12th | Accounting for Partnership Firms – Fundamentals| Question No. 36 To 40 | Ts Grewal Solution 2024-2025

X and Y are partners in a firm. X is entitled to a salary of  ` 10,000 per month and commission of 10% of the net profit after partners' salaries but before charging commission. Y is entitled to a salary of  ` 25,000 p.a. and commission of 10% of the net profit after charging all commission and partners' salaries. Net profit before providing for partners' salaries and commission for the year ended 31st March, 2024 was ` 4,20,000. Show distribution of profit.

Profit and Loss Appropriation Account for the year ended March 31, 2024
Dr.				Cr.
Particulars			( `)	Particulars	( `)
Partners’ Salary:				Profit and Loss A/c (Net Profit)	4,20,000
X (10,000 × 12)	1,20,000
Y	25,000		1,45,000
Partners’ Commission:
X’s Capital A/c		27,500
Y’s Capital A/c		22,500	50,000
Profit transferred to:
X’s Capital A/c	1,12,500
Y’s Capital A/c	1,12,500		2,25,000
			4,20,000		4,20,000

Working Notes:

WN 1Calculation of Commission

Commission to X = 10% of Net Profit after partners’ salaries but before charging such commission

Profit after Partners’ Salaries = 4,20,000` 1,45,000 =  ` 2,75,000

Commission to X	= Profit after Partners’ Salaries × Rate of commission / 100
	= 2,75,000 ×  10 /100= 27,500

Commission to Y = 10% of Net Profit after charging Commission and Partners’ Salaries

Profit after commission and partners’ salaries = 4,20,000-` 1,45,000-` 27,500 =  ` 2,47,500

Commission to Y	= Profit after commission and partners’ salaries × Rate of commission / 100+Rate
	= 2,45,500 ×  10 /100+10= 22,500

WN 2Calculation of Profit Share of each Partner

Profit available for distribution = 4,20,000-` 1,45,000 -` 50,000 =  `2,25,000

Profit sharing ratio = 1 : 1

 Profit share of each X and Y = 2,25,000× 1/2

 

Ram and Mohan, two partners, drew for their personal use `1,20,000 and  ` 80,000. Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest chargeable from each partner?

In this question, date of drawings made by the partners is not given. Therefore, interest on drawings is calculated on average basis for a period of six months.

Interest on Ram’s Drawings = 1,20,000× 6/ 100×6/12=3,600

Interest on Mohan’s Drawings = 80,000× 6/ 100×6/12=2,400

 

Brij and Mohan are partners in a firm. They withdrew ` 48,000 and ` 36,000 respectively during the year evenly in the middle of every month. According to the partnership agreement, interest on drawings is to be charged @ 10% p.a.
Calculate interest on drawings of the partners using the appropriate formula.

Since, the drawings are made evenly at the middle of every month, therefore interest on drawings is calculated for a period of six months.

Interest on Brij's Drawings= `. 48,000×10/100×6/12= `. 2,400

Interest on Mohan's Drawings= `. 36,000×10/100×6/12= `. 1,800

 

Dev withdrew  `10 000 on 15th day of every month Interest on drawings was to be charged @ 12% per annum. Calculate interest oh Dev's Drawings. (CBSC 2019)

 

Interest on Dev’s Drawings=10,000×12=1,20,000×12/100×6/12=7,200

Note ; Interest on drawing will be calculated for 6 month as average ,because same amount withdrawn in the middle of every month during the year

 

One of the partners in a partnership firm has withdrawn `9,000 at the end of each quarter, throughout the year. Calculate interest on drawings at the rate of 6% per annum.

Answer:

Amount of Drawings =  ` 9,000 per quarter
Annual Drawings=  ` (9,000 × 4) =  ` 36,000
Rate of Interest on Drawings = 6% p.a.

Average Period	=	(Months remaining after the first drawings + Months remaining after the last drawings)/2
	=	(9 + 0)/2 = 4.5 months
Interest on Drawings	=	(Annual drawings × Rate of Drawings/100 × Average Period/12)
	=	(36,000 × 6/100 × 4.5/12) =  ` 810