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12th | Accounting for Partnership Firm – Fundamental | Question No. 1 To 5 | Ts Grewal Solution 2023-2024

Question 1:


In the absence of Partnership Deed, what are the rules relation to :
(a) Salaries of partners,
(b) Interest on partners’ capitals,
(c) Interest on loan by partner,
(d) Division of profit,
(e) Interest on partners’ drawings

(f) Interest on loan to partners?

Answer:

 

 Items (Points)

 Provision in the Absence of Partnership Deed

(a)

 Salaries of Partners

 No Salary will be allowed to Partners.

(b)

 Interest on Partners’ Capitals

 No interest will be allowed to Partners on Capital

(c)

 Interest on Loan by Partners’

 6% p.a. Interest will be allowed on the amount given by
 partners in the form of Loans and Advances to firm.

(d)

 Division of Profit

 Profits will be shared equally, it is irrespective the
 amount of capital contributed by partners

(e)

 Interest on Partners’ Drawings

 No Interest will be charged on the Drawings of Partners

(F)

Interest on loan to partner

Not charged from partner

 

Question 2:


Mahesh, Ramesh and Suresh are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the commencement of the firm, they have faced the following problems :
(a) Mahesh wants that interest on capital should be allowed to the partners but Ramesh and Suresh do not agree.
(b) Ramesh wants that the partners should be allowed to draw salary but Mahesh and Suresh do not agree.
(c) Suresh wants that the loan given by him to the firm should bear interest @ 10% p.a. but Mahesh and Ramesh do not agree.
(d) Mahesh and Ramesh having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but Suresh does not agree.
State how you will settle these disputes if the partners approach you for purpose.

Answer:

 

Disputes

Possible Judgements

(a)

Mahesh wants that interest on capital should be allowed to the partners but Ramesh and Suresh do not agree. 

As per Partnership Act, no interest on Capital will be allowed.

Reason: There is no partnership agreement among Mahesh, Ramesh and Suresh regarding interest on capital.

(b)

Ramesh wants that the partners should be allowed to draw salary but Mahesh and Suresh do not agree.

No salary will be allowed to any partner.

Reason: There is no partnership agreement.

(c)

Suresh wants that the loan given by him to the firm should bear interest @ 10% p.a. but Mahesh and Ramesh do not agree.

Interest on partner’s loan (Suresh’s loan) will be allowed at 6% p.a.

Reason: As per Partnership Act, in the absence of partnership agreement, interest on partners loan is allowed at 6% p.a.

(d)

Mahesh and Ramesh having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but Suresh does not agree.

Profit will be shared equally and not in the capital ratio.

Reason: There is no partnership agreement.

 

Question 3:


Following differences have arisen among P, Q and R. State who is correct in each case:
(a) P used 
` 20,000 belonging to the firm and made a profit of  ` 5,000. Q and R want the amount to be given to the firm?
(b) Q used  `5,000 belonging to the firm and suffered a loss of 
` 1000. He wants the firm to bear the loss?
(c) P and Q want to purchase goods from A Ltd., R does not agree?
(d) Q and R want to admit C as partner, P does not agree?

(e) R had given loan of `1,00,000 to firm and demands interest @ 10% p.a. P  and Q do not want to pay the interest.

 

Answer:

(a) P is bound to pay ` 20,000 together with profit of ` 5,000 to the firm because this amount belongs to the firm.

Explanation: As per Principal and Agent relationship, P is principal as well as agent to the firm and to Q and R. As per this rule, any profit earned by an agent (P) by using the firm’s property is attributable to the firm.

 

(b) Q is liable to pay ` 5,000 to the firm. As per the Partnership Act, 1932, every partner of a partnership firm is liable to the firm for any loss caused by his/her willful negligence.

Explanation: Here Q is solely responsible for the loss of ` 1,000 because he used the property of the firm and also represented himself as a principal rather than an agent to the other partners and to the firm.

(c) P and Q may buy goods from A Ltd.

 

Explanation: As per Partnership Act, 1932, a partner has a right to buy and sell goods without consulting the other partners unless a Public Notice has been given by the partnership firm to restrict the partners to buy and sell.

 

(d) C will not be admitted because one of the partners P has not agreed to admit C.

 

(e) P,Q and R are not correct

 

Explanation: As per Partnership Act, a new partner cannot be admitted into a firm unless all the existing partners agree on the same decision. In other words, a new partner can be admitted in a partnership firm with the consent of all the existing partners.

 

Question 4: Barun, Tarun and Shivam are partners in a firm and do not have a Partnership Deed. Barun introduced further capital of `5,00,000 on 1st October, 2022. Whereas Shivam took a loan of ` 50,000 from the firm on 1st October, 2022. Disputes have arisen among them on the following issues:


(a) Barun demands interest 10% p.a. on ` 5,00,000 being his extra capital.

(b) Tarun desires that his son Deep should be admitted as partner and he will give him half of his share Barun and Shivam do not agree.

(c) Barun and Tarun are of the view that Shivam should be charged interest on loan from the firm at

the lending rate of the banks, which is 12% p.a.

(d) Tarun has withdrawn `50,000 from the firm for his personal use. Barun and Shivam are of the view thatTarun should be charged interest @ 10% p.a.

Give solution to each issue of dispute.

 

Answer:

In the absence of Partnership Deed, the provisions of Indian Partnership Act, 1932 will apply as follows;

(a) Interest will not be allowed on extra capital introduced by Barun,

(b) Deep cannot be admitted as Barun and Shivam don't agree, no partner has right to admit any one as a partner,

(c) Interest will not be charged from Shivam as rate of interest was not agreed.

(d) Interest on drawings will not be charged on Tarun’s drawings.

 

Question 5:


Harshad and Dhiman are in partnership since 1st April, 2022. No partnership agreement was made. They contributed  ` 4,00,000 and  ` 1,00,000 respectively as capital. In addition, Harshad advanced an amount of  ` 1,00,000 to the firm on 1st October, 2022. Due to long illness, Harshad could not participate in business activities from 1st August, 2022 to 30th September, 2022.  Profit for the year ended 31st March, 2023 was  ` 1,80,000. Dispute has arisen between Harshad and Dhiman.
HarshadClaims :
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in the ratio of capital;
Dhiman Claims :
(i) Profit should be distributed equally;
(ii) He should be allowed 
` 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.
You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.

Answer:

DISTRIBUTION OF PROFITS 

Harshad Claims:

Decisions
(i) If there is no agreement on interest on partner’s capital, according to Indian partnership act 1932, no interest will be allowed to partners.
(ii) If there is no agreement on the matter of profit sharing, according to partnership act 1932, profit shall be distributed equally.

Dhiman Claims:

Decisions
(i) Dhiman claim is justified, according partnership act 1932 if there is no agreement on the matter of profit distribution, profit shall be distributed equally.
(ii) No salary will be allowed to any partner because there is no agreement on matter of remuneration.
(iii) Dhiman’s claim is not justified on the matter of interest on capital but justified on the matter of interest on loan. If there is no agreement on interest on partner’s loan, Interest shall be provided at 6% p.a.
 

Profit and Loss Account

Dr.

for the year ended 31st March, 2023

Cr.

Particulars

(`)

Particulars

(`)

Interest on Partner’s Loan

 

Profit and Loss A/c

1,80,000

Harshad 1,00,000 × (6/100) × (6/12)

3,000

 

 

Profit and Loss Appropriation A/c
 

1,77,000

 

 

 

1,80,000

 

1,80,000

 

 

 

 

 

Profit and Loss Appropriation Account

Dr.

for the year ended 31st March, 2023

Cr.

Particulars

(`)

Particulars

(`)

Profit transferred to

 

Profit and Loss A/c

1,77,000

Harshad’s Capital

88,500

 

 

Dhiman’s Capital

88,500

 

 

 

 

 

 

 

1,77,000

 

1,77,000

 

 

 

 

 

 

 

Ts Grewal Solution 2023-2024

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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