12th | Accounting for Partnership Firm – Fundamental | Question No. 51 To 55 | Ts Grewal Solution 2023-2024

Amit and Vijay started a partnership business on 1st April, 2022. Their capital contributions were  ` 2,00,000 and  ` 1,50,000 respectively. The Partnership Deed provided as follows:
(a) Interest on capital be allowed @ 10% p.a.
(b) Amit to get a salary of  ` 2,000 per month and Vijay  ` 3,000 per month.
(c) Profits are to be shared in the ratio of 3 : 2.
Net profit for the year ended 31st March, 2023 was  ` 2,16,000. Interest on drawings amounted to  ` 2,200 for Amit and  ` 2,500 for Vijay.
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)		2,16,000
Amit’s Capital A/c	20,000		Interest on Drawings A/c:
Vijay’s Capital A/c	15,000	35,000	Amit’s Capital A/c	2,200
Salary to:			Vijay’s Capital A/c	2,500	4,700
Amit (2,000 × 12)	24,000
Vijay (3,000 × 12)	36,000	60,000
Profit transferred to:
Amit’s Capital A/c	75,420
Vijay’s Capital A/c	50,280	1,25,700
		2,20,700			2,20,700

Working Notes:

WN 1Calculation of Interest on Capital

Interest on Amit’s Capital=2,00,000×10/100=20,000

Interest on Vijay’s Capital=1,50,000×10/100=15,000

 

WN 2Calculation of Profit Share of each Partner

Divisible Profit = 2,16,000 + 4,700 - ` 35,000 -` 60,000 = ` 1, 25,700

Profit sharing ratio = 3 : 2

Amit’s profit share=1,25,700×3/5=75,420

Vijay’s profit share=1,25,700×2/5=50,280

 

A and B are partners sharing profits and losses in the ratio of 3 : 1. On 1st April, 2022, their capitals were: A ` 50,000 and B ` 30,000. During the year ended 31st March, 2023 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.

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)	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

 

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.

Answer:

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 1Calculation 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 2Calculation 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

 

Amit, Binita and Charu are three partners. On 1st April, 2022, 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, 2023 was  ` 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

Answer:

Profit and Loss Appropriation Account for the year ended March 31, 2023
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 1Calculation 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 2Calculation 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 3Calculation of Amount to be transferred to General Reserve

Amount for General Reserve = 10% of Profit

=5,00,000×10÷100=` 50,000

WN 4Calculation 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

 

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:

Yadu- `80,000, Vidu- `70,000 and Radhu- `50,000.

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

 

Answer:

	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:

WN1Calculation of Interest on Capital

Yadu =9,00,000×6/100=54,000

Vidu=5,00,000×6/100=30,000

Radhu=4,00,000×6/100=24,000

 

WN2Calculation of Interest on Drawings

Yadu =80,000×8/100×6/12=3,200

Vidu=70,000×8/100×6/12=2,800

Radhu=50,000×8/100×6/12=2,000

 

WN3Distribution of profit (4:3:3)

Yadu =1,53,000×4/10=61,200

Vidu =1,53,000×3/10=45,900

Radhu =1,53,000×3/10=45,900