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12th | Accounting for Partnership Firm – Fundamental | Question No. 91 To 95 | Ts Grewal Solution 2023-2024

Question 91:


The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March, 2017,  ` 80,000 in the ratio of 3 : 3 : 2 without providing for the following adjustments:
(a) Alia and Chand were entitled to a salary of 
` 1,500 each p.a.
(b) Bhanu was entitled for a commission of 
` 4,000.
(c) Bhanu and Chand had guaranteed a minimum profit of 
` 35,000  p.a. to Alia any deficiency to borne equally by Bhanu and Chand.

Pass the necessary Journal entry for the above adjustments in the books of the firm. Show workings clearly.(CBSE Sample paper 2018)

Answer:

In the books of Mudit, Sudhir and Uday

Journal

Date

Particulars

 

L.F.

Debit

( `)

Credit

( `)

2017

 

 

 

 

 

March 31

Bhanu’s Capital A/c

Dr.

 

21,000

 

 

Chand’s Capital A/c

Dr.

 

2,000

 

 

  To Alia’s Capital A/c

 

 

 

23,000

 

(Being adjustment entry passed for rectification of errors)

 

 

 

 


Working Notes:

Table Showing Adjustment

Particulars

Alia’s Capital A/c

Bhanu’s Capital A/c

Chand’s Capital A/c

Firm

 

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Dr.
(
`)

Cr.
(
`)

Profits wrongly Distributed (Dr.)

30,000

 

30,000

 

20,000

 

 

80,000

Salary to be provided (Cr.)

 

18,000

 

 

 

18,000

36,000

 

Commission to be provided (Cr.)

 

 

 

4,000

 

 

4,000

 

Profits correctly distributed

 

35,000

 

5,000

 

Nil

40,000

 

Balance to be adjusted

23,000(Cr.)

21,000(Dr.)

2,000(Dr.)

Nil

 

Divisible Profits

=

Profits before appropriation – (Salary + Bhanu’s Commission)

 

=

 ` [80,000 – (36,000 + 4,000)] =  ` 40,000

Alia’s Share of Profits

=

 ` (40,000 × 3/8) = 15,000

Deficiency in Alia’s Share of Profits

=

 ` (35,000 – 15,000) =  ` 20,000 (To be borne by Bhanu and Chand in 1:1)

Alia’ final share of Profits

=

 ` 35,000

Bhanu’s final share of Profits

=

 ` [(40,000 × 3/8) – 10,000] =  ` 5,000

Chand’s final share of Profits

=

 ` [(40,000 × 2/8) – 10,000] = Nil

 

Question 92:


Ajay, Binay and Chetan were partners sharing profits in the ratio of 3 : 3 : 2. The Partnership Deed provided for the following:
(i) Salary of 
` 2,000 per quarter to Ajay and Binay.
(ii) Chetan was entitled to a commission of 
` 8,000
(iii) Binay was guaranteed a rofit of 
` 50,000 p.a.
The profit of the firm for the year ended 31st March, 2015 was
`1,50,000 which was distributed among Ajay, Binay and Chetan in the ratio of 2 : 2 : 1, without taking into consideration the provisions of Partnership Deed. Pass necessary rectifying entry for the above adjustments in the books of the firm. Show your workings clearly. (Delhi 2016 C)

Answer:

Journal

Date

Particulars

L.F.

Debit

 (`)

Credit

 (`)

 

 

 

 

 

 

 

Ajay’s Capital A/c

Dr.

 

6,400

 

 

Binay’s Capital A/c

Dr.

 

2,000

 

 

    To Chetan’s Capital A/c

 

 

 

8,400

 

(Adjustment entry made)

 

 

 

 

 

Working Notes:

WN1: Profit & Loss Appropriation A/c

Profit and Loss Appropriation Account

for the year ended 31st March, 2015

Dr.

 

 

Cr.

Particulars

`

Particulars

`

Salary:

 

Profit and Loss A/c

1,50,000

Ajay’s Capital A/c

8,000

 

 

 

Binay’s Capital A/c

8,000

16,000

 

 

 

Chetan’s Capital A/c (Commission)

8,000

 

 

Profit transferred to:

 

 

 

Ajay’s Capital A/c (47,250 – 1,650)

45,600

 

 

 

Binay’s Capital A/c (47,250 + 2,750)

50,000

 

 

 

Chetan’s Capital A/c (31,500 – 1,100)

30,400

1,26,000

 

 

 

1,50,000

 

1,50,000

 

 

 

 

 

WN2: Statement Showing Adjustment

Statement Showing Adjustment

Particulars

Ajay

Binay

Chetan

Total

Salary to be provided

8,000

8,000

-

(16,000)

Commission to be provided

 

 

8,000

        (8,000)

Profit to be credited

45,600

50,000

30,400

(1,26,000)

Total

53,600

58,000

38,400

(1,50,000)

Profit already distributed

(60,000)

(60,000)

(30,000)

1,50,000

Net Effect

(6,400)

(2,000)

8,400

NIL

 

Question 93:


Ankur, Bhavns and Disha are partners in a firm. On 1st April, 2022, the balance in their Capital Accounts stood at  ` 14,00,000,  ` 6,00,000 and  ` 4,00,000 respectively. They shared profits in the proportion of 7 : 3 : 2 respectively. Partners are entitled to interest on capital @ 6% per annum and salary to Bhavna@  ` 50,000 p.a. and a commission of  ` 3,000 per month to Disha as per the provisions of the partnership Deed. Bhavna's share of profit (excluding interest on capital) is guaranteed at not less than  ` 1,70,000 p.a. Disha's share of profit (including interest on capital but excluding commission) is guaranteed at not less than  ` 1,50,000 p.a. Any deficiency arising on that account shall be met by Ankur. The profit of the firm for the year ended 31st March, 2023 amounted to  ` 9,50,000.
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

`

Interest on Capital to:

 

 

Profit and Loss A/c

9,50,000

Ankur’s Capital A/c

84,000

 

 (Net Profit)

 

Bhavna’s Capital A/c

36,000

 

 

 

Disha’s Capital A/c

24,000

1,44,000

 

 

 

 

 

 

Salary to Bhavna

50,000

 

 

Commission to Disha

(` 3,000 × 12)

36,000

 

 

 

 

 

 

Profit transferred to:

 

 

 

Ankur’s Capital A/c

4,14,000

 

 

 

Bhavna’s Capital A/c

1,80,000

 

 

 

Disha’s Capital A/c

1,26,000

7,20,000

 

 

 

 

9,50,000

 

9,50,000

 

 


Working Notes:

Profit available for distribution =  9,50,000 – (1,44,000 + 50,000 + 36,000) = ` 7,20,000
Profit sharing ratio = 7 : 3 : 2

Ankur’s profit share = 7,20,000×7/12=4,20,000

Bhavna’s profit share = 7,20,000×3/12=1,80,000

Disha’s profit share = 7,20,000×1/12=1,20,000


Bhavna’s Minimum Guaranteed Profit =
` 1,70,000 (excluding interest on capital)
But, Bhavna’s Actual Profit Share =
`1,80,000
This implies that there is no deficiency in Bhavna’s profit share as her actual profit share (i.e.
` 1,80,000) exceeds his minimum guaranteed profit share (i.e. ` 1,70,000).
 
Disha’s Minimum Guaranteed Profit =
` 1,50,000 (including interest on capital but excluding salary)
Disha’s Minimum Guaranteed Profit (excluding interest) = 1,50,000 – 24,000 =
` 1,26,000
But, Disha’s Actual Profit Share = 1,20,000
Deficiency in Disha’s Profit Share = 1,26,000 – 1,20,000 = 6,000
This deficiency is to be borne by Ankur alone.
Therefore,
Ankur’s New Profit Share =  4,20,000 – 6,000 =
` 4,14,000

 

Mininum Earnings Guaranteed by a Partner

Question 94:


Three Chartered Accountants Abhijit, Baljit and Charanjit form a partnership, profits being shared in the ratio of 3 : 2 : 1 subject to the following:
(a) Charanjitshare of profit guaranteed to be not less than 
` 15,000 p.a.
(b) Baljit gives a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average gross fee of the preceding five years when he was carrying on profession alone, which on an average works out at 
` 25,000.
The profit for the first year of the partnership are 
`75,000. The gross fee earned by Baljit for the firm is  `16,000. You are required to show Profit and Loss Appropriation Account after giving effect to the above.

Answer:

Profit and Loss Appropriation Account

Dr.

 

 

Cr.

Particulars

`

Particulars

`

Profit transferred to:                   

 

Profit and Loss A/c (Net Profit)   

75,000

Abhijit’s Capital A/c

41,400

 

B’s Capital A/c

 

Baljits Capital A/c

27,600

 

(Deficiency in Revenue)

9,000

Charanjits Capital A/c

15,000

84,000

 

 

 

84,000

 

84,000

 

 

 

 


Working Notes:

Deficiency in revenue guaranteed by B = 25,000 -` 16,000 = `9,000

Profit to be distributed among Partners = 75,000 + B’s deficiency in guaranteed interest

= 75,000 + 9,000 = `84,000

Profit sharing ratio = 3 : 2 : 1

Abhijits profit share=84,000×3/6=42,000

Baljit’s profit share=84,000×2/6=28,000

Charanjit’s profit share=84,000×1/6=14,000

Charanjit is given a guarantee of minimum profit of`15,000

Deficiency in C’s Profit Share = 15,000 - ` 14,000 = `1,000

Deficiency is to be borne by A= 1000×3/5=600

Deficiency is to be borne by b= 1000×2/5=400

Therefore, Final Profit Share of A = 42,000  600 = `41,400

Final Profit Share of B = 28,000  400 = `27,600*

Final Profit Share of C =14,000 + 1,000 = `15,000

* In the book, the final profit to B is given as `18,600, however, as per the solution it should be `27,600. The deficiency of  `9,000 that was guaranteed by B to the firm would not be deducted from his share as he is bearing it in form of profit.

 

Question 95: Xen, Sam and Tim are partners in a firm. For the year ended 31st March, 2022, the profit of the firm 12,00,000 was distributed equally among them, without giving effect to the following terms of the partnership Deed:


(i) Sam's guarantee to the firm that the firm would earn a profit of at least 1,35,000. Any shortfall in these profits would met by him.

(ii) Profits to be shared in the ratio of 2:2 :1.

You are required to pass the necessary Journal entries to rectify the error in accounting.

Answer:

JOURNAL

Date

Particulars

 

LF

Dr. (Rs.)

Cr. (Rs.)

2023

×en's Capital A/c

Dr.

 

40,000

 

 

Sam's Capital A/c

Dr.

 

40,000

 

 

Tim's Capital A/c

Dr.

 

40,000

 

 

To Profit & Loss Adjustment A/c 

 

 

 

1,20,000

 

(Profit wrongly distributed now reversed)

 

 

 

 

 

Sam's Capital A/C

Dr.

 

15,000

 

 

To Profit & Loss Adjustment A/c

 

 

 

15,000

 

(For Shortfall in Profit)

 

 

 

 

 

Profit & Loss Adjustment A/c

Dr.

 

1,35,000.

 

 

To ×en's Capital

 

 

 

54,000

 

To Sam's Capital A/c

 

 

 

54,000

 

To Tim's Capital A/c

 

 

 

27,000

 

(For Rectified Profit Distributed (2: 2:1): )

 

 

 

 

 

 

 

 

 

 

 

 

Ts Grewal Solution 2023-2024

Click below for more Questions

Class 12 / Volume – I

Chapter 1 – Accounting For Partnership Firms Fundamentals

 

Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30
Question No. 31 To 35
Question No. 36 To 40
Question No. 41 To 45
Question No. 46 To 50
Question No. 51 To 55

Question No. 56 To 60

Question No. 61 To 65
Question No. 66 To 70
Question No. 71 To 75

Question No. 76 To 80
Question No. 81 To 85
Question No. 86 To 90

Question No. 91 To 95