12th | Accounting for Partnership Firms – Fundamentals| Question No. 51 To 55 | Ts Grewal Solution 2024-2025

Amit and Vijay started a partnership business on 1st April, 2023. 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, 2024 was  ` 2,16,000. Interest on drawings amounted to  ` 2,200 for Amit and  ` 2,500 for Vijay.
Prepare Profit and Loss Appropriation Account.

Profit and Loss Appropriation Account for the year ended 31st March, 2024
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, 2023, their capitals were: A ` 50,000 and B ` 30,000. During the year ended 31st March, 2024 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.

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

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, 2023, 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, 2024 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

 

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.

 

	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