/c 1,350 (Interest on drawings omitted, now charged) A's Capital A/c Dr. 16,710 B's Capital A/c Dr. 11,140 To P&L Adjustment A/c (29,200 – 1,350) 27,850 (Loss on adjustment is distributed between the partner)

 Partners’ Capital Accounts Dr. Cr. Particulars A B Particulars A B B’s Capital A/c 1,210 - Balance b/d 4,00,000 3,00,000 A’s Capital A/c – 1,210 Balance c/d 3,98,790 3,01,210 4,00,000 3,01,210 4,00,000 3,01,210

Working Notes:

WN 1 Calculation of Capital as on April 01, 2019 (Opening Capital)

 Particulars A B Total Capital as on March 31, 2020 (Closing) 4,00,000 3,00,000 7,00,000 Add: Drawings 48,000 36,000 84,000 Less: Profit (3:2) (1,20,000) (80,000) (2,00,000) Capital as on April 01, 2019 (Opening) 3,28,000 2,56,000 5,84,000

WN 2 Calculation on Interest on Capital
Interest on A’s capital=3,28,000×5/100=16,400

Interest on B’s capital=2,56,000×5/100=12,800

WN 3 Calculation of Interest on Drawings
Interest on A’s Drawing =48,000×5/100×4.5/12=900

Interest on B’s Drawing =36,000×5/100×3/12=450

 Journal Date Particulars L. F. Debit Amount ( `) Credit Amount ( `) A’s Capital A/c Dr. 1,210 To B’s Capital A/c 1,210 (Amount of interest on Capital and interest on drawings adjusted)

 Statement Showing Adjustment Particulars A B Total Interest on Capital (to be credited) 16,400 12,800 29,200 Less: Interest on Drawings (900) (450) (1,350) Right distribution of ` 27,850 15,500 12,350 27,850 Less: Wrong Distribution of ` 27,850 (3 : 2) (16,710) (11,140) (27,850) Net Effect (1,210) 1,210 NIL

#### Question 75:

The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for same years. Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit-sharing ratio should come into effect retrospectively were for the three years. Harry and Porter have agreement on this account. The profits for the last three years were:

 Year 2019 2020 2021 Profit ( `) 2,20,000 2,40,000 2,90,000

Show adjustment of profits by means of a single adjustment Journal entry.