12th Ts grewal 2021-22 Question 81 to 85 Accounting for partnership firm- fundamentals

Page No 2.96

Question 81:

A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They earned a profit of  ` 30,000 during the year ended 31st March, 2021.  Distribute profit among A, B and C if:
(a) C's share of profit is guaranteed to be
 ` 6,000 Minimum.
(b) Minimum profit payable to C amounting to
 ` 6,000 is guaranteed by A.
(c) Guaranteed minimum profit of
 ` 6,000 payable to C is guaranteed by B.
(d) Any deficiency after making payment of guaranteed
 ` 6,000 will be borne by A and B in the ratio of 3 : 1.

Answer:

Case (a)

Profit and Loss Appropriation Account
for the year ended 31st March, 2021

Dr.

 

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Profit transferred to:

 

Profit and Loss A/c

30,000

A’s Capital A/c

14,400

 

 

 

B’s Capital A/c

9,600

 

 

 

C’s Capital A/c

6,000

30,000

 

 

 

30,000

 

30,000

 

 

 

 


Working Notes:

 

Profit = ` 30,000

Profit sharing ratio = 3 : 2 : 1

C is given a guarantee of minimum profit of ` 6,000

A’s profit share= 30,000×3/6=15,000

B’s profit share= 30,000×2/6=10,000

C’s profit share= 30,000×1/6=5,000

Deficiency in C’s Profit Share = 6,000- ` 5,000 = ` 1,000

This deficiency is to be borne by A and B in their profit sharing ratio i.e. 3 : 2

Deficiency is to be borne by A= 1000×3/5=600

Deficiency is to be borne by b= 1000×2/5=400

 

Therefore,

Final Profit Share of A = 15,000 -` 600 = ` 14,400

Final Profit Share of B = 10,000 -` 400 = ` 9,600

Final Profit Share of C = 5,000 + 1,000 = ` 6,000

Case (b)

Profit and Loss Appropriation Account
for the year ended 31st  March,  2021

Dr.

 

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Profit transferred to:

 

Profit and Loss A/c

30,000

A’s Capital A/c

14,000

 

 

 

B’s Capital A/c

10,000

 

 

 

C’s Capital A/c

6,000

30,000

 

 

 

30,000

 

30,000

 

 

 

 


Working Notes:

Deficiency in C’s Profit Share = 6,000 ` 5,000 = ` 1,000

This deficiency is to be borne by A only.

Therefore,

Final Profit Share of A = 15,000- ` 1,000 = ` 14,000

Final Profit Share of B = 10,000

Final Profit Share of C = 5,000 + 1,000 = ` 6,000

Case (c)

Profit and Loss Appropriation Account
for the year ended 31st  March,  2021

Dr.

 

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Profit transferred to:

 

Profit and Loss A/c

30,000

A’s Capital A/c

15,000

 

 

 

B’s Capital A/c

9,000

 

 

 

C’s Capital A/c

6,000

30,000

 

 

 

30,000

 

30,000

 

 

 

 


Working Notes:

Deficiency in C’s Profit Share = 6,000-` 5,000 = ` 1,000

This deficiency is to be borne by B only.

Therefore,

Final Profit Share of A = 15,000

Final Profit Share of B = 10,000 - ` 1,000 = ` 9,000

Final Profit Share of C = 5,000 + 1,000 = ` 6,000

Case (d)

Profit and Loss Appropriation Account
for the year ended 31st  March,  2021

Dr.

 

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Profit transferred to:         

 

Profit and Loss A/c             

30,000

A’s Capital A/c

14,250 

 

 

 

B’s Capital A/c

9,750

 

 

 

C’s Capital A/c

6,000

30,000

 

 

 

30,000

 

30,000

 

 

 

 


Working Notes:

Deficiency in C’s Profit Share = 6,000 - ` 5,000 = ` 1,000

This deficiency is to be borne by A and B in the ratio of 3:1.

Deficiency is to be borne by A= 1000×3/5=750

Deficiency is to be borne by B= 1000×1/5=250

Therefore,

Final Profit Share of A = 15,000 - 750 = ` 14,250

Final Profit Share of B = 10,000 - 250 = ` 9,750

Final Profit Share of C = 5,000 + 1,000 = ` 6,000

 



Page No 2.97

Question 82:

P, Q and R entered into partnership on 1st April, 2018 to share profits and losses in the ratio of 12 : 8 : 5. It was provided that in no case R's share in profit be less then `30,000 p.a. The profits and losses for the period ended 31st March were: 2019 Profit `1,20,000; 2020 Profit `1,80,000; 2021 Loss `1,20,000.
Pass the necessary Journal entries in the books of the firm.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(`)

Credit

Amount

(`)

 

 

 

 

 

 

2019

P’s Capital A/c

Dr.

 

3,600

 

 

Q’s Capital A/c

Dr.

 

2,400

 

 

        To R’s Capital A/c

 

 

 

6,000

 

(Deficiency adjusted)

 

 

 

 

 

 

 

 

 

 

2021

P’s Capital A/c

Dr.

 

32,400

 

 

Q’s Capital A/c

Dr.

 

21,600

 

 

        To R’s Capital A/c

 

 

 

54,000

 

(Deficiency adjusted)

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

WN1: Calculation of amount of deficiency of R
R's Minimum Guaranteed Profit = ` 30,000 For 2018-19, 

R's actual share of profit = 1,20,000 ×5/25=` 24,000

Deficiency in R's Profit = 30,000 - 24,000 = ` 6,000

This deficiency is to be borne by P & Q in the ratio of 12:8. For 2018-19, 

This deficiency is to be borne by P=6,000×12/20=3,600

This deficiency is to be borne by Q=6,000×8/20=2,400

 

WN2: R's actual share of profit = 1,80,000×5/25=` 36,000

This implies that there is no deficiency in R's profit share as his actual share exceeds his minimum

guaranteed share. For 2020-21,

 R's share of loss = 1,20,000×5/25=` 24,000

Deficiency in R's Profit = 30,000 + 24,000 = ` 54,000

This deficiency is to be borne by P & Q in the ratio of 12:8.



Page No 2.97

Question 83:

A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They admit C, their Manager, as a partner with effect from 1st April, 2020, for 1/4th share of profits.
C, while a Manager, was in receipt of a salary of
 ` 27,000 p.a. and a commission of 10% of the net profits after charging such salary and commission.
In terms of the Partnership Deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the manager, would have to be personally borne by A out of his share of profit. Profit for the year ended 31st March, 2021 amounted to
 ` 2,25,000.

You are required to show Profit and Loss Appropriation Account for the year ended 31at March, 2021.

Answer:

Profit and Loss Appropriation Account

for the year and March 31, 2021

Dr.

 

 

Cr.

Particulars

Amount

( `)

Particulars

Amount

( `)

Profit transferred to:

 

Profit and Loss A/c            

2,25,000

A’s Capital A/c

96,750

 

 

 

B’s Capital A/c

72,000

 

 

 

C’s Capital A/c

56,250

2,25000

 

 

 

2,25000

 

2,25000

 

 

 

 


Working Notes:

WN 1 Calculation of Remuneration to C as a Manager

Salary to C = ` 27,000

Commission to C = 10% of Net Profit after Salary and Commission

Net Profit after Salary and Commission = 2,25,000- 27,000 = ` 1,98,000

C’s commission = 1,98,000×10/110=18,000

C’s remuneration as Manager = Salary + Commission = 27,000 + 18,000 = ` 45,000

WN 2 Calculation of Profit Share of C as a Partner

Profit = ` 2,25,000

C’s profit share = 2,25,000×1/4=56,250

Part of C’s Profit Share to be borne by A = 56,250 - ` 45,000 = ` 11,250

Profit available for distribution between A and B = 2,25,000 - 45,000 = ` 1,80,000

A’s profit share = 1,80,000×3/5=1,08,000

C’s profit share = 1,80,000×2/5=72,000

A’s Profit share after adjusting C’s deficiency = 1,08,000 - ` 11,250 = ` 96,750

 



Page No 2.97

Question 84:

Asgar, Chaman and Dholu are partners in a firm. Their Capital Accounts stood at `6,00,000;  ` 5,00,000 and  ` 4,00,000 respectively on 1st April, 2020. They shared Profits and Losses in the proportion of 4 : 2 : 3. Partners are entitled to interest on capital @ 8% per annum and salary to Chaman and Dholu @  `7,000 per month and  `10,000 per quarter respectively as per the provision of the Partnership Deed.

Dholu's share of profit (excluding interest on capital but including salary) is guaranteed at a minimum of  `1,10,000 p.a. Any deficiency arising on that account shall be met by Asgar. The profit for the year ended 31st March, 2021 amounted to  ` 4,24,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2021.

Answer:

Profit and Loss Appropriation Account
for the year ended March 31, 2021

Dr.

 

 

 

Cr.

Particulars

 

Amount
`

Particulars

Amount
`

Interest on Capital to:

 

 

Profit and Loss A/c (Net Profit)

4,24,000

Asgar’s Capital A/c

48,000

 

 

 

Chaman’s Capital A/c

40,000

 

 

 

Dholu’s Capital A/c

32,000

1,20,000

 

 

 

 

 

 

Salary to Chaman (` 7,000 × 12)

84,000

 

 

Salary to Dholu (` 10,000 × 4)

40,000

 

 

 

 

 

 

Profit transferred to:

 

 

 

Asgar’s Capital A/c

70,000

 

 

 

Chaman’s Capital A/c

40,000

 

 

 

Dholu’s Capital A/c

70,000

1,80,000

 

 

 

 

4,24,000

 

4,24,000

 

 


Working Notes:

Profit available for distribution =  4,24,000 – (1,20,000 + 84,000+ 40,000) = ` 1,80,000
Profit sharing ratio = 4 : 2 : 3

Asgar’s profit share = 1,80,000×4/9=80,000

Chaman’s profit share = 1,80,000×2/9=40,000

Dhalu’s profit share = 1,80,000×3/9=60,000


Dholu’s Minimum Guaranteed Profit =
` 1,10,000 (excluding interest on capital, but including salary)
Dholu’s Minimum Guaranteed Profit (excluding salary) = 1,10,000 – 40,000 =
` 70,000
But, Dholu’s Actual Profit Share =
` 60,000
Deficiency in Dholu’s Profit Share = 70,000 – 60,000 = 10,000
This deficiency is to be borne by Asgar alone.
Therefore,
Asgar’s New Profit Share =  80,000 – 10,000 =
` 70,000

 



Page No 2.97

Question 85:

The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March, 2017,  ` 80,000 in the ratio of 3 : 3 : 2 without providing for the following adjustments:
(a) Alia and Chand were entitled to a salary of
 ` 1,500 each p.a.
(b) Bhanu was entitled for a commission of
 ` 4,000.
(c) Bhanu and Chand had guaranteed a minimum profit of
 ` 35,000  p.a. to Alia any deficiency to borne equally by Bhanu and Chand.
Pass the necessary Journal entry for the above adjustments in the books of the firm. Show workings clearly.

Answer:

In the books of Mudit, Sudhir and Uday

Journal

Date

Particulars

 

L.F.

Debit Amount

( `)

Credit Amount

( `)

2017

 

 

 

 

 

March 31

Bhanu’s Capital A/c

Dr.

 

21,000

 

 

Chand’s Capital A/c

Dr.

 

2,000

 

 

  To Alia’s Capital A/c

 

 

 

23,000

 

(Being adjustment entry passed for rectification of errors)

 

 

 

 


Working Notes:

Table Showing Adjustment

Particulars

Alia’s Capital A/c

Bhanu’s Capital A/c

Chand’s Capital A/c

Firm

 

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Profits wrongly Distributed (Dr.)

30,000

 

30,000

 

20,000

 

 

80,000

Salary to be provided (Cr.)

 

18,000

 

 

 

18,000

36,000

 

Commission to be provided (Cr.)

 

 

 

4,000

 

 

4,000

 

Profits correctly distributed

 

35,000

 

5,000

 

Nil

40,000

 

Balance to be adjusted

23,000(Cr.)

21,000(Dr.)

2,000(Dr.)

Nil

 

Divisible Profits

=

Profits before appropriation – (Salary + Bhanu’s Commission)

 

=

 ` [80,000 – (36,000 + 4,000)] =  ` 40,000

Alia’s Share of Profits

=

 ` (40,000 × 3/8) = 15,000

Deficiency in Alia’s Share of Profits

=

 ` (35,000 – 15,000) =  ` 20,000 (To be borne by Bhanu and Chand in 1 : 1)

Alia’ final share of Profits

=

 ` 35,000

Bhanu’s final share of Profits

=

 ` [(40,000 × 3/8) – 10,000] =  ` 5,000

Chand’s final share of Profits

=

 ` [(40,000 × 2/8) – 10,000] = Nil