Fundamental of Partnership[Chapter-1],Class 12 Accounts

  1. Why Profit and Loss Appropriation Account is prepared? [1]
  2. State the provisions of ‘Indian Partnership Act, 1932’ in the absence of partnership deed regarding (i) Interest on Partner’s Drawings and (ii) Interest on Advances other than capital. [1]
  3. X and Y are partners in a firm without a partnership deed. X is active partner and claims a salary of Rs.36,000 per month. State with reason whether the claim is valid or not. [1]
  4. Amit has provided a capital of Rs.1,00,000 where as Vivek had provided Rs.20,000 only as capital. Vivek  however has provided Rs.40,000 as loan to the firm. There is no partnership agreement. Vivek  claims interest of Rs.2,400. Whereas other partners do not want to give any interest. State giving reason who is correct in this case. [1]
  5. X and Y are partners in a firm. State by giving reasons whether their claims are valid if partnership deed is silent in the following matters:
    1. X spends twice the time that Y devotes to business. X claims that he should get a salary of Rs.40,000 per month for his extra time spent.
    2. Y has provided a capital of Rs.1,00,000 whereas X has provided Rs.10,000 only as capital. X however has provided 20,000 as loan to the firm. What interest will be give to X and Y.
  • X wants to introduce his son Z into his business. Y object to it.
  1. Y wants that profit should be distributed in the ratio of capitals but X wants that it should be distributed equally. [4]

 

  1. In the absence of partnership deed, what are the rules for following:

 

  1. Salary to partners
  2. Interest on partners capital
  • Interest on partners loan
  1. Interest on partners drawings
  2. Division of profit among the partners
  3. A and B are partners in a firm. A is to get commission of 10% of net profit before charging any commission. B is to get a commission of 10% on net profit after charging all commissions. Net profit before charging any commission was Rs.55,000. Find out the commission of A and B. [3]

 

  1. What should we do when appropriations are more than the profits? [1]
  2. What do understand by the following:
  3. When ‘Interest on capital is Treated as an appropriation’
  4. When “Interest on capital is Treated as a charge” [1]

 

  1. A and B started business on July 1, 2004, each partner contributing Rs.1,50,000 as his share of capital. Three months later, on October 1, 2004, B makes an additional contribution of Rs.1,00,000 which is treated as loan. The profit for the period ending March 2005 was Rs.85,000 before charging any interest. All the partners were entitled to a salary of Rs.3,000 each per quarter. The partners had drawn Rs.24,000 each on 1st January 2005. Prepare P/L Appropriation Account. [3]

 

  1. ] AK, CK and VK set up a partnership firm on January 1, 2013. Thecontributed Rs.50,000 ; Rs.40,000 and Rs.30,000 respectively as their capitals and decided to share profits in the ratio of 3:2:1. The partnership deed provided that AK is to be paid a salary of Rs.1,000 per month and CK a commission of Rs.5,000. It also provided that interet on capital be allowed @6% p.a. The drawings for the year were AK Rs.6,000; CK Rs.4,000; and VK Rs.2,000. Interest on drawings Rs.270 on AK’s drawings; Rs.180 on CK’s drawings and Rs.90 on VK’s drawings. The net amount of profit as per the profit and loss account for the year ended 2013 was Rs.35,660. Prepare P/L Appropriation Account and Partners capital accounts. [6]

 

  1. Pawan and Purna are partners in a firm sharing profits in the ratio of 3:2. The balance in their capital and current accounts as on January 1, 2013 were as under:                                                                              PAWAN                                  PURNA

Capital Account                                             30,000                       20,000

Current Account (Cr.)                                   10,000                        8,000

The partnership deed provided that Pawan is to be paid salary Rs.500 per month whereas Purna is to get commission of Rs.4,000 for the year. Interest on capital is to be allowed 6% p.a. The drawings of Pawan and Purna for the year were Rs.3,000 and Rs.1,000, respectively. Interest on drawings for Pawan and Purna works out at Rs.75 and Rs.25 respectively. The net profit of the firm before making these adjustments was Rs.24,900. Prepare the Profit and Loss Appropriation Account and partners capital and current accounts.

 

Profit & Loss Appropriation Account,

 

  1. Pawan and Vikas were partners in a firm sharing profits in the ratio of 4 : 1. Their capitals on 1.4.2006 were : Pawan Rs.2,50,000 and Vikas Rs.50,000. The partnership deed provided that Pawan will get a commission of 10% on the net profit after allowing a salary of Rs.2,500 per month to Vikas. The profit of the firm for the year ended 31.3.2007 was Rs.1,40,000. Prepare Profit and Loss Appropriation Account. [4]

 

  1. A, B and C were partners in a firm having capitals of Rs.60,000, Rs.60,000 and Rs.80,000 respectively. Their current account balances were : A Rs.10,000; B Rs.5,000 and C Rs.2,000 (Dr.). According to the partnership deed the partners were entitled to interest on capital @5% p.a. C being the working partner was also entitled to a salary of Rs.6,000 p.a. The profits were to be divided as follows: (a)The first Rs.20,000 in proportion to their capitals (b) Next Rs.30,000 in the ratio of 5 : 3 : 2 (c) Remaining profits to be shared equally The firm made a profit of Rs.1,56,000 before charging any of the above items. Prepare the profit and loss appropriation account and pass the necessary Journal entry for the appropriation of profits. [6]

 

  1. X and Y were partners in a firm sharing profits and losses in the ratio of their capitals which were Rs.5,00,000 and Rs.4,00,000 respectively. The partnership agreement provided a salary of Rs.20,000 p.a. to Y and 10% p.a. interest on partners’ capital. The profit of the firm for the year ended 31st March, 2008 was Rs.1,46,000. Prepare P/L Appropriation Account of X and Y for the year ended 31st March 2008. (3)

 

  1. Angad, Fateh and Kothari were partners in a firm sharing profits in the ratio of 3 : 4 : 5. The fixed capitals were Angad Rs.2,00,000, Fateh Rs.2,50,000 and Kothari Rs.3,00,000 respectively. The partnership deed provided for the following :

(i). Interest on capital @6% p.a.

(ii) Salary of Rs.15,000 p.a. to Kothari.

(iii) Interest on partner’s drawings will be charged @12% p.a. During the year ended 31.3.2009 the firm earned a profit of Rs.1,35,000. Angad withdrew Rs.5,000 on 1.4.2008, Fateh withdrew Rs.6,000 on 30.9.2008 and Kothari withdrew Rs.7,500 on 31.12.2008. Prepare Profit and Loss Appropriation Account for the year ended 31.3.2009 [4]

 

  1. DK, EK and FK were partners in a firm sharing profits in the ratio of 7:4:9. Their fixed capitals were ; DK Rs.2,00,000; EK Rs.75,000 and FK Rs.3,50,000. Their Partnership deed provided for the following:

(i). Interest on capital @ 9% per annum and Interest on drawings @ 6% per annum.

(ii) Salary of Rs.6,000 per month to EK. DK Withdrew Rs.25,000 ; EK withdrew Rs.15,000 during the year and interest on FK’s Drawings was Rs.1,250 on average basis. During the year ended 31st December, 2013, the firm earned a profit of Rs.1,70,000. Prepare P/L Appropriation Account. [4]

 

Partner Capital and Current account

 

  1. Singh and King entered into partnership on 1st April 2013 without any partnership deed. They introduced capitals of Rs.5,00,000 and Rs.3,00,000 respectively. On 30 October 2013, Singh advanced Rs.2,00,000 by way of loan to the firm without any agreement as to interest. The profit and loss account for the year ended 31.3.2017 showed a profit of Rs.4,30,000 but the Partners could not agree upon the amount of interest on loan to be charged and the basis of division of profits. Pass a journal entry for the distribution of the profit between the partners and prepare the capital accounts of both the partners and Loan account of Singh. [4]

 

  1. Ashok and Rohit were partners in a firm sharing profits in the ratio of 5 : 3. Their fixed capitals on 1-4-2010 were : Ashok Rs.60,000 and Rohit Rs.80,000. They agreed to allow interest on capital @12% p.a. and to charge interest on drawings @15% irrespective of time period. The profit of the firm for the year ended 31-3-2011 before all adjustments were Rs.12,600 during the year. The drawing made by Ashok and Rohit were Rs.2,000 and Rs.4,000 during the year. Prepare profit and loss appropriation account. The interest on capital will be allowed even if the firm incurs loss. [4]

 

  1. Singh and Gupta decided to start a partnership firm to manufacture low cost jute bags as plastic bags were creating many environmental problems. They contributed capitals of Rs. 1,00,000 and Rs. 50,000 on 1st April, 2012 for this. Singh expressed his willingness to admit Shakti as a partner without capital, who is specially abled but a very creative and intelligent friend of his. Gupta agreed to this. The terms of partnership were as follows : Singh, Gupta and Shakti will share profits in the ratio of 2 : 2 : 1. Interest on capital will be provided @ 6% p.a. Due to shortage of capital, Singh contributed Rs. 25,000 on 30th September, 2012 and Gupta contributed Rs. 10,000 on 1st January, 2013 as additional capital. The profit of the firm for the year ended 31st March, 2013 was Rs. 1,68,900. Identify any two values which the firm wants to communicate to the society.Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2013.

 

INTEREST OF CAPITAL

 

  1. A and B started business on 1st Jan. 2017 with a capital of Rs. 60,000 and Rs. 40,000 respectively. A introduced Rs. 25,000 into the firm on 1st July 2017 as additional capital. His drawings for the year were Rs. 10,000. Calculate interest on capital payable to A and B, if rate of interest is 10% p.a. on 31st December 2017. [1]

 

  1. Where would you record the interest on capital when capitals are fixed? [1]

 

  1. X and Y are partners in a firm having not partnership deed. X and Y have contributed Rs.2,00,000 and Rs.4,00,000 respectively as capitals. Y wants that profit should be distributed in the ratio of capitals and interest on capital should be 10% p.a. but X does not agree to this. State giving reason who is correct in this case. [1]

 

  1. X and Y are partners in a firm having no partnership deed. X desires that Y should not participate in the conduct of the firm’s business and will not get any interest on capital but Y does not agree to this. State giving reason who is correct in this case. [1]

 

  1. X and Y started business on 1.1.2013 with capitals of Rs.1,20,000 and Rs.80,000 respectively. During the year, A introduced Rs.20,000 to the firm as additional capital on 1.7.2013. They withdrew Rs.1,000 per month for the house expenses in lieu of profit. Interest on capital is to be allowed @ 10% per annum. Calculate the interest payable to X and Y for the year ending 31.12.2013. [3]

 

  1. Vivek and Kumar started business on 1st April, 2013 with capitals of Rs.5,00,000 and Rs.3,00,000 respectively. On 1st October 2013 they decided that their capitals should be 4,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash. Interest on capital is allowed at 8% p.a. Calculate the interest on Kumar’s Capital on 31st March 2017. [3]

 

  1. A and B are partners and they had Rs.2,00,000 and Rs.3,00,000 in their respective capital accounts as on 1st April 2013. A paid in further Rs.25,000 on I November 2013 and another Rs.25,000 on 15 February 2017. Calculate the Interest on capital for A when rate of interest on capital is 6% p.a. [3] 8. X and Y are partners sharing profit and loss in the ratio 3:2. Their capitals on 1 April 2013 were Rs.1,00,000 and Rs.80,000. On 1st July 2013 X introduced Rs.20,000 as his additional capital and Y introduced Rs.2,000 only. Find out interest on capital for both the partners @ 10% p.a. on 31st March 2017. [3]

 

INTEREST OF DRAWING

 

  1. How would you record the interest on drawings when capitals are fixed? [1]
  2. Name the method of calculating interest on drawings of the partners if different amounts are withdrawn on different dates. [1]
  3. X, Y and Z are partners sharing profits equally. They have decided that no interest on drawings is to be charged to any partner. But after one year ‘Z’ wants that interest on drawings should be charged to every partner. State how ‘Z’ can do this. [1]
  4. Calculate interest on drawings of Mr. Vivek @ 8% p.a. for the year ended 31st March, 2017 in each of the following cases: Case 1: If he withdrew Rs.2,000 at the beginning of each year. Case 2: If he withdrew Rs.2,000 during the middle of each month. Case 3: If he withdrew Rs.2,000 at the end of each month. [3]

 

  1. Calculate interest on drawings of Mr. Vivek @ 10% p.a. for the year ended 31st March, 2017 in each of the following cases: Case 1: If he withdrew Rs.1,000 at the beginning of each Quarter. Case 2: If he withdrew Rs.1,000 during the middle of each Quarter. Case 3: If he withdrew Rs.1,000 at the end of each Quarter. [3]

 

  1. Find out interest on drawing of Mr. Vivek , if he withdrew Rs.2,000 in the beginning of every month for last six months.. Rate of interest on drawings is 6% p.a. [3]

 

  1. Find out interest on drawing of Mr. Vivek , if he withdrew Rs.2,000 at the end of every month for six months ended 31st March 2017. Rate of interest on drawings is 6% p.a. [3]
  2. Find out interest on drawing of Mr. Vivek , if he withdrew Rs.2,000 in the middle of every month for six months ended 31st March 2017. Rate of interest on drawings is 6% p.a. (3)

 

  1. Calculate interest on drawing of Mr.Vivek @ 10% p.a. for the year ended 31st March 2017 in each of the following cases:

If he withdrew Rs.500 per month during the year.

If he withdrew 2,000 in each quarter. (3)

 

  1. Vivek is a partner in a firm. He withdrew the following amounts during the year 2013:

January 31     Rs.6,000

March 31        Rs.4,000

June 30           Rs.8,000

September 30 Rs.3,000

October 31     Rs.5,000

The interest on drawings is to be charged @6% p.a. Assuming the accounting year closes on December 31 each year, calculate interest on drawings to be debited to Mr. Vivek .

 

  1. Vivek  and Mohan were partners in a firm. The partnership agreement provided that interest on drawings was to be charged @12% p.a. Vivek  had withdrawn the following amounts during the year ended 31.12.2013:

January 1       Rs.10,000

March 31        Rs.16,000

July 1              Rs.20,000

December 31             Rs.4,000

Calculate interest on Vivek ’s Drawings. (4)

 

PAST ADJUSTMENT

 

  1. Vivek , Ashish and Kanwar are partners in a firm having fixed capitals of Rs.40,000; Rs.20,000; 25,000 respectively sharing profits as 7 : 6 : 4. The rate of interest on capital was agreed at 10% per annum, but was wrongly credited to them 12% per annum. Give adjustment entry [3]

 

  1. Vivek , Gaurav and Swami sharing profits and losses equally. Their capitals were Rs.1,20,000; Rs.90,000 and Rs.60,000 respectively. For the year 2017, interest was credited to them @6% instead of 5% p.a. Give adjustment entry. [3]

 

  1. On March 31, 2013 after the close of books of accounts, the capital accounts of A, B and C stood at Rs.48,000; 40,000 and Rs 24,000 respectively. The profits for the year Rs.72,000 was distributed equally. Subsequently it was discovered that interest on capital @5% p.a. had been omitted. The profit sharing ratio was 2:2:1. Pass adjustment entry. [3]

 

 

 

  1. Ram and Shyam were partners in a firm sharing profits in the ratio of 3:5. Their fixed capitals were Rs.2,50,000 and Rs.4,50,000 respectively. After the final accounts of the year had been closed, it was found that interest on capital at 10% per annum as provided in the partnership agreement has not been credited to the capital accounts of the partners. Give necessary adjustment entry. [3]

 

  1. A, B, C and D are partners sharing profits and losses in the ratio of 4:3:3:2. Their fixed capitals on 31.3.2010 were Rs.30,000; Rs.45,000; 60,000 and 45,000 respectively. After preparing the final accounts for the year ended 31.3.2011. it was discovered that interest on capital @12% p.a. was not allowed and interest on drawings amounting to Rs.1,000; 1,250; 750 and 500 respectively was not charged. Give necessary adjustment entry. [4]

 

  1. Vivek , Bitu and Chetan were partners in a firm. On 1.4.2013 their capitals were Rs.1,00,000; Rs.50,000 and Rs.50,000 respectively. As per the provisions of the partnership deed:

Chetan was entitled for a salary of Rs.10,000 p.a.

Partners were entitled to interest on capital at 5% p.a.

Profits were to be shared in the ratio of partner’s capital. The net profit for the year 2013-14 of Rs.66,000 was divided equally without providing for the above terms. Give adjustment entry. [4]

 

  1. PK, MK and NK shared profits in the ratio of 3:2:1. The profits of the last three years were Rs.2,80,000, Rs.1,68,000 and Rs.2,12,000 respectively. These profits were by mistake, shared equally for all the three years. It is now decided to correct the error. Give entry. [4]

 

  1. Seema, Tanuja and Tripti were partners in a firm trading in garments. They were sharing profits in the ratio of 5 : 3 : 2. Their capitals on 1st April, 2012 were Rs. 3,00,000, Rs. 4,00,000 and Rs. 8,00,000 respectively. After the flood in Uttarakhand, all partners decided to help the flood victims personally. For this Seema withdrew Rs. 20,000 from the firm on 15th September, 2012. Tanuja instead of withdrawing cash from the firm took garments amounting to Rs. 24,000 on 1 October from the firm and distributed those to the flood victims. On the other hand, Tripti withdrew Rs. 2,00,000 from her capital on 1st January, 2013 and provided a mobile medical van in the flood affected area.

 

  1. The partnership deed provides for charging interest on drawings @ 6% p.a. After the final accounts were prepared it was discovered that interest on drawings had not been charged. Give the necessary adjusting journal entry and show the working notes clearly. Also state any two values which the partners wanted to communicate to the society.

 

GUARANTEE

 

  1. State the meaning of Guarantee of Minimum profit. [1]

 

  1. Vivek , Kumar and Rahul were in a partnership sharing profits as 4:2:1 respectively. It was provided that in no case Rahul’s share in profit should be less than Rs. 7500. The profits for the year 2017 amount to Rs. 31500. You are required to show the appropriation amongst partners. [3]
  2. X and Y are sharing profits in the ratio of 3:2. Z was admitted for 1/6th share of profit with a minimum guaranteed amount of Rs.20,000. The firm earned a profit at the end of first financial year Rs.1,08,000. Find out the share of profit which X, Y and Z will get. [3]

 

  1. A, B and C were partners in a firm sharing profits in 2:3:5 ratio. A was guaranteed a minimum profit of Rs.1,00,000. Any deficiency on this account was to be borne by C. the net profit of the firm for the year ended 31.3.2013 was Rs.4,50,000. Prepare Profit and Loss Appropriation Account. [3]

 

  1. A, B and C are partners sharing profits in the ratio of 5:4:1. C is given a guarantee that his share of profits in any given year would be Rs.5,000. Deficiency, if any, would be borne by A and B equally. The profits for the year 2013 amounted to Rs.40,000. Pass necessary journal entries. [3]

 

  1. P, Q and R are partners in a firm. Their profit sharing ratio is 3:2:1. However, R is guaranteed a minimum amount of Rs.20,000 as share of profits every year. Any deficiency arising on that account shall be met by Q. The profits for two years ending December 31st , 2012 and 2013 were Rs.90,000 and 1,50,000 respectively. Prepare Profit and Loss Appropriation Account for two years. [4]

 

  1. A, B and C are partners in a firm sharing profits in the ratio of 2:2:1. C is guaranteed a minimum amount of Rs.10,000 as his share of profit every year. Deficiency, if any, on that account shall be borne by B. The profits for two years ended 31st March, 2015 and 2016 were Rs.50,000 and Rs.60,000 respectively. [4]

 

  1. Ahmad, Bheem and Daniel are partners in a firm. On 1st April 2011 the balance in their capital accounts stood at Rs.8,00,000, Rs.6,00,000 and Rs.4,00,000 respectively. They shared profits in the proportion of 5 : 3 : 2 respectively. Partners are entitled to interest on capital @5% p.a. and salary to Bheem @ Rs.3,000 per month and a commission of Rs.12,000 to Daniel as per the provisions of the partnership deed. Ahmad’s share of profit, excluding interest on capital, is guaranteed at not less than Rs.25,000 p.a. Bheem’s share of profit, including interest on capital but excluding salary, is guaranteed at not less than Rs.55,000 p.a. Any deficiency arising on that account shall be met by Daniel. The profits of the firm for the year ended 31st March 2012 amounted to Rs.2,16,000. Prepare Profit and Loss Appropriation A/c for the year ended 31st March 2012.

Author: Ravi Kashyap

Commerce Expert

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