12th | Ts grewal 2022-2023 Question 46 to 50 | Fundamental Accounting for Partnership firm

Double Entry Book Keeping Ts Grewal Vol. 1 2019 Solutions for Class 12 Commerce ACCOUNTANCY Chapter 2 - Accounting For Partnership Firms Fundamentals

Question 46:

A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1st April, 2021, their capitals were: A  ` 50,000 and B  ` 30,000. During the year ended 31st March, 2022 they earned a net profit of  ` 50,000. The terms of partnership are:
(a) Interest on capital is to allowed @ 6% p.a.
(b) A will get a commission @ 2% on turnover.
(c) B will get a salary of
` 500 per month.
(d) B will get commission of 5% on profits after deduction of all expenses including such commission.
Partners' drawings for the year were: A
` 8,000 and B  ` 6,000. Turnover for the year was  ` 3,00,000.
After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partners' Capital Accounts.

 Profit and Loss Appropriation Account for the year ended 31st March, 2022 Dr. Cr. Particulars ( `) Particulars ( `) Interest on  Capital: Profit and Loss A/c (Net Profit) 50,000 A’s Capital A/c 3,000 B’s Capital A/c 1,800 4,800 B’s Salary (500 × 12) 6,000 Partner’s  Commission A’s Capital A/c 6,000 B’s Capital A/c 1,581 7,581 Profit transferred to: A’s Capital A/c 23,714 B’s Capital A/c 7,905 31,619 50,000 50,000

 Partners’ Capital Accounts Dr. Cr. Particulars A ( `) B ( `) Particulars A ( `) B ( `) Drawings A/c 8,000 6,000 Balance b/d 50,000 30,000 Interest on Capital A/c 3,000 1,800 Commission A/c 6,000 1,581 Salary A/c 6,000 Balance c/d 74,714 41,286 P/L Appropriation A/c 23,714 7,905 82,714 47,286 82,714 47,286

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on A’s capital=50,000×6/100=3000

Interest on B’s capital=30,000×6/100=1,800

WN 2 Calculation of Commission to Partners

A’s commission = 2% on turnover

=3,00,000×2/100=6,000

Commission to B = 5% on Profits after all Expense including such Commission

Profits after all expense = 50,000 -` 4,800 -` 6,000 -` 6,000 = ` 33,200

B’s commission= Profit after all expenses×Rate of commission/100+Rate

33.200×5/105=1,581 (approx.)

WN 3 Calculation of Profit Share of each Partner

Profit available for Distribution = 50,000 -` 4,800- ` 6,000 -`7,581 = ` 31,619

Profit sharing ratio = 3 : 1

A’s profit share= 31,619×3/4=23,716

B’s profit share= 31,619×1/4=7,905

Question 47:

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.

 Profit and Loss Appropriation Account Dr. Cr. Particulars ( `) Particulars ( `) 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 Journal Entries Date Particulars L.F. Debit  ( `) Credit  ( `) 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

Question 48:

Amit, Binita and Charu are three partners. On 1st April, 2021, 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, 2022 was
` 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

 Profit and Loss Appropriation Account for the year ended March 31, 2022 Dr. Cr. Particulars ( `) Particulars ( `) 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 ×Rate100+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 = 2,76,190×1÷ 3=
` 92,063

Question 49: Yadu, Vidu and Radhu were partners in a firm sharing profits in the ratio of 4:3:3. Their fixed capitals

1st April, 2018 were ` 9,00,000, `5,00,000 and ` 4,00,000 respectively. On 1st November, 2018, Yadu gave a loan of `80,000 to the firm, as per the partnership agreement.

(i) The partners were entitled to an interest on capital @ 6% p.a.

(ii)Interest on partners' drawings was to be charged@ 8% p.a.

The firm earned profit of `2,53,000 (after interest on Yadu's Loan) during the year 2018-19. Partners

drawings for the year amounted to:

Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2019.

 Profit and Loss Appropriation Account Dr. Cr. Particulars ` Particulars ` Interest on Capital: Profit and Loss A/c (Net Profit) 2,53,000 Yadu’s Capital A/c Vidu’s Capital A/c 54,000 30,000 Interest on Capital: Radhu’s Capital A/c 24,000 1,08,000 Yadu’s Capital A/c Vidu’s Capital A/c 3.200 2,800 Radhu’s Capital A/c 2,000 8,000 Profit transferred to: Yadu’s Capital A/c Vidu’s Capital A/c 61,200 45,900 Radhu’s Capital A/c 48,900 1,53,000 2,61,000 2,61,000

Working notes:

WN1 Calculation of Interest on Capital

Vidu=5,00,000×6/100=30,000

WN2 Calculation of Interest on Drawings

Vidu=70,000×8/100×6/12=2,800

WN3 Distribution of profit (4:3:3)

Vidu =1,53,000×3/10=45,900

Question 50:

Sajal and Kajal are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2021 their Capitals were: Sajal ` 50,000 and Kajal ` 40,000.
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
` 30,000.
(c) Interest on partners' drawings @ 6% p.a. Drawings: Sajal
` 10,000 and Kajal  ` 8,000.
(d) 10% of the divisible profit is to be transferred to Reserve.
Net profit for the year ended 31st March, 2022 is
` 68,460.
Note: Net profit means net profit after debit of interest on loan by the partner.

 Profit and Loss Account for the year ended 31st March, 2022 Dr. Cr. Particulars ( `) Particulars ( `) Interest on Kajal’s loan@ 6% p.a. 1,800 Profit 70,260 Profit transferred to P/L Appropriation A/c 68,460 70,260 70,260

 Profit and Loss Appropriation Account for the year ended 31st  March,  2022 Dr. Cr. Particulars ( `) Particulars ( `) Interest on Capital A/c: Profit and Loss A/c 68,460 Sajal’s Capital A/c 2,500 Kajal’s Capital A/c 2,000 4,500 Interest on Drawings A/c: Sajal’s Capital A/c 300 Reserve 6,450 Kajal’s Capital A/c 240 540 Profit transferred to: Sajal’s Capital A/c 38,700 Kajal’s Capital A/c 19,350 58,050 69,000 69,000

 Partners’ Capital Accounts Dr. Cr. Particulars Sajal ( `) Kajal ( `) Particulars Sajal ( `) Kajal ( `) Drawings A/c 10,000 8,000 Balance b/d 50,000 40,000 Interest on Drawings A/c 300 240 Interest on Capital A/c 2,500 2,000 P&L Appropriation A/c 38,700 19,350 Balance c/d 80,900 53,110 91,200 61,350 91,200 61,350

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on Sajal’s capital=50,000×5/100=2,500

Interest on Kajal’s capital=20,000×5/100=2,000

WN 2 Calculation of Interest on Drawings

Interest on Sajal’s Drawing=10,000×6/100×6/12=300

Interest on Kajal’s Drawing=8,000×6/100×6/12=240

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

= 68,460 + 540 - 4,500 = ` 64,500

Amount of reserve =64,500×10/100=6,450

WN 4 Calculation of Profit Share of each Partner

Profit available for Distribution = 68,460 + 540 – (` 4,500+ ` 6,450) = ` 58,050

Profit sharing ratio = 2 : 1

Sajal’s profit share = 58,050×2/3=38700

kajal’s profit share = 58,050×1/3=19350