12th | Accounting for Partnership Firm – Fundamental | Question No. 16 To 20 | Ts Grewal Solution 2023-2024

X, Y and Z are partners in a firm sharing profits in 2 : 2 : 1 ratio. The fixed capitals of the partners were : X  `5,00,000; Y  ` 5,00,000 and Z  ` 2,50,000 respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. Z is to be allowed a salary of  ` 2,000 per month. The profit of the firm for the year ended 31st March, 2023 after debiting Z's salary was  ` 4,00,000.
Prepare Profit and Loss Appropriation Account.

Answer:

Profit and Loss Appropriation Account for the year ended 31st March 2023
Dr.					Cr.
Particulars			`	Particulars	`
Interest on Capital:				Profit and Loss A/c (Net Profit after Z’s salary)	4,00,000
X’s Capital A/c		50,000
Y’s Capital A/c		50,000
Z’s Capital A/c		25,000	1,25000
Profit transferred to:
X’s Capital A/c	1,10,000
Y’s Capital A/c	1,10,000
Z’s Capital A/c	55,000		2,75,000
			4,00,000		4,00,000

Working Notes:

WN 1 Salary to Z has not been debited to Profit and Loss Appropriation Account. This is because Profit of ` 4,00,000 is given after adjusting the Z’s salary.

WN 2Calculation of Interest on Capital

 

Interest on X^' s Capital=5,00,000×10/100=50,000

Interest on Y's Capital=5,00,000×10/100=50,000

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

         
WN 3Calculation of Profit Share of each Partner

Divisible of Profit after Interest on Capital = ` 4,00,000-`1,25,000 = ` 2,75,000

Profit sharing ratio = 2 : 2 : 1

Profit share of  X' s =5,00,000×2/5=1,10,000

Profit share of  Y' s =5,00,000×2/5=1,10,000

Profit share of  Z' s=5,00,000×1/5=55,000

 

X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of  ` 8,00,000 and  ` 6,00,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of  ` 60,000 which has not been withdrawn. Profit for the year ended 31st March, 2023 before interest on capital but after charging Y's salary amounted to  ` 2,40,000.
A provision of 5% of the profit is to be made in respect commission to the manager. Prepare an account showing the allocation profits.

Answer:

Profit and Loss Account for the year ended 31st March 2023
Dr.			Cr.
Particulars	( `)	Particulars	( `)
Manager’s Commission (3,00,000×5%)	15,000	Profit and Loss A/c (Net Profit after Y’s salary)	2,40,000
		Y’s Salary	60,000
Profit transferred to Profit and Loss
Appropriation A/c	2,85,000
	3,00,000		3,00,000

 

Profit and Loss Appropriation Account for the year ended 31st March 2023
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Salary to Y		60,000	Profit and Loss Adjustment A/c	2,85,000
Interest on Capital:			(After manager’s commission)
X’s Capital A/c	40,000
Y’s Capital A/c	30,000	70,000
Profit transferred to:
X’s Capital A/c	93,000
Y’s Capital A/c	62,000	1,55,000
		2,85,000		2,85,000

Working Notes:

WN 1Calculation of Manager’s Commission

Profit for making Managers’ Commission = 2,40,000 + 60,000 (Y’s Salary) =  `3,00,000

Manager's Commission=₹3,00,000×5/100=₹15,000

WN 2Calculation of Interest on Capital

Interest on X's Capital A/c=₹8,00,000×5/100=₹40,000Interest on Y's Capital A/c=₹6,00,000×5/100=₹30,000

 

WN 3Calculation of Profit Share of each Partner

Profit available for distribution = 2,85,000- ` 60,000 - ` 70,000 =  `1,55,000

X's Share of Profit=₹1,55,000×3/5=₹93,000

Y's Share of Profit=₹1,55,000×2/5=₹62,000

 

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

Balances as on 1st April 2022 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, 2023.

Prepare Profit and Loss Appropriation Account.

 

Answer;

	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:

WN1Profit After allowed and charged Atul and Mithul Respectively

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

WN2interest allowed on loan given by Atul

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

 

WN3interest Charged on loan given to Mithul

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

 

WN4Calculation 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 ofAtul =1,20,000×3/5=72,000

Profit Share ofMithul =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, 2023.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2023

Answer:

Profit and Loss Appropriation Account for the year ended March 31, 2023
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.

 

Question 20: