12th | Accounting for Partnership Firm – Fundamental | Question No. 51 To 55 | Ts Grewal Solution 2025-2026

Amit, Binita and Charu are three partners. On 1st April, 2024, 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, 2025 was  ` 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

Profit and Loss Appropriation Account for the year ended March 31, 2024
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

 

Sajal and Kajal are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2024, their Capitals were:
Sajal – ₹ 5,00,000 and Kajal – ₹ 4,00,000.

Prepare Profit and Loss Appropriation Account and Partners' Capital Accounts at the end of 31st March, 2025 from the following information:
(a) Interest on Capital is to be allowed @ 5% p.a.
(b) Interest on the loan advanced by Kajal for the whole year, the amount of loan being ₹ 3,00,000.
(c) Interest on partners' drawings @ 6% p.a.
Drawings: Sajal ₹ 1,00,000 and Kajal ₹ 80,000.
(d) 10% of the divisible profit is to be transferred to Reserve.
Profit, before giving effect to the above, for the year ended 31st March, 2025 is ₹ 7,02,600.

Profit and Loss Account for the year ended 31st March, 2025
Particulars	₹	Particulars	₹
Interest on Kajal’s loan @ 6% p.a.	18,000	Profit	7,02,600
Profit transferred to P/L Appropriation A/c	6,84,600
	7,02,600		7,02,600

 

Profit and Loss Appropriation Account for the year ended 31st March, 2025
Particulars		₹	Particulars		₹
Interest on Capital A/c:			Profit and Loss A/c		6,84,600
- Sajal’s Capital A/c	25,000		Interest on Drawings A/c:
- Kajal’s Capital A/c	20,000	45,000	- Sajal’s Capital A/c	3,000
Reserve		64,500	- Kajal’s Capital A/c	2,400	5,400
Profit transferred to:
- Sajal’s Capital A/c	3,87,000
- Kajal’s Capital A/c	1,93,500	5,80,500
		6,90,000			6,90,000

 

 

Partners' Capital Accounts
Particulars	Sajal	Kajal	Particulars	Sajal	Kajal
Drawings A/c	1,00,000	80,000	Balance b/d	5,00,000	4,00,000
Interest on Drawings A/c	3,000	2,400	Interest on Capital A/c	25,000	20,000
Balance c/d	8,09,000	5,31,100	P&L Appropriation A/c	3,87,000	1,93,500
	9,12,000	6,13,500		9,12,000	6,13,500

         

Working Notes:

WN 1: Calculation of Interest on Capital

Interest on Sajal’s capital = ₹ 5,00,000 × 5% = ₹ 25,000

Interest on Kajal’s capital = ₹ 4,00,000 × 5% = ₹ 20,000

 

WN 2: Calculation of Interest on Drawings

Sajal’s Drawing = ₹ 1,00,000 × 6% × 6/12 = ₹ 3,000

Kajal’s Drawing = ₹ 80,000 × 6% × 6/12 = ₹ 2,400

WN 3: Calculation of Amount to be Transferred to Reserve

Divisible Profit = Net Profit + Interest on Drawings - Interest on Capital
= 6,84,600 + 5,400 – 45,000
= ₹ 6,45,000

Amount of Reserve = ₹ 6,45,000 × 10% = ₹ 64,500

WN 4: Calculation of Profit Share of Each Partner

Profit available for distribution
= 6,84,600 + 5,400 – (45,000 + 64,500)
= ₹ 5,80,500

Profit Sharing Ratio: 2:1

Sajal’s Share = ₹ 5,80,500 × 2/3 = ₹ 3,87,000

Kajal’s Share = ₹ 5,80,500 × 1/3 = ₹ 1,93,500

 

Ali and Bahadur are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1st April, 2024 stand as Ali  ` 2,50,000 and Bahadur  ` 2,00,000. The partners are allowed interest on capitals @ 5% p.a. Drawings of the partners during the year ended 31st March, 2025 amounted to  ` 35,000 and  ` 25,000 respectively.
Profit for the year, before charging interest on capital and annual salary of Bahadur @  ` 30,000, amounted to  ` 4,00,000, 10% of divisible profit is to be transferred to Reserve.
You are asked to show Partners' Current Account and Capital Accounts recording the above transactions.

Partners’ Capital Accounts
Dr.			Cr.
Particulars	Ali	Bahadur	Particulars	Ali	Bahadur
			Balance b/d	2,50,000	2,00,000
Balance c/d	2,50,000	2,00,000
	2,50,000	2,00,000		2,50,000	2,00,000

 

Partners’ Current Accounts
Dr.					Cr.
Particulars	Ali	Bahadur	Particulars	Ali	Bahadur
Drawings A/c	35,000	25,000	Interest on Capital A/c	1,2500	1,0000
			Bahadur’s Salary A/c	-	3,0000
Balance c/d	1,96,420	1,08,830	P/L Appropriation A/c	21,8920	9,3830
	2,31,420	1,33,830		23,1420	13,3830

 

Working Notes:

 

WN 1

Profit and Loss Appropriation Account for the year ended March 31, 2025
Dr.				Cr.
Particulars		( `)	Particulars	( `)
Interest on Capital:			Profit and Loss A/c	4,00,000
Ali	12,500
Bahadur	10,000	22,500
Reserve		34,750
Bahadur’s Salary		30,000
Profit transferred to:
Ali’s Capital A/c	2,18,920
Bahadur’s Capital A/c	93,830	3,12,750
		4,00,000		4,00,000

 

WN 2Calculation of Interest on Capital

Interest on Ali’s capital=2,50,000×5/100=12,500

Interest on Bahadur’s capital=2,00,000×5/100=10,000

 

WN 3Calculation of Amount to be transferred to Reserve
Amount transferred to Reserve=10% of Divisible Profits =10%×(4,00,000-22,500-30,000)=` 34,750

 

WN 4Calculation of Profit Share of each Partner

Profit available for distribution = 4,00,000-` 22,500-` 30,000- ` 3,4750 = ` 31,2750

Ali's Profit Share = 3,12,750×70÷100=2,18,920

Bahadur's Profit Share = 3,12,750×30÷100=93,830

 

Appropriations more than Available Profits

Qustion 54:

Neeraj and Surya are partners sharing profits and losses in the ratio of 2: 1.Their capitals are ₹ 4,00,000 and ₹ 2,00,000 respectively. Neeraj is entitled to interest on capital @12% p.a. and Surya is entitled to salary of ₹ 6,000 per month. Profit before providing for interest on capital and partner's salary for the year ended 31st March, 2025 was ₹ 50,000. Show the distribution of profits.

Interest on capital to Neeraj - ₹ 48,000

Salary to Surya = ₹ 6,000×12= ₹ 72,000

Total of Interest and salary = 48,000+72,000= 1,20,000

Profit is 50,000 which less than interest and salary. Therefore, profit will be distributed in the ratio of appropriation

Below is the appropriation

	Neeraj	Surya
Interest on capital	48,000	-
Salary	-	72,000
Total	48,000	72,000
Ratio of appropriation	2	3

 

Neeraj = 50,000×2÷5=20,000

Surya = 50,000×3÷5=30,000

 

Kabir, Zoravar and Parul are partners sharing prohts in the ratio of 5 :3 :2.Their capitals as on 1st April, 2024 were: Kabir- ` 5,20,000, Zoravar-` 3,20,000 and Parul - `2,00,000.

The Partnership Deed provided as follows:

(i) Kabir and Zoravar each will get salary of `24,000 p.a.

(ii) Parul will get commission of 2% of Sales.

(iii) Interest on capital is to be allowed @ 5% p.a.

(iv) Interest on Drawings is to be charged @ 5% p.a.

(v) 10% of Divisible Profit is to be transferred to General Reserve.

Sales for the year ended 31st March, 2025 were `50,00,000. Drawings by each of the partners during the year was `60,000. Net Prom for the year was `1,55,500.

Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2025.

 

Profit and loss appropriation account year ended 31st March, 2025
Particulars	`	Particulars	`
To Profit transferred Kabir  -1,60,000×5/20=40,000 Zoravar-1,60,000×4/20=32,000 Parul-1,60,000×11/20=88,000	160,000	By  Net profit By Interest on Drawings Kabir- 60,000×5/100×5/12=1,500 Zoravar-60,000×5/100×5/12=1,500 Parul-60,000×5/100×5/12=1,500	1,55,500 4,500
	1,60,000		1,60,000

 

Working note;

Profit and loss appropriation account year ended 31st March, 2025
Particulars	`	Particulars	`
To Salary Kabir  -24,000 Zoravar-24,000 To Commission Parul=50,00,000×2/100=1,00,000   To Interest on capital Kabir  -5,20,000×5/100=26,000 Zoravar-3,20,000×4/20=16,000 Parul-2,00,000×10/20=10,000	48,000   1,00,000         52,000	By  Net profit By Interest on Drawings Kabir  -60,000×5/100×5/12=1,500 Zoravar-60,000×5/100×5/12=1,500 Parul-60,000×5/100×5/12=1,500	1,55,500 4,500
	2,00,000		1,60,000

 

Ratio of appropriation will be calculated for insufficient profit distribution given below;

Kabir  - Salary + Interest on capital

=24,000+26,000=50,000

Zoravar- Salary + Interest on capital

=24,000+16,000=40,000

Parul- Commission + Interest on capital

=1,00,000+10,000=1,10,000

Ratio of appropriation = 50,000 : 40,000 :1,10,000=5:4:11