12th | Accounting For Partnership Firms Fundamentals | Question No. 16 to 20 | Ts Grewal Solution 2022-2023

Atul and Mithun are partners sharing profits in the ratio of 3: 2

Balances as on 1st April 2021 were as follows:

Capital Accounts (fixed): Atul- `5,00,000 and Mithun- `6,00,000

Loan Accounts: Atul - `3,00,000 (Cr.) and Mithun - `2,00,000 (Dr.)

It was agreed to allow and charge interest @ 8% p.a. Partnership Deed provided to allow interest on capital @ 10% p.a. Interest on Drawings was charged `5,000 each.

Profit before giving effect to above was `2,28,000 for the year ended 31st March, 2022.

Prepare Profit and Loss Appropriation Account.

 

	Profit and Loss Appropriation Account
Dr.							Cr.
Particulars			`	Particulars			`
Interest on Capital:				Profit and Loss A/c (Net Profit)			2,20,000
Atul’s Current A/c		50,000		Interest on Drawings:
Mithul’s Current A/c		60,000	1,10,000	Atul’s Current A/c		5,000
				Mithul’s Current A/c		5,000	10,000
Profit transferred to:
Atul’s Current A/c		72,000
Mithul’s Current A/c		48,000	1,20,000
			2,30,000				2,30,000

 

Working Notes:

WN1 Profit After allowed and charged Atul and Mithul Respectively

2,28,000 -24,000 +16,000 = 2,20,000

WN2 interest allowed on loan given by Atul

Interest on  loan =3,00,000×8/100 = 24,000

 

WN3 interest Charged on loan given to Mithul

Interest on  loan=2,00,000×8/100=16,000

 

WN4 Calculation of Interest on Capital

Interest on Atul’s loan=5,00,000×10/100=50,000

Interest on Mithul's loan=6,00,000×10/100=60,000

 

WN5 Calculation of Profit Share of each Partner

Profit Share of Atul =1,20,000×3/5=72,000

Profit Share of Mithul =1,20,000×2/5=48,000

 

Reema and Seema are partners sharing profits equally. The Partnership Deed provides that both Reema and Seema will get monthly salary of ` 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were ` 5,00,000 each and drawings during the year were ` 60,000 each.
The firm incurred a loss of ` 1,00,000 during the year ended 31st March, 2022.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2022.

Profit and Loss Appropriation Account for the year ended March 31, 2022
Dr.						Cr.
Particulars		`	Particulars		`
Profit and Loss A/c (loss)		1,00,000	Interest on Drawings A/c:
			Reema’s Capital A/c	3,000
			Seema’s Capital A/c	3,000	6,000
			Loss transferred to
			Reema’s Capital A/c	47,000
			Seema’s Capital A/c	47,000	94,000
		1,00,000			1,00,000

Note: Since the firm has incurred loss, no interest on capital and salary will be allowed to the partners. However, interest on drawings will be charged from each of them @ 10% p.a. on the amounts withdrawn by them for an average period of six months.

 

Bhanu and Partab are partners sharing profits equally. Their fixed capitals as on 1st April, 2021 are  ` 8,00,000 and  ` 10,00,000 respectively. Their drawings during the year were  ` 50,000 and  ` 1,00,000 respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a. and interest on drawings is to be charged @ 15% p.a. Net Profit for the year ended 31st March, 2022 was  ` 1,20,000.
Prepare Profit and Loss Appropriation Account.

Profit and Loss Appropriation Account for the year ended March 31, 2022
Dr.								Cr.
Particulars			( `)	Particulars			( `)
Interest on Capital A/c:				Profit and Loss A/c			1,20,000
Bhanu’s Current A/c		80,000		Interest on Drawings A/c:
Partap’s Current A/c		1,00,000	1,80,000	Bhanu’s Current A/c	3,750
				Partap’s Current A/c		7,500	11,250
				Loss transferred to
				Bhanu’s Current A/c		24,375
				Partap’s Current A/c		24,375	48,750
			1,80,000				1,80,000

 

Amit and Sumit entered into partnership on 1st April, 2021 contributing `1,50,000 and  ` 2,50,000 respectively towards capital. The Partnership Deed provided for interest on capital @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of `1,00,000 for the year ended 31st March 2022.
Pass the Journal entry for interest on capital.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit ( `)
2023
March 31	Profit & Loss Appropriation A/c	Dr.		40,000
	To Amit’s Current A/c				15,000
	To Sumit’s Current A/c				25,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Working Notes:

 

WN1: Calculation of Interest on Capital:
Amit's Interest on Capital=1,50,000×10/100=` 15,000

Sumit's Interest on Capital=2,50,000×10/100=` 25,000

 

Kamal and Kapil are partners having fixed capitals of  ` 5,00,000 each as on 31st March, 2021. Kamal introduced further capital of  ` 1,00,000 on 1st October, 2021 whereas Kapil withdrew  ` 1,00,000 on 1st October, 2021 out of capital.
Interest on capital is to be allowed @ 10% p.a.
The firm earned net profit of  ` 6,00,000 for the year ended 31st March 2022.
Pass the Journal entry for interest on capital and prepare Profit and Loss Appropriation Account.

Journal
Date	Particulars		L.F.	Debit  ( `)	Credit  ( `)
2023
March 31	Profit & Loss Appropriation A/c	Dr.		1,00,000
	To Kamal’s Current A/c				55,000
	To Kapil’s Current A/c				45,000
	(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

Profit and Loss Appropriation Account for the year ended 31 March 2022
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on Capital A/c:			Profit and Loss A/c	6,00,000
Kamal’s Current  A/c	55,000
Kapil’s Current  A/c	45,000	1,00,000
Profit transferred to:
Kamal’s Current  A/c	2,50,000
Kapil’s Current  A/c	2,50,000	5,00,000
		6,00,000		6,00,000

 

Working Notes:

WN1: Calculation of Interest on Capital:

Kamal = (5,00,000×10×6÷100×12) + (6,00,000×10×6÷100×12) = `. 55,000

Kapil=(5,00,000×10×6÷100×12) + (4,00,000×10×6÷100×12) = `. 45,000