Chapter 2 Accounting for Partnership Basic Concepts Solutions

Question - 31 : - Harish is a partner in a firm. He withdrew the following amounts during the year 2017:

₹

February 01

4,000

May 01

10,000

June 30

4,000

October 31

12,000

December 31

4,000

Interest on drawings is to be charged @ 7.5 % p.a.
Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.

Answer - 31 : -

Calculation ofinterest on Harish’s drawings

	Drawings × Period	Product
01 Feb. 17 to 31 Dec. 17	4,000 × 11 =	44,000
01 May 17 to 31 Dec. 17	10,000 × 8 =	80,000
30 June 17 to 31 Dec. 17	4,000 × 6 =	24,000
31 Oct. 17 to 31 Dec. 17	12,000× 2 =	24,000
31 Dec. 17 to 31 Dec. 17	4,000 × 0 =	0
	Sum of Product	1,72,000

Question - 32 : - On March 31, 2017, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of ₹ 24,000 ₹ 18,000 and ₹ 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017, amounted to ₹ 36,000 and the partner’s drawings had been Ram, ₹ 3,600; Shyam, ₹ 4,500 and Mohan, ₹ 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.

Answer - 32 : -

	Ram	Shyam	Mohan
Capital on March 31	24,000	18,000	12,000
Add: Drawings	3,600	4,500	2,700
Less: Profit (3:2:1)	(18,000)	(12,000)	(6,000)
Capital April 01, 2012	9,600	10,500	8,700

Question - 33 : - Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’ share in profit has been guaranteed by Amit and Sumit to be a minimum sum of ₹ 8,000. Profits for the year ended March 31, 2017 was ₹ 36,000. Divide profit among the partners.

Answer - 33 : -

Guarantee of Profit tothe partners

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Profit transferred to				Profit and Loss	36,000
Amit’s Capital		18,000
Less: Gurantee to Samiksha {2,000 × (3/5)}		(1,200)	16,800

Sumit’s Capital		12,000
Less: Gurantee to Samiksha {2,000 × (2/5)}		(800)	11,200

Samiksha Capital	6,000
Add: Amit’s Guarantee		1,200
Add: Sumit’s Guarantee		800	8,000

			36,000		36,000

Question - 34 : - Pinki, Deepati and Kaku are partner’s sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than ₹ 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to ₹ 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.

Answer - 34 : -

Profit and Loss Appropriation Account
Dr.						Cr.
Particulars				Amount ₹	Particulars	Amount ₹
Profit transferred to					Profit & Loss	40,000
Pinki’s Capital		20,000
Less: Gurantee to Kaku {1,000 × (1/2)}		(500)		19,500

Deepti’s Capital		16,000
Less: Guarantee to Kaku {1,000 × (1/2)}		(500)		15,500

Kaku’s Capital	4,000
Add: Deficiency received from
Pinki			500
Deepti			500	5,000

				40,000		40,000

Question - 35 : - Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of ₹ 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are ₹ 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.

Answer - 35 : -

Profit and Loss Appropriation Account as on March 31, 2016
Dr.						Cr.
Particulars				Amount ₹	Particulars	Amount ₹
Profit transferred to					Profit and Loss	40,000
Abhay’s Capital				20,000

Siddharth’s Capital		12,000
Less: Guarantee to Kusum’s		(2,000)		10,000

Kusum’s Capital	8,000
Add: Deficiency received from Siddharth			2,000	10,000



				40,000		40,000

Profit and Loss Appropriation Account as on March 31, 2017
Dr.			Cr.
Particulars	Amount ₹	Particulars	Amount ₹
Profit transferred to		Profit and Loss	60,000
Abhay’s Capital	30,000
Siddharth’s Capital	18,000
Kusum’s Capital	12,000

	60,000		60,000

Question - 36 : - Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than ₹ 5,000. The profits for the year ending March 31, 2017 amounts to ₹ 35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show distribution of profit among partner.

Answer - 36 : -

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Profit transferred to				Profit and Loss	35,000
Radha’s Capital		17,500
Less: Fatima’s Deficiency {1,500 × (3/5)}		(900)	16,600

Mary’s Capital		14,000
Less: Fatima’s Deficiency {1,500 × (2/5)}		(600)	13,400

Fatima’s Capital	3,500
Add: Deficiency born by
Radha		900
Mary		600	5,000

			35,000		35,000

Journal
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹

	Profit and Loss Appropriation A/c	Dr.		35,000
	To Radha’s Capital A/c				16,600
	To Mary’s Capital A/c				13,400
	To Fatima’s Capital A/c				5,000
	(Profit distributed among Partners)

AlternativeMethod

Journal
Date	Particulars		L.F.	Debit Amount ₹	Credit Amount ₹
	Profit and Loss Appropriation A/c	Dr.		35,000
	To Radha’s Capital A/c				17,500
	To Mary’s Capital A/c				14,000
	To Fatima’s Capital A/c				3,500
	(Profit distributed among Partners)

	Radha’s Capital A/c	Dr.		900
	Mary’s Capital A/c	Dr.		600
	To Fatima’s Capital A/c				1,500
	(Deficiency of Fatima’s Share taken from Radha and Mary)

Question - 37 : - X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3: 2: 1, respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of ₹ 8,000. The net profit for the year ended March 31, 2017 was ₹ 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.

Answer - 37 : -

Profit and Loss Appropriation Account as on March 31, 2017
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Profit transferred to				Profit and Loss	30,000
X’s Capital	15,000
Less: Z’s Deficiency {3,000 × (3/5)}	(1,800)		13,200

Y’s Capital	10,000
Less: Z’s Deficiency {3,000 × (2/5)}	(1,200)		8,800

Z’s Capital		5,000
Add: Share of Deficiency born by
Radha		1,800
Mary		1,200	8,000

			30,000		30,000

Question - 38 : - Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of ₹ 60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are: (i) ₹ 2,50,000; (ii) 3,60,000.

Answer - 38 : -

(i)

Profit and Loss Appropriation Account as on March 31, 2015
Dr.				Cr.
Particulars		Amount ₹	Particulars	Amount ₹
Profit transferred to			Profit and Loss	2,50,000
Arun’s Capital	1,00,000
Less: Chintu’s share of deficiency	(10,000)	90,000

Bobby’s Capital		1,00,000

Chintu’s Capital	50,000
Add: Deficiency received from Arun	10,000	60,000

		2,50,000		2,50,000

(ii)

Profit and Loss Appropriation Account as on March 31, 2015
Dr.			Cr.
Particulars	Amount ₹	Particulars	Amount ₹
Profit transferred to		Profit and Loss	3,60,000
Arun’s Capital {3,60,000 × (2/5)}	1,44,000
Bobby’s Capital {3,60,000 × (2/5)}	1,44,000
Chintu’s Capital {3,60,000 × (1/5)}	72,000
	3,60,000		3,60,000

Question - 39 : - Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2: 2: 1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than ₹ 20,000. The net profit for the year ended March 31, 2017 amounted to ₹ 70,000. Prepare Profit and Loss Appropriation Account.

Answer - 39 : -

Profit and Loss Appropriation Account as on March 31, 2017
Dr.					Cr.
Particulars			Amount ₹	Particulars	Amount ₹
Profit transferred to				Profit and Loss	70,000
Ashok’s Capital		28,000
Less: Cheena’s share of deficiency {6,000 × (1/2)}		(3,000)	25,000

Brijesh’s Capital		28,000
Less: Cheena’s share of deficiency {6,000 × (1/2)}		(3,000)	25,000

Cheena’s Capital	14,000
Add: Deficiency received from
Ashok		3,000
Brijesh		3,000	20,000

			70,000		70,000

Question - 40 : -
Ram, Mohan and Sohan are partners with capitals of ₹ 5, 00,000, ₹ 2, 50,000 and 2, 00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as follows:

Ram 1/2, Mohan 1/3 Sohan 1/6. But Ram and Mohan have guaranteed that Sohan’s share in the profit shall not be less than ₹ 25,000, in any year. The net profit for the year ended March 31, 2017 is ₹ 2, 00,000, before charging interest on capital. You are required to show distribution of profit.

Answer - 40 : -

Profit and Loss Appropriation A/c as on 31 March 2017
Dr.				Cr.
Particulars		Amount ₹	Particulars	Amount ₹
Interest on Capital			Profit and Loss	2,00,000
Ram	50,000
Mohan	25,000
Sohan	20,000	95,000

Profit Transferred to
Ram’s Capital	52,500
Less: Share of deficiency {7,500 × (3/5)}	(4,500)	48,000

Mohan’s Capital	35,000
Less: Share of deficiency {7,500 × (2/5)}	(3,000)	32,000

Sohan’s Capital	17,500
Add: Deficiency received from
Ram	4,500
Mohan	3,000	25,000

		2,00,000		2,00,000

Free - Previous Years Question Papers

	₹
February 01	4,000
May 01	10,000
June 30	4,000
October 31	12,000
December 31	4,000

Chapter 2 Accounting for Partnership Basic Concepts Solutions

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