Chapter 2 Accounting for Partnership Basic Concepts Solutions

Question - 21 : - Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of ₹ 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2016 and March 31, 2017 were ₹ 40,000 and ₹ 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.

Answer - 21 : -

Profit and Loss Appropriation Account for the year ended 31st31st March 2016
Dr.			Cr.
Particulars	Amount ₹	Particulars	Amount ₹
Profit transferred to		Profit and Loss	40,000
Amann’s Capital 16,000	16,000
Babita’s Capital (16,000 – 2,000)	14,000
Suresh’s Capital (8,000 + 2,000)	10,000

	40,000		40,000

Profit and Loss Appropriation Account for the year ended 31st March 2017
Dr.			Cr.
Particulars	Amount ₹	Particulars	Amount ₹
Profit transferred to		Profit and Loss	60,000
Amann’s Capital	24,000
Babita’s Capital	24,000
Suresh’s Capital	12,000

	60,000		60,000

Question - 22 : -
Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of ₹ 1, 50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
(i) Partners capital on April 1, 2016;
Simmi, ₹ 30,000; Sonu, ₹ 60,000;
(ii) Current accounts balances on April 1, 2016;
Simmi, ₹ 30,000 (cr.); Sonu, ₹ 15,000 (cr.);
(iii) Partners drawings during the year amounted to
Simmi, ₹ 20,000; Sonu, ₹ 15,000;
(iv) Interest on capital was allowed @ 5% p.a.
(v) Interest on drawing was to be charged @ 6% p.a. at an average of six months;
(vi) Partners’ salaries: Simmi ₹ 12,000 and Sonu ₹ 9,000. Also show the partners’ current accounts.

Answer - 22 : -

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
Interest on Capital			Profit and Loss Account		1,50,000
Simmi	1,500		Interest on Drawings
Sonu	3,000	4,500	Simmi	600
			Sonu	450	1,050
Partners’ Salaries
Simmi	12,000
Sonu	9,000	21,000

Profit transferred to
Simmi’s Current	94,162
Sonu’s Current	31,388	1,25,550

		1,51,050			1,51,050

Partners’ Capital Account
Dr.					Cr.
Particulars	Simmi	Sonu	Particulars	Simmi	Sonu
			Balance b/d	30,000	60,000
Balance c/d	30,000	60,000

	30,000	60,000		30,000	60,000

Partners’ Current Account
Dr.					Cr.
Particulars	Simmi	Sonu	Particulars	Simmi	Sonu
Drawings	20,000	15,000	Balance b/d	30,000	15,000
Interest on Drawings	600	450	Interest on Capital	1,500	3,000
			Partners’ Salaries	12,000	9,000
Balance c/d	1,17,662	43,388	Profit and Loss Appropriation	94,162	31,388
	1,37,662	58,388		1,37,662	58,388

Question - 23 : -
Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were ₹ 80,000 and ₹ 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹ 2,000 and ₹ 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was ₹ 1, 00,300. The drawings of Ramesh and Suresh were ₹ 40,000 and ₹ 50,000, respectively. Interest on drawings amounted to ₹ 2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.

Answer - 23 : -

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
Interest on Capital			Profit and Loss		1,00,300
Ramesh	9,600		Interest on Drawings
Suresh	7,200	16,800	Ramesh	2,000
			Suresh	2,500	4,500
Partners’ Salaries
Ramesh	24,000
Suresh	36,000	60,000

Profit Transferred to
Ramesh’s Capital {28,000 × (4/7)}		16,000
Suresh’s Capital {28,000 × (3/7)}		12,000
		1,04,800			1,04,800

Partners’ Capital Account
Dr.					Cr.
Particulars	Ramesh	Suresh	Particulars	Ramesh	Suresh
Drawings	40,000	50,000	Cash	80,000	60,000
Interest on Drawings	2,000	2,500	Interest on Capital	9,600	7,200
Balance c/d	87,600	62,700	Partners’ Salaries	24,000	36,000
			Profit & Loss Appropriation	16,000	12,000
	1,29,600	1,15,200		1,29,600	1,15,200

Capital Ratio	=	Ramesh	:	Suresh
		80,000	:	60,000
		4	:	3

Question - 24 : -
Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:
(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
(ii) 5% interest is to be allowed on capital;
(iii) Vanita should be paid a monthly salary of ₹ 600.
The following balances are extracted from the books of the firm, on March 31, 2017.

Sukesh

Verma*

₹

₹

Capital Accounts

40,000

40,000

Current Accounts

(Cr.) 7,200

(Cr.) 2,800

Drawings

10,850

8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary was ₹ 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.

Answer - 24 : -

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Amount ₹	Particulars	Amount ₹
Interest on Capital			Profit and Loss	9,500
Sukesh	2,000
Vanita	2,000	4,000

Profit transferred to
Sukesh’s Current {5,500 × (3/5)}		3,300
Vanita’s Current {28,000 × (2/5)}		2,200
		9,500		9,500

Partner’s Capital Account
Dr.					Cr.
Particulars	Sukesh	Vanita	Particulars	Sukesh	Vanita
			Balance b/d	40,000	40,000
Balance c/d	40,000	40,000
	40,000	40,000		40,000	40,000

Partner’s Current Account
Dr.					Cr.
Particulars	Sukesh	Vanita	Particulars	Sukesh	Vanita
Drawings	10,850	8,150	Balance b/d	7,200	2,800
			Partner’s Salaries		7,200
			Profit and Loss Appropriation	3,300	2,200
Balance c/d	1,650	6,050	Interest on capital	2,000	2,000
	12,500	14,200		12,500	14,200

Question - 25 : -
Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of ₹ 20, 00,000, ₹ 18, 00,000 and ₹ 16, 00,000, respectively. The profit for the year ended March 2017 amounted to ₹ 1, 35,000 and the partner’s drawings had been Rahul ₹ 50,000, Rohit ₹ 50,000 and Karan ₹ 40,000. The profits are distributed among partners in the ratio of 3:2:1. Calculate the interest on capital @ 5% p.a.

14. Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of ₹ 2, 50,000 and ₹ 1, 50,000, respectively. On October 01, 2016, they decided that their capitals should be ₹ 2, 00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.

Answer - 25 : -

Product Method

Sunflower

01 April 2016 to 30 September 2016	2,50,000 × 6 =	15,00,000
01 October 2016 to 31 March 2017	2,00,000 × 6 =	12,00,000
	Sum of Product	27,00,000

Pink Rose

01 April 2016 to 30 September 2016	1,50,000 × 6 =	9,00,000
01 October 2016 to 31 March 2017	2,00,000 × 6 =	12,00,000
	Sum of Product	21,00,000

Alternative Method:

Simple Interest Method

Sunflower

April 01, 2016 to September 30, 2016	2,50,000 ×	10	×	6	=	₹ 12,500
		100		12
October 01, 2016 to March 31, 2017	2,00,000 ×	10	×	6	=	₹ 10,000
		100		12
	Interest on Sunflower’s Capital					₹ 22,500

Pink Rose

April 01, 2016 to September 30, 2016	1,50,000 ×	10	×	6	=	₹ 7,500
		100		12
October 01, 2016 to March 31, 2017	2,00,000 ×	10	×	6	=	₹ 10,000
		100		12
	Interest on Pink Rose’s Capital					₹ 17,500

Question - 26 : - On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹ 4, 00,000, ₹ 3, 00,000 and ₹ 2, 00,000, respectively. Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted to ₹ 1, 50,000 and the partner’s drawings had been Mountain: ₹ 20,000, Hill ₹ 15,000 and Rock ₹ 10,000. Calculate interest on capital.

Answer - 26 : -

Generally interest on Capital is calculated on opening balance of capital. If additional capital is not given.

	Mountain	Hill	Rock
Closing Capital	4,00,000	3,00,000	2,00,000
Add: Drawings	20,000	15,000	10,000
Less: Profit (1:1:1)	(50,000)	(50,000)	(50,000)
Opening Capital	3,70,000	2,65,000	1,60,000

Intereston Capital

Mountain	3,70,000 ×10 / 100= ₹ 37,000
Hill	2,65,000 × 10 / 100= ₹ 26,500
Rock	1,60,000 × 10 / 100= ₹ 16,000

Question - 27 : -
Rishi is a partner in a firm. He withdrew thefollowing amounts during the year ended March 31, 2018.

May 01, 2017

₹ 12,000

July 31, 2017

₹   6,000

September 30, 2017

₹   9,000

November 30, 2017

₹ 12,000

January 01, 2018

₹   8,000

March 31, 2018

₹   7,000

Interest on drawings is charged @ 9% p.a. Calculateinterest on drawings.

Answer - 27 : -

Product Method

	Drawings × Period	Product
01 May, 2017 to 31 March 2018	12,000 × 11 =	1,32,000
31 July, 2017 to 31 March 2018	6,000 × 8 =	48,000
30 September, 2017 to 31 March 2018	9,000 × 6 =	54,000
30 Nov. 2017 to 31 March 2018	12,000 × 4 =	48,000
01 Jan. 2018 to 31 March 2018	8,000 × 3 =	24,000
31 March 2018 to 31 March 2018	7,000 × 0 =	0
	Sum of Product	3,06,000

Question - 28 : - The capital accounts of Moli and Golu showed balances of ₹ 40,000 and ₹ 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @ 12 p.a. Golu advanced a loan of ₹ 10,000 to the firm on August 01, 2016. During the year, Moli withdrew ₹ 1,000 per month at the beginning of every month whereas Golu withdrew ₹ 1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was ₹ 20,950. Calculate interest on drawings show distribution of profits and prepare partner’s capital accounts.

Answer - 28 : -

Profit and Loss Adjustment Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
Interest on Capital			Profit and Loss Account		20,950
Moli	4,000		Interest on Drawings
Golu	2,000	6,000	Moli	780
			Golu	660	1,440
Interest on Partner’s Loan
Golu’s {10,000 × (6/100) × (8/12)}		400

Profit transferred to
Moli’s Capital {15,990 × (3/5)}	9,594
Golu’s Capital {15,990 × (2/5)}	6,396	15,990

		22,390			22,390

Partners’ Capital Account
Dr.					Cr.
Particulars	Moli	Golu	Particulars	Moli	Golu
Drawings	12,000	12,000	Balance b/d	40,000	20,000
Interest on Drawing	780	660	Interest on Capital	4,000	2,000
Balance c/d	40,814	15,736	Profit and Loss Adjustment	9,544	6,396


	53,594	28,396		53,594	28,396

Question - 29 : - Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of ₹ 40,000 and ₹ 30,000, respectively. They withdrew from the firm the following amounts, for their personal use:

Rakesh

Month

₹

May 31, 2016

600

June 30, 2016

500

August 31, 2016

1,000

November 1, 2016

400

December 31, 2016

1,500

January 31, 2017

300

March 01, 2017

700

Rohan

At the beginning of each month

400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts are closed on March 31, 2017, every year.

Answer - 29 : -

Rakesh’s Interest onDrawings

	Drawings × Period	Product
31 May 2016 to 31 March 2017	600 × 10 =	6,000
30 June 2016 to 31 March 2017	500 × 9 =	4,500
31 August 2016 to 31 March 2017	1,000 × 7 =	7,000
1 November 2016 to 31 March 2017	400 × 5 =	2,000
31 December 2016 to 31 March 2017	1,500 × 3 =	4,500
31 January 2017 to 31 March 2017	300 × 2 =	6,00
01 March 2017 to 31 March 2017	700 × 1 =	700
	Sum of Product	25,300

Question - 30 : - Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were ₹ 2, 50,000 and ₹ 1, 50,000, respectively. They share profits equally. On July 01, 2017, they decided that their capitals should be ₹ 1, 00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31, 2018.

Answer - 30 : -

Interest on Capital

Raj

	Capital × Period	Product
1 April 2017 to 30 June 2017	2,50,000 × 3 =	7,50,000
1 July 2017 to 31 March 2018	1,00,000 × 9 =	9,00,000
	Sum of Product	16,50,000

Neeraj

	Capital × Period	Product
1 April 2017 to 30 June 2017	1,50,000 × 3 =	4,50,000
1 July 2017 to 31 March 2018	1,00,000 × 9 =	9,00,000
	Sum of Product	13,50,000

Free - Previous Years Question Papers

	Sukesh	Verma*
	₹	₹
Capital Accounts	40,000	40,000
Current Accounts	(Cr.) 7,200	(Cr.) 2,800
Drawings	10,850	8,150

May 01, 2017	₹ 12,000
July 31, 2017	₹ 6,000
September 30, 2017	₹ 9,000
November 30, 2017	₹ 12,000
January 01, 2018	₹ 8,000
March 31, 2018	₹ 7,000

Rakesh	Month	₹
	May 31, 2016	600
	June 30, 2016	500
	August 31, 2016	1,000
	November 1, 2016	400
	December 31, 2016	1,500
	January 31, 2017	300
	March 01, 2017	700
Rohan	At the beginning of each month	400

Chapter 2 Accounting for Partnership Basic Concepts Solutions

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