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Page No 1.104:

Answer:

1. Since there is no partnership deed, no interest will paid to Y on his capital.

2. Since there is no partnership deed, no salary would be given to X.

3. Since there is no partnership deed, interest on loan would be given to Z @ 6% instead of 12% p.a.

4. Since there is no partnership deed, no interest on drawings will be charged from X.

5. Since there is no partnership deed, Profit or Loss will be shared equally.

 



Page No 1.105:

Answer:

1. Since there is no partnership deed, no interest on additional capital will be allowed.

2.  Since there is no partnership deed, D cannot be admitted because A & C do not agree.

3. Since there is no partnership deed, no interest on loan would be charged from C because rate of interest is not predefined.

4. Since there is no partnership deed, no interest on drawings will be charged.

Page No 1.105:

Answer:

In the absence of Partnership deed:

(a) Interest on Loan is to be provided at 6% p.a.
(b) Since, rent is a charge against profit, thus, it will be debited to Profit & Loss Account
(c) Profit after interest on loan @ 6% p.a. and rent is to be distributed equally between the partners.
 
Profit and Loss Appropriation Account
for the year ended 31st March, 2017
Dr.     Cr.
Particulars Amount Rs. Particulars Amount Rs.
Profit transferred to:   Profit and Loss A/c 1,22,750
X’s Capital A/c
61,375   (1,50,000 – 25,000 – 2,250)  
Y’s Capital A/c
61,375 1,22,750    
  1,22,750   1,22,750
       

Working Notes: Calculation of Interest on X’s Loan
Interest on Loan (from Oct. 01, 2016 to Mar. 31, 2017) = 75,000 × 6100 × 612=Rs 2,250

Page No 1.105:

Question 4:

                                    

Answer:

Yes, A has contravened the provisions of Partnership law. In the absence of Partnership deed, the following  provisions of Indian Partnership Act, 1932 applies:

(a) Remuneration is not payable to any of the partners, therefore Salary to both A and B will not be provided.
(b) Interest on Capital is not allowed to any of the partners, therefore, it should not be provided to both A and B.
(c) Interest on loan @ 6% p.a. is a charge against profit and should have been debited to Profit and Loss A/c. Similarly, Rent is a charge and it should also be debited to Profit and Loss A/c.
(d) Profit (after charging interest on loan @ 6% p.a. and rent) is to be distributed equally.
 
Profit and Loss Appropriation Account
for the year ended 31st March, 2017
Dr.   Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Profit transferred to:  
Profit and Loss A/c (Net Profit)
51,000
A’s Capital A/c
25,500   (60,000 – 6,000 – 3,000)  
B’s Capital A/c
25,500 51,000    
  51,000   51,000
       



Page No 1.106:

Answer:

Amount advanced by the Partners = Rs 30,000

Profit sharing ratio = 3 : 2

Time Period (from October 01, 2016 to March 31, 2017) = 6 months

Interest rate = 6% p.a.

Calculation of Interest on Advances

Note: In the absence of a partnership agreement regarding rate of interest on loans and advances, interest is provided at 6% p.a.

Page No 1.106:

Answer:

Journal
Date Particulars L.F. Debit
Amount

(Rs)
Credit
Amount

(Rs)
2016 Bank A/c Dr.   5,00,000  
Oct. 01
To X’s Loan A/c
      2,00,000
 
To Z’s Loan A/c
      3,00,000
  (Loan received from X and Z)        
2017          
Mar. 31 Interest on X’s Loan A/c Dr.   6,000  
  Interest on Z’s Loan A/c Dr.   9,000  
 
To X’s Loan A/c
      6,000
 
To Z’s Loan A/c
      9,000
  (Interest on loan credited to Partner’s Loan A/c)        
           
Mar. 31 Profit and Loss A/c Dr.   15,000  
 
To Interest on X’s Loan A/c
      6,000
 
To Interest on Z’s Loan A/c
      9,000
  (Interest on Loan transferred to Profit and Loss A/c)        
           

 

X’s Loan Account
Dr.   Cr.
Date Particulars Amount Rs Date Particulars  Amount Rs
2017     2017    
Mar.31 Balance c/d 2,06,000 Oct. 01 Bank A/c 2,00,000
      2017    
      Mar. 31 Interest on X’s Loan A/c 6,000
    2,06,000     2,06,000
           

 

Z’s Loan Account
Dr.   Cr.
Date Particulars Amount
Rs
Date Particulars  Amount
Rs
2017     2016    
Mar.31 Balance c/d 3,09,000 Oct. 01 Bank A/c 3,00,000
      2017    
      Mar. 31 Interest on Z’s Loan A/c 9,000
    3,09,000     3,09,000
           

Working Notes: Calculation of Interest on Loan
X = 2,00,000 × 6100 × 612 = Rs 6,000Z = 3,00,000 × 6100 × 612 =Rs 9,000

Page No 1.106:

Answer:

Case 1: If the profits before interest for the year amounted to Rs 3,750
 

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Profit transferred to:   Profit and Loss A/c 1,050
X’s Capital A/c
420   (3,750 – 2,700)  
Y’s Capital A/c
630 1,050    
  1,050   1,050
       


Case 2: If the profits before interest for the year amounted to Rs 2,250

 

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
       
Profit and Loss A/c 450 Loss transferred to:  
(2,700 – 2,250)  
X’s Capital A/c
180  
   
Y’s Capital A/c
270 450
  450   450
       

Case 3: If the losses before interest for the year amounted to Rs 3,750

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Profit and Loss A/c 6,450 Loss transferred to:  
(3,750 + 2,700)  
X’s Capital A/c
2,580  
   
Y’s Capital A/c
3,870 6,450
  6,450   6,450
       

Working Notes: Calculation of Interest on Loan
X = 60,000 × 6100 × 612 = Rs 1,800Y = 30,000 × 6100 × 612 =Rs 900
Rate of interest on loan has not been provided in the question, thus, as per Indian Partnership Act, 1932 interest has been calculated @ 6% p.a.

Page No 1.106:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2017

 

 

 

 

 

March 31

Interest on Loan A/c

Dr.

 

13,500

 

 

    To Bank A/c

 

 

 

13,500

 

(Interest on Loan paid)

 

 

 

 

 

 

 

 

 

 

March 31

Profit & Loss A/c

Dr.

 

13,500

 

 

 To Interest on Loan A/c

 

 

 

13,500

 

(Interest on Loan transferred to Profit & Loss A/c)

 

 

 

 

 

 

 

 

 

 

 

 Working Notes:

Interest on Loan:To Reema=2,00,000×6×6100×12=Rs 6,000To Leena=2,50,000×6×6100×12=Rs 7,500

Page No 1.106:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2017

 

 

 

 

 

March 31

Interest on Loan A/c

Dr.

 

15,000

 

 

    To Ankit’s Loan A/c

 

 

 

7,500

 

    To Bhanu’s Loan A/c

 

 

 

7,500

 

(Interest on Loan due for 6 months)

 

 

 

 

 

 

 

 

 

 

March 31

Charu’s Capital A/c

Dr.

 

3,000

 

 

      To Interest on Loan A/c

 

 

 

3,000

 

(Interest on Loan due for 6 months)

 

 

 

 

 

 

 

 

 

 

March 31

Profit & Loss A/c

Dr.

 

15,000

 

 

 To Interest on Loan A/c

 

 

 

15,000

 

(Interest on Loan transferred to Profit & Loss A/c)

 

 

 

 

 

 

 

 

 

 

March 31

Interest on Loan A/c

Dr.

 

3,000

 

 

   To Profit & Loss A/c

 

 

 

3,000

 

(Interest on Loan transferred to Profit & Loss A/c)

 

 

 

 

 

 

 

 

 

 

 

 Working Notes:

Interest on Loan:To Ankit & Bhanu=2,50,000×6×6100×12=Rs 7,500From  Charu=1,00,000×6×6100×12=Rs 3,000

Page No 1.106:

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2017

 

 

 

 

 

March 31

Interest on Loan A/c

Dr.

 

4,500

 

 

    To Anita’s Loan A/c

 

 

 

2,250

 

    To Lalita’s Loan A/c

 

 

 

2,250

 

(Interest on Loan due for 3 months)

 

 

 

 

 

 

 

 

1,500

 

March 31

Manju’s Current A/c

Dr.

 

 

1,500

 

      To Interest on Loan A/c

 

 

 

 

 

(Interest on Loan due for 3 months)

 

 

 

 

 

 

 

 

 

 

March 31

Profit & Loss A/c

Dr.

 

4,500

 

 

 To Interest on Loan A/c

 

 

 

4,500

 

(Interest on Loan transferred to Profit & Loss A/c)

 

 

 

 

 

 

 

 

 

 

March 31

Interest on Loan A/c

Dr.

 

1,500

 

 

   To Profit & Loss A/c

 

 

 

1,500

 

(Interest on Loan transferred to Profit & Loss A/c)

 

 

 

 

 

 

 

 

 

 

 

 Working Notes:

Interest on Loan:To Anita & Lalita=1,50,000×6×3100×12=Rs 2,250From  Manju=1,00,000×6×3100×12=Rs 1,500



Page No 1.107:

Answer:

Calculation of Interest on Capital

Case (a) 

Where there is no clean agreement except for interest on capitals

Profit for the year ended = Rs 1,500

Total amount of interest = Rs 1,800

Here, total amount of interest on capital is more than the profit available for distribution. Therefore, profit of Rs 1,500 is distributed between X and Y in the ratio of their interest on capital.

Particulars

   X

:

Y

Interest on Capital

1,200

:

600

or, Ratio of interest on Capital

2

:

1

Case (b)

In case, there is a clear agreement that the interest on capital will be allowed even if the firm has incurred loss, then the whole amount of interest on capital is to be allowed to the partners.

Total Profit of the firm = Rs 1,500

Total amount of Interest on Capital = Rs 1,800 (i.e. Rs 1,200 + Rs 600). Therefore, loss to the firm amounts to Rs 300. This loss is to shared by X and Y in their profit sharing ratio that is 2 : 3. 

Calculation of Interest on Capital

Case (a) 

Where there is no clean agreement except for interest on capitals

Profit for the year ended = Rs 1,500

Total amount of interest = Rs 1,800

Here, total amount of interest on capital is more than the profit available for distribution. Therefore, profit of Rs 1,500 is distributed between X and Y in the ratio of their interest on capital.

Particulars

   X

:

Y

Interest on Capital

1,200

:

600

or, Ratio of interest on Capital

2

:

1

Case (b)

In case, there is a clear agreement that the interest on capital will be allowed even if the firm has incurred loss, then the whole amount of interest on capital is to be allowed to the partners.

Total Profit of the firm = Rs 1,500

Total amount of Interest on Capital = Rs 1,800 (i.e. Rs 1,200 + Rs 600). Therefore, loss to the firm amounts to Rs 300. This loss is to shared by X and Y in their profit sharing ratio that is 2 : 3. 

Page No 1.107:

Answer:

Interest on capital is calculated on the opening balance of partner’s capital.

Calculation of Capital balance at the beginning

Particulars

Ram

Mohan

Capital at the end

24,000

18,000

Less: Profit already credited (1:1)

(8,000)

(8,000)

Add: Drawings already debited

4,000

6,000

Capital at the beginning

20,000

16,000

 

 

 

Page No 1.107:

Answer:

Assuming the capitals of the partners are fixed, interest on capital will be calculated on their fixed capital (i.e. Rs 24,000 for Ram and Rs 18,000 for Mohan)

Interest on Ram's Capital = 24,000 × 5100=Rs 1,200Interest on Mohan's Capital = 18,000 × 5100= Rs 900

Page No 1.107:

Answer:

Calculation of Interest on B’s Capital

Particulars

Amount

Rs

B’s Capital balance as on March 31, 2017

40,000

Less: Profit adjusted in B’s Capital

(5,000)

Add: Drawings

15,000

Capital Balance at the beginning (as on April 01, 2016)

50,000

 

 

Interest on B's Capital = Capital at the beginning × Rate100                                   = 50,000 × 6100= Rs 3,000

Page No 1.107:

Answer:

Calculation of opening capital balance
 

Particulars X Y
Capital at the end 10,000 8,000
Less: Profit already credited 6,000-4,000×12
(1,000) (1,000)
Add: Drawings already debited
  3,000
Opening Capital 9,000 10,000

Interest on X’s Capital =9,000×5100=Rs 450Interest on Y’s Capital =10,000×5100=Rs 500

Page No 1.107:

Answer:

Calculation of Interest on Capital

Interest on Gee's Capital=3,00,000×6100=Rs 18,000Interest on Ess's Capital=3,00,000×6100=Rs 18,000


Calculation of Interest on Current Account Balances

Interest on Gee's Current Account Balance=1,00,000×6100=Rs 6,000Interest on Ess's Current Account Balance=2,00,000×6100=Rs 12,000

Page No 1.107:

Answer:

Calculation of Interest on Capital

Interest on Emm's Capital=5,00,000×6100=Rs 30,000Interest on EII's Capital=6,00,000×6100=Rs 36,000


Calculation of Interest on Current Account Balances

Interest allowed on Emm's Current Account Balance=1,00,000×6100=Rs 6,000 (Credit)Interest charged on EII's Current Account Balance=1,00,000×6100=Rs 6,000 (Debit)



Page No 1.108:

Answer:

Calculation of Interest on Capital

Interest on A's Capital=2,00,000×5100=Rs 10,000Interest on B's Capital=2,50,000×5100=Rs 12,500


Calculation of Opening Current Account Balances

For A

Closing Current Account Balance

40,000

Add: Drawings

36,000

Less: Profit Share

30,000

Opening Current Account Balance

46,000

 

For B

Closing Current Account Balance

(50,000)

Add: Drawings

36,000

Less: Profit Share

30,000

Opening Current Account Balance

(44,000)


Calculation of Interest on Current Account Balances

Interest allowed on A's Current Account Balance=46,000×5100=Rs 2,300 (Credit)Interest charged on B's Current Account Balance=44,000×5100=Rs 2,200 (Debit)

Page No 1.108:

Answer:

(i) When Partnership deed is silent about the treatment of Interest on Capital:
 

Profit and Loss Appropriation Account
Dr.   Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Interest on Capital: (WN i)   Profit and Loss A/c (Net Profit) 60,000
X’s Capital A/c
40,000      
Y’s Capital A/c
20,000 60,000    
  60,000   60,000
       


(ii) When interest is a charge as per the Partnership Deed

 

Profit and Loss Appropriation Account
Dr.   Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Interest on Capital:   Profit and Loss A/c (Net Profit) 60,000
X’s Capital A/c
48,000      
Y’s Capital A/c
24,000 72,000 Loss transferred to:  
   
X’s Capital A/c
7,200
 
   
Y’s Capital A/c
4,800 12,000
  72,000   72,000
       

Working Notes: Calculation of Interest on Capital
X=8,00,000×6100=Rs 48,000Y=4,00,000×6100=Rs 24,000Total                          Rs 72,000

(i)  Since, partnership deed is silent regarding the treatment of interest on capital, therefore, it will be treated as an appropriation out of profits and interest will be allowed to extent of available profits.
X=48,00072,000×60,000=Rs 40,000Y=24,00072,000×60,000=Rs 20,000

(ii) Interest is to be treated as a charge against profits, thus, full amount of interest on capital is to be provided.

Page No 1.108:

Answer:

Profit and Loss Appropriation Account

for the year ended March 31, 2016

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on X’s Capital

1,25,000

Profit and Loss A/c

2,00,000

Y’s Salary

75,000

 

 

 

2,00,000

 

2,00,000

 

 

 

 

Working Note:

Interest on X's Capital = 50,00,000 × 8100=Rs 4,00,000
Salary to Y @ 20,000 p.m = Rs 2,40,000

Total appropriation to be made = 4,00,000 + 2,40,000 = Rs 6,40,000

Profit earned during the year = 2,00,000

Here, profit available for distribution (i.e. Rs 2,00,000) is less than the sum total of Interest on Capital and Salary (i.e. Rs 6,40,000).

Therefore, profit will be distributed in the ratio of Interest on Capital and Salary.

                    Interest on X's Capital : Y's Salary                                         4,00,000   :   2,40,000Ratio                                         10    :   6

Interest on X's Capital = 2,00,000 × 1016=Rs 1,25,000Y's Salary = 2,00,000  × 616=Rs 75,000

Note: The answer provided in the book is incorrect as interest on capital will only to be provided to X since he has contributed the capital amount.

Page No 1.108:

Answer:

Case: 1

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

50,000

 

 

    To Bala’s Capital A/c

 

 

 

30,000

 

    To Rajan’s Capital A/c

 

 

 

20,000

 

(Profit shared by the Partners in the ratio 3:2)

 

 

 

 

 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit :

 

Profit and Loss A/c

50,000

Bala

30,000

 

 

 

Rajan

20,000

50,000

 

 

 

50,000

 

50,000

 

 

 

 

 

Case: 2

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Bala’s Capital A/c

Dr.

 

30,000

 

 

Rajan’s Capital A/c

Dr.

 

20,000

 

 

    To Profit & Loss Appropriation A/c

 

 

 

50,000

 

(Loss shared by the Partners in the ratio 3:2)

 

 

 

 

 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit and Loss A/c

50,000

Loss:

 

 

 

Bala                                             

30,000

 

 

 

Rajan                                          

20,000

50,000

 

50,000

 

50,000

 

 

 

 

 

Case: 3

 

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Interest on Capital A/c

Dr.

 

90,000

 

 

    To Bala’s Capital A/c

 

 

 

50,000

 

    To Rajan’s Capital A/c

 

 

 

40,000

 

(Interest on capital due @10% p.a)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

90,000

 

 

    To Interest on Capital A/c

 

 

 

90,000

 

(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

10,000

 

 

    To Bala’s Capital A/c

 

 

 

6,000

 

    To Rajan’s Capital A/c

 

 

 

4,000

 

(Profit transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital A/c:

 

Profit and Loss A/c

1,00,000

Bala

50,000

 

 

 

Rajan

40,000

90,000

 

 

Profit transferred to:

 

 

 

Bala’s Capital A/c

6,000

 

 

 

Rajan’s Capital A/c

4,000

10,000

 

 

 

1,00,000

 

1,00,000

 

 

 

 

           

 

Case 4:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Interest on Capital A/c

Dr.

 

45,000

 

 

    To Bala’s Capital A/c

 

 

 

25,000

 

    To Rajan’s Capital A/c

 

 

 

20,000

 

(Interest on capital due @5% p.a)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

45,000

 

 

    To Interest on Capital A/c

 

 

 

45,000

 

(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

5,000

 

 

    To Bala’s Capital A/c

 

 

 

3,000

 

    To Rajan’s Capital A/c

 

 

 

2,000

 

(Profit transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 

 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital A/c:

 

Profit and Loss A/c

50,000

Bala

25,000

 

 

 

Rajan

20,000

45,000

 

 

 

Profit transferred to:

 

 

 

Bala’s Capital A/c

3,000

 

 

 

Rajan’s Capital A/c

2,000

5,000

 

 

 

50,000

 

50,000

 

 

 

 

           

 

Case 5:
 

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Interest on Capital A/c

Dr.

 

45,000

 

 

    To Bala’s Capital A/c

 

 

 

25,000

 

    To Rajan’s Capital A/c

 

 

 

20,000

 

(Interest on capital due)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

45,000

 

 

    To Interest on Capital A/c

 

 

 

45,000

 

(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

 

 

 

 

 

 

 

 

 

 

 Bala’s Capital A/c

Dr.

 

9,000

 

 

Rajan’s Capital A/c

Dr.

 

6,000

 

 

    To Profit & Loss Appropriation A/c

 

 

 

15,000

 

(Loss  transferred to Partners’ Capital A/c)

 

 

 

 

 

 

 

 

 

 


 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital A/c:

 

Profit and Loss A/c

30,000

Bala

25,000

 

Loss:

 

Rajan

20,000

45,000

 Bala                                              

9,000

 

 

 

 Rajan                                         

6,000

15,000

 

50,000

 

50,000

 

 

 

 

 

Case 6:

 

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Interest on Capital A/c

Dr.

 

45,000

 

 

    To Bala’s Capital A/c

 

 

 

25,000

 

    To Rajan’s Capital A/c

 

 

 

20,000

 

(Interest on capital due @5% p.a)

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss Appropriation A/c

Dr.

 

45,000

 

 

    To Interest on Capital A/c

 

 

 

45,000

 

(Interest on capital transferred to Profit & Loss Appropriation A/c)

 

 

 

 

 

 

 

 

 

 

  

 

Profit and Loss Appropriation Account

for the year ended 

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital A/c:

 

Profit and Loss A/c

45,000

Bala

25,000

 

 

 

Rajan

20,000

45,000

 

 

 

50,000

 

50,000

 

 

 

 

Page No 1.108:

Answer:

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 = 6,000 × 6100×612= Rs 180Interest on Mohan's Drawings = 4,000 × 6100×612= Rs 120 

 



Page No 1.109:

Answer:

Page No 1.109:

Answer:

Page No 1.109:

Answer:

Total Drawings = Rs 30,000 (2,500 × 12)

(i) If drawings are made in the beginning of each month

Interest on Drawings = Total Drawings × Rate100 × 6.512Interest on Drawings  = 30,000×6100×6.512=Rs 975

(ii) If drawings are made in the middle of each month

Interest on Drawings = Total Drawings × Rate100 × 612Interest on Drawings = 30,000×6100×612=Rs 900

(iii) If drawings are made in the end of each month

Interest on Drawings = Total Drawings × Rate100 × 5.512Interest on Drawings = 30,000×6100×5.512=Rs 825

Page No 1.109:

Answer:

(i) If drawings are made in the beginning of each quarter

Total Drawings = Rs 48,000 (12,000 × 4)
Interest on Drawings = Total Drawings × Rate100 × 7.512Interest on Drawings = 48,000×5100×7.512=Rs 1,500

(ii) If drawings are made at the end of each quarter

Total Drawings = Rs 48,000 (12,000 × 4)
Interest on Drawings = Total Drawings × Rate100 × 4.512Interest on Drawings = 48,000×5100×4.512=Rs 900

(iii) If drawings are made in the middle of each quarter

Total Drawings = Rs 72,000 (18,000 × 4)
Interest on Drawings = Total Drawings × Rate100 × 612Interest on Drawings = 72,000×5100×612=Rs 1,800

Page No 1.109:

Answer:

Total Drawings = 10,000×6 = Rs 60,000                                                     XInterest on Drawings made in the beginning = Total Drawings × Rate100 × 3.512Interest on X's Drawings made in the beginning = 60,000×5100×3.512=Rs 875                                                     YInterest on Drawings made at the end = Total Drawings × Rate100 × 2.512Interest on Y's Drawings made at the end = 60,000×5100×2.512=Rs 625                                                    ZInterest on Drawings made in the middle = Total Drawings × Rate100 × 312Interest on Z's Drawings made in the middle = 60,000×5100×312=Rs 750

Page No 1.109:

Answer:

Calculation of Interest on Capital

Calculation of Interest on Drawings

Interest on A’s Drawings

Year

2014-15

Drawings

×

Period

=

Product

June 30 to Mar. 31

500

×

9

=

4,500

July 31 to Mar. 31

600

×

8

=

4,800

Oct. 01 to Mar. 31

450

×

6

=

2,700

Mar. 01 to Mar. 31

1400

×

1

=

1,400

Sum of Product

13,400

 

 

Interest on B’s Drawings

Total Drawings = 300 ×12 = Rs 3,600

Average Period = 5.5 months

Page No 1.109:

Answer:

Case I:
Interest on Drawings = Total Drawings × Rate100 × 612Interest on Drawings = 60,000×5100×612=Rs 1,500

Case II:
Total Drawings = 5,000×12 = Rs 60,000Interest on Drawings = Total Drawings × Rate100 × 612Interest on Drawings = 60,000×5100×612=Rs 1,500
Note: Since date of drawings is not given, thus, interest has been calculated for an average period of 6 months.

Page No 1.109:

Answer:

Interest on Drawings = Total Drawings × Rate100Interest on Drawings = 5,00,000 ×5100=Rs 25,000
Note:
Since p.a. word is not suffixed with the rate of interest on drawings, thus, time factor is not considered while calculating interest on drawings.

Page No 1.109:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Salary:   Profit and Loss A/c (Net Profit) 8,40,000
X’s Capital A/c
2,40,000   (5,50,000 + 2,40,000 + 50,000 )  
Y’s Capital A/c
50,000 2,90,000    
Commission:      
X
55,000      
Y
45,000 1,00,000    
Profit transferred to:      
X’s Capital A/c
2,25,000      
Y’s Capital A/c
2,25,000 4,50,000    
  8,40,000   8,40,000
       

Working Notes:
WN 1: Calculation of Commission
For X: Net Profit after charging Salaries but before charging any commission
Net Profit after charging Salaries = Rs 5,50,000 (given in the question)Commission=5,50,000×10100=Rs 55,000

For Y: Net Profit after charging Salaries and commission
Net Profit after charging Salaries and Commission = 5,50,000 - 55,000 = Rs 4,95,000Commission=4,95,000×10110=Rs 45,000

WN 2: Calculation of Profit Share of each Partner
Net distributable profit = 8,40,000 – 2,90,000 – 1,00,000 = Rs 4,50,000
Profit share of both X and Y = 4,50,000×12=Rs 2,25,000



Page No 1.110:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Interest on Capital @5%:   Profit and Loss A/c (Net Profit) 1,04,000
X’s Capital A/c
6,000      
Y’s Capital A/c
10,000 16,000    
Salary to Z 25,000    
Commission to Z @ 5%  3,000    
Charity at 20% 12,000    
Profit transferred to:      
X’s Capital A/c
24,000      
Y’s Capital A/c
24,000 48,000    
  1,04,000   1,04,000
       

Working Notes:
WN 1: Calculation of Commission
Profit after Interest on Capital and Salary= 1,04,000 - 16,000 - 25,000 = Rs 63,000
Commission = 63,000×5105=Rs 3,000

WN 2: Calculation of Charity
Profit after Interest on Capital, Salary and Commission = 1,04,000 - 16,000 - 25,000 - 3,000 = Rs 60,000
Donation to Charity=60,000×20100=Rs 12,000

WN 3: Distribution of profit among X and Y
Profit to be distributed = 1,04,000 - 16,000 - 25,000 - 3,000 - 12,000 = Rs 48,000
Share of X and Y individually = Rs 24,000 (each)

Page No 1.110:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs. Particulars Amount Rs.
Interest on Capital   Profit and Loss A/c (Net Profit) 1,50,000
A’s Capital A/c
15,000   Interest on Drawings (WN 1)  
B’s Capital A/c
12,000  
A’s Capital A/c
1,950  
C’s Capital A/c
9,000 36,000
B’s Capital A/c
1,800  
Salary  
C’s Capital A/c
1,650 5,400
B (1,500 × 12)
18,000      
C (1,500 × 12)
18,000 36,000    
Commission to A 1,50,000×5100 7,500    
Transfer to Reserve (WN 2) 7,590    
Profit transferred to:      
A’s Capital A/c
30,360      
B’s Capital A/c
C’s Capital A/c
22,770 15,180 68,310    
  1,54,500   1,54,500
       

Working Notes:
WN 1: Calculation of Interest on Drawings
Total Drawings = 3,000×12 = Rs 36,000
Interest on Drawings (A) = Total Drawings × Rate100 × 6.512Interest on Drawings (A)= 36,000×10100×6.512=Rs 1,950Interest on Drawings (B) = Total Drawings × Rate100 × 612Interest on Drawings (B)= 36,000×10100×612=Rs 1,800Interest on Drawings (C) = Total Drawings × Rate100 × 5.512Interest on Drawings (C)= 36,000×10100×5.512=Rs 1,650

WN 2: Calculation of Transfer to Reserve
Amount to be transferred to Reserve = Distributable Profit × 10100Amount to be transferred to Reserve =75,900* × 10100=Rs 7,590*Distributable Profit = 1,50,000 + 5,400 36,000  36,000  7,500 = Rs 75,900

Page No 1.110:

Answer:

Profit and Loss Appropriation Account

for the year ended March 31, 2016

Dr.

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partners’ Commission:

 

Profit and Loss A/c (Net Profit)

1,80,000

A

6,000

 

 

 

B

9,000

 

 

 

C

6,000

 

 

 

D

9,000

30,000

 

 

Profit transferred to:

 

 

 

A’s Capital A/c

60,000

 

 

 

B’s Capital A/c

45,000

 

 

 

C’s Capital A/c

30,000

 

 

 

D’s Capital A/c

15,000

1,50,000

 

 

 

1,80,000

 

1,80,000

 

 

 

 

Working Notes:

WN 1 Calculation of Partners’ Commission

Partners’ Commission = 20% on Net Profit after such commission

This commission is to be shared by the partners in the ratio of 2 : 3 : 2 : 3

WN 2 Calculation of Profit Share of each Partner

Profit available for Distribution = 1,80,000 − 30,000 = Rs 1,50,000

Profit sharing ratio = 4 : 3 : 2 : 1

Page No 1.110:

Answer:

(a) Amount transferred to Reserve=10% of the Net Profit=2,50,000×10100=Rs 25,000(b) Amount transferred to Reserve=10% of the Distributable Profit                                                     =(2,50,00045,00036,000+5,000+4,000)100=1,78,000×10100=Rs 17,800

Page No 1.110:

Answer:

Profit and Loss Appropriation Account

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital:

 

Profit and Loss A/c (Net Profit after Z’s salary)

4,00,000

X

50,000

 

 

 

Y

50,000

 

 

 

Z

25,000

1,25000

 

 

Profit transferred to:

 

 

 

X’s Capital A/c

1,10,000

 

 

 

Y’s Capital A/c

1,10,000

 

 

 

Z’s Capital A/c

55,000

2,75,000

 

 

 

4,00,000

 

4,00,000

 

 

 

 

Working Notes:

WN 1 Salary to Z has not been debited to Profit and Loss Appropriation Account. This is because Profit of Rs 4,00,000 is given after adjusting the Z’s salary.

WN 2 Calculation of Interest on Capital

WN 3 Calculation of Profit Share of each Partner

Divisible of Profit after Interest on Capital = Rs 4,00,000 − Rs 1,25,000 = Rs 2,75,000

Profit sharing ratio = 2 : 2 : 1

Page No 1.110:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2015
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Interest on Capital (WN3)   Profit and Loss A/c 5,97,600
X
22,000   (6,00,000 - 2,400)  
Y
17,500   Interest on Drawings (WN2)  
Z
9,000 48,500
X
6,600  
Salary to:  
Y
4,400  
Y
40,000  
Z
4,400 15,400
Z
60,000 1,00,000    
Profit transferred to:      
X’s Capital A/c
1,85,800      
Y’s Capital A/c
1,85,800      
Z’s Capital A/c
92,900 4,64,500    
  6,13,000   6,13,000
       

 

Partners’ Capital Accounts
Dr.   Cr.
Date Particulars X Y Z Date Particulars X Y Z
2014         2014        
Oct. 01 Bank A/c     20,000 Apr. 01 Balance b/d 2,00,000 1,60,000 1,00,000
2015         Oct. 01 Bank A/c 40,000 30,000  
Mar. 31 Balance c/d 2,40,000 1,90,000 80,000          
    2,40,000 1,90,000 1,00,000     2,40,000 1,90,000 1,00,000
                   

 

Partners’ Current Accounts
Dr.   Cr.
Date Particulars X Y Z Date Particulars X Y Z
2014         2014        
Apr. 01 Balance b/d   8,000   Apr. 01 Balance b/d 20,000   10,000
2015         2015        
Mar. 31 Drawings A/c 1,44,000 96,000 96,000 Mar. 31 Interest on Capital A/c 22,000 17,500 9,000
Mar. 31 Interest on Drawings A/c 6,600 4,400 4,400 Mar. 31 Salary A/c   40,000 60,000
Mar. 31 Balance c/d 77,200 1,34,900 71,500 Mar. 31 P&L Appropriation A/c 1,85,800 1,85,800 92,900
    2,27,300 2,43,300 1,71,900     2,27,800 2,43,300 1,71,900
                   

Working Notes:
WN 1: Calculation of Interest on Loan
Y= 40,000 × 6100= Rs 2,400
Interest on Loan is a charge against profit therefore net profit after deducting interest on loan amount is shown in Profit and Loss Appropriation Account. Also, Interest on Loan is to be shown in Partners’ Loan Account and hence it is not credited to Partners’ Current Account.

WN 2: Calculation of Interest on Drawings (at the end of each month)
X=1,44,000×10100×5.512=Rs 6,600Y=96,000×10100×5.512=Rs 4,400Z=96,000×10100×5.512=Rs 4,400

WN 3: Calculation of Interest on Capital

Interest (1st April – 1st Oct.) Interest (1st Oct. – 31st March) Total
X=2,00,000×10100×612=Rs 10,000 X=2,40,000×10100×612=Rs12,000 22,000
Y=1,60,000×10100×612=Rs 8,000 Y=1,90,000×10100×612=Rs 9,500 17,500
Z=1,00,000×10100×612=Rs 5,000 Z=80,000×10100×612=Rs 4,000 9,000



Page No 1.111:

Answer:

Partners’ Capital Accounts

Dr.

Cr.

Particulars

Sohan Rs

Mohan Rs

Particulars

Sohan Rs

Mohan Rs

Drawings A/c

50,000

30,000

Balance b/d

4,00,000

3,00,000

Interest on Drawings A/c

1,250

750

Interest on Capital A/c

20,000

15,000

 

 

 

P/L Appropriation A/c

60,000

50,000

Balance c/d

4,69,750

3,37,250

Partners’ Salary

36,000

-

 

 

 

Commission

5,000

3,000

 

5,21,000

3,68,000

 

5,21,000

3,68,000

 

 

 

 

 

 

Working Note:

Calculation of Interest on Capital

Page No 1.111:

Answer:

Profit and Loss Appropriation Account

for the year ended March 31, 2015

Dr.   Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital:

 

Profit (after Salary)

21,000

P

2,000

 

 

 

Q

1,500

 

 

 

R

1,500

5,000

 

 

Profit transferred to:

 

 

 

P’s Capital A/c

7,000

 

 

 

Q’s Capital A/c

5,000

 

 

 

R’s Capital A/c

4,000

16,000

 

 

 

21,000

 

21,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

 

 

Cr.

Particulars

P

Q

R

Particulars

P

Q

R

Drawings A/c

10,000

10,000

10,000

Balance b/d

40,000

30,000

30,000

 

 

 

 

Salaries A/c

-

6,000

4,000

 

 

 

 

Interest Capital A/c

2,000

1,500

1,500

Balance c/d

39,000

32,500

29,500

P/L Appropriation A/c

7,000

5,000

4,000

 

49,000

32,500

29,500

 

49,000

42,500

39,500

 

 

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on P's Capital = 40,000×5100=Rs 2,000Interest on Q's Capital = 30,000×5100=Rs 1,500Interest on R's Capital = 30,000×5100=Rs 1,500


WN 2 Calculation of Profit Share of each Partner

Profit available for distribution = 21,000 − 5000 = Rs 16,000

  1. Distribution of first Rs 10,000 (50%, 30% and 20%)

        

  1. Distribution of Remaining Profit i.e. Rs 6,000 (16,000 − 10,000) equally

        

Therefore,

Page No 1.111:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2015
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Interest on Capital (WN1)   Profit and Loss A/c (Net Profit) 44,490
P
1,800   Interest on Drawings (WN2)  
Q
2,340  
Q
68  
R
1,460 5,600
R
132 200
Salary to P 12,000    
Commission to R 1,290    
Profit transferred to:      
P’s Capital A/c
12,900      
Q’s Capital A/c
7,740      
R’s Capital A/c
5,160 25,800    
  44,690   44,690
       

WN 1: Calculation of Interest on Capital
P= 30,000×6100=Rs 1,800
For QInterest on Capital for 9 months =40,000×6100×912=Rs 1,800Add: Interest on Capital for 3 months = 36,000×6100×312=Rs 540Total Interest on Capital = Rs 2,340

Total Interest on Capital = 1,800 + 540 = Rs 2,340

For RInterest on Capital for 11 months = 24,000×6100×1112=Rs 1,320Add: Interest on Capital for 1 month = 28,000×6100×112=Rs 140Total Interest on Capital = Rs 1,460

WN 2: Calculation of Interest on Drawings

Year (2014) Drawings × Period = Product
Aug. 01 1,000 × 8 = 8,000
Nov. 30 1,400 × 4 = 5,600
Sum of Product 13,600
   
Interest on Q’s Drawings= 13,600×6100×112=Rs 68
Interest on R’s Drawings made at the end = 4,800×6100×5.512=Rs 132
WN 3: Calculation of Commission to R
Profit after interest on drawings and capital and salary = 44,490 - 5,600 - 12,000 + 200 = Rs 27,090
Commission= 27,090×5105=Rs 1,290

Page No 1.111:

Answer:

Profit and Loss Appropriation Account

for the year ended March 31, 2015

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on  Capital:

 

Profit and Loss A/c (Net Profit)

1,50,000

A

9,000

 

 

 

B

5,400

14,400

 

 

B’s Salary

18,000

 

 

Partner’s  Commission

 

 

 

A

18,000

 

 

 

B

4,743

22,743

 

 

Profit transferred to:

 

 

 

A’s Capital A/c

71,143

 

 

 

B’s Capital A/c

23,714

94,857

 

 

 

50,000

 

1,50,000

 

 

 

 

 

Partners’ Capital Accounts

Dr.

 

 

 

 

Cr.

Particulars

A

B

Particulars

A

B

Drawings A/c

24,000

18,000

Balance b/d

1,50,000

90,000

 

 

 

Interest on Capital A/c

9,000

5,400

 

 

 

Commission A/c

18,000

4,743

 

 

 

Salary A/c

 

18,000

Balance c/d

2,24,143

1,23,857

P/L Appropriation A/c

71,143

23,714

 

2,48,143

1,41,857

 

2,48,143

1,41,857

 

 

 

 

 

 

Working Notes:

WN 1 Calculation of Interest on Capital

Interest on A's Capital = 1,50,000 × 6100=9,000Interest on B's Capital = 90,000 × 6100=5,400

 

WN 2 Calculation of Commission to Partners

Commission to A = 2% on Turnover                           = 2100×9,00,000 = Rs 18,000


Commission to B = 5% on Profits after all Expense including such Commission

Profits after all expense = 1,50,000 14,400 18,000 − 18,000 = Rs 99,600

Commission to B = Profit after all Expenses × Rate100 + Rate                           = 99,600 × 5105= Rs 4,743

WN 3 Calculation of Profit Share of each Partner

Profit available for Distribution = 1,50,000 − 14,400 − 18,000 −18,000 − 4,743 = Rs 94,857

Profit sharing ratio = 3 : 1

A's Profit Share = 94,857 × 34=71,143B's Profit Share = 94,857  × 14=23,714



Page No 1.112:

Answer:

Profit and Loss Appropriation Account
for the year ended 31st March, 2016
Dr.     Cr.
Particulars Amount Rs Particulars Amount Rs
Interest on Capital @ 15%   Profit and Loss A/c (Net Profit) 3,04,200
A
60,000      
B
45,000   Interest on Advances (WN1)  
C
30,000 1,35,000
A
3,600  
   
B
6,300  
   
C
900 10,800
Profit transferred to:      
A’s Capital A/c
80,000      
B’s Capital A/c
60,000      
C’s Capital A/c
40,000 1,80,000    
  3,15,000   3,15,000
       

 

Partners’ Capital Accounts
Dr. Cr.
Particulars A B C Particulars A B C
        Balance b/d 4,00,000 3,00,000 2,00,000
Balance c/d 4,00,000 3,00,000 2,00,000        
  4,00,000 3,00,000 2,00,000   4,00,000 3,00,000 2,00,000