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

#### 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.

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

#### 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.

 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

#### 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.

 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

#### 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.

 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.