NCERT Solutions for Class 12 Commerce Accountancy Chapter 1 Accounting For Partnership : Basic Concepts are provided here with simple step-by-step explanations. These solutions for Accounting For Partnership : Basic Concepts are extremely popular among class 12 Commerce students for Accountancy Accounting For Partnership : Basic Concepts Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the NCERT Book of class 12 Commerce Accountancy Chapter 1 are provided here for you for free. You will also love the ad-free experience on Meritnation’s NCERT Solutions. All NCERT Solutions for class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 100:

Question 1:

Define Partnership Deed.

Answer:

Partnership Deed is a written agreement among the partners of a partnership firm. It includes agreement on profit sharing ratio, salaries, commission of partners, interest provided on partner's capital and drawings and interest on loan given or taken by the partners, etc. Generally following details are included in a partnership deed.

1. Objective of business of the firm

2. Name and address of the firm

3. Name and address of all partners

4. Profit and loss sharing ratio

5. Contribution to capital by each partner

6. Rights, types of roles and duties of partners

7. Duration of partnership

8. Rate of interest on capital, drawings and loans

9. Salaries, commission, if payable to partners.

10. Rules regarding admission, retirement, death and dissolution of the firm, etc.

Page No 100:

Question 2:

Why it is considered desirable to make the partnership agreement in writing.

 

Answer:

Partnership agreement may be oral or written. It is not compulsory to form partnership agreement in writing under the Partnership Act, 1932. However, written partnership deed is desirable than oral agreement as it helps in avoiding disputes and misunderstandings among the partners. Also, it helps in settling disputes (as the case may be) among the partners, as written partnership deed can be referred to anytime. If written partnership deed is duly signed and registered under Partnership Act, then it can be used as evidence in the court of law.

Page No 100:

Question 3:

List the items which may be debited or credited in the capital accounts of the partners when:

(i) Capitals are fixed

(ii) Capitals are fluctuating

Answer:

(i)When Capitals are fixed

The following items are credited in the Partner's Capital Account when capital accounts are fixed.

(a) Opening balance of capital

(b) Additional capital introduced during an accounting year

The following items are debited in the Partner's Capital Account when capital accounts are fixed.

(a) Part of capital withdrawn

(b) Closing balance of capital

(ii) When Capitals are fluctuating

The following items are credited in the Partner's Capital Account when capital accounts are fluctuating.

(a) Opening balance of capital.

(b) Additional capital introduced during an accounting year

(c) Salaries to the partners

(d) Interest on capital

(e) Share of profit

(f) Commission and bonus to the partners

The following items are debited in the Partner's Capital Account when capital accounts are fluctuating.

(a) Drawings made during the accounting period

(b) Interest on drawings.

(c) Share of loss.

(d) Closing balance of capital.

Page No 100:

Question 4:

Why is Profit and Loss Adjustment Account prepared? Explain.

Answer:

The Profit and Loss Adjustment Account is prepared because of the following two reasons.

1. To record omitted items and rectify errors if any- After the preparation of Profit and Loss Account and Balance Sheet, if any error or omission is noticed, then these errors or omissions are adjusted by opening Profit and Loss Adjustment Account in the subsequent accounting period without altering old Profit and Loss Account.

2. To distribute profit or loss between the partners- Sometimes, besides adjusting the items and rectifying errors, this account is also used for distribution of profit (or loss) among the partners. In this situation, this account acts as a substitute for Profit and Loss Appropriation Account. The main rationale to prepare the Profit and Loss Adjustment Account is to ascertain true profit or loss.

Page No 100:

Question 5:

Give two circumstances under which the fixed capitals of partners may change.

Answer:

The following are the two circumstances under which the fixed capitals of partner may change.

(i) If any additional capital is introduced by the partner during the year.

(ii) If any part of capital is permanently withdrawn by the partner from the firm.

Page No 100:

Question 6:

If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?

Answer:

If a fixed amount is withdrawn on the first day of every quarter, then the interest is calculated on the amount withdrawn for a period of seven and half () months.

Example:

If a partner withdraws Rs 5,000 in the beginning of each quarter and the interest is charged @ 10% on the drawings, then interest on drawings is calculated as:

Total drawings made by the partner during the whole year are Rs 20,000, i.e. Rs 5000× 4.

Interest on drawings



Page No 101:

Question 7:

In the absence of partnership deed, specify the rules relating to the following:

(i) Sharing of profits and losses.

(ii) Interest on partner’s capital.

(iii) Interest on Partner’s drawings.

(iv) Interest on Partner’s loan

(v) Salary to a partner.

Answer:

(i) Sharing of profits and losses: If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.

(ii) Interest on partner’s capital: If the partnership deed is silent on interest on partner’s capital, then according to the Partnership Act of 1932, no interest on capital should be given to the partners of the firm.

(iii) Interest on partner’s drawings: If the partnership deed is silent on interest on partner’s drawings, then according to the Partnership Act of 1932, no interest on drawing should be charged from the partners of the firm for the amount of capital withdrawn in form of drawings.

(iv) Interest on partner’s loan: If the partnership deed is silent on interest on partner’s loan, then according to the Partnership Act of 1932, the partners are entitled for 6% p.a. interest on the loan forwarded by them to the firm.

(v) Salary to a partner: If the partnership deed is silent on salary to a partner, then according to the Partnership Act of 1932, no salary should be given to any partner.

Page No 101:

Question 2:

Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital, were Rs 90,000 and Rs 60,000. The profit during the year were Rs 45,000. According to partnership deed, both partners are allowed salary, Rs 700 per month to Anubha and Rs 500 per month to Kajal. Interest allowed on capital @ 5% p.a. The drawings at the end of the period were Rs 8,500 for Anubha and Rs 6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings. Prepare partners capital accounts, assuming that the capital account are fluctuating.

Answer:

 

a)

Note: If Partners’ Salaries, Interest on capital and Interest on Drawing are treated as these have already adjusted in Profit and Loss Account. The Solution will be as

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit Transferred to Current  A/c

 

 

Profit and Loss

 

45,000

Anubha’s Capital

30,000

 

 

 

 

Kajal’s Capital

15,000

45,000

 

 

 

 

 

 

 

 

 

 

 

45,000

 

 

45,000

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Anubha

Kajal

Particulars

Anubha

Kajal

Drawings

8,500

6,500

Balance b/d

90,000

60,000

Interest on Drawings

425

325

Partners’ Salaries

8,400

6,000

 

 

 

Interest on Capital

4,500

3,000

Balance c/d

1,23,975

77,175

Profit and Loss Appropriation

30,000

15,000

 

1,32,900

84,000

 

1,32,900

84,000

 

 

 

 

 

 

 

b) Alternative

Note: If Partners’ salaries, interest on capital and interest on drawings adjusted in Profit and Loss Appropriation Account. The solution will be as.

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partners’ Salaries:

 

 

Profit and Loss Account

 

45,000

Anubha

8,400

 

Interest on Drawings

 

 

Kajal

6,000

14,400

Anubha

425

 

 

 

 

Kajal

325

750

Interest on Capital:

 

 

 

 

 

Anubha

4,500

 

 

 

 

Kajal

3,000

7,500

 

 

 

 

 

 

 

 

 

Profit transferred to

 

 

 

 

 

Anubha’s Capital

15,900

 

 

 

 

Kajal’s Capital

7,950

23,850

 

 

 

 

 

 

 

 

 

 

 

45,750

 

 

45,750

 

 

 

 

 

 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Anubha

Kajal

Particulars

Anubha

Kajal

Drawings

8,500

6,500

Balance b/d

90,000

60,000

Interest on Drawings

425

325

Partners’ Salaries

8,400

6,000

 

 

 

Interest on Capital

4,500

3,000

Balance c/d

1,09,875

70,125

Profit and Loss Appropriation

15,900

7,950

 

1,18,800

76,950

 

1,18,800

76,950

 

 

 

 

 

 

 

 

Page No 101:

Question 1:

What is partnership? What are its chief characteristics? Explain.

Answer:

According to the Section 4 of the Partnership Act, 1932, partnership is an agreement between two or more persons who have agreed to share profits or losses of a business that will be carried by all or any one of them acting for all.

Person who joined their hands to set up the business are called ‘partners’ individually and ‘firm’ collectively and the name under which they carry out their business is termed as ‘firm name’.

Important Characteristics of Partnership

The following are the important characteristics of partnership.

1.Two or more persons: Partnership is an agreement between two or more persons coming together for a common goal. There should be at least two persons to form a partnership. Although as per the Partnership Act of 1932, there is no maximum limit on the number of partners in a partnership firm, but as per the Rule (10) of the Companies (Miscellaneous) Rules Act 2014, the maximum number of partners permissible is 50. Therefore, in case the number of partners exceeds the aforesaid limit, then the concerned partnership is considered to be illegal. In this regards it must be noted that Section 464 of Companies Act 2013, the maximum number of partners permissible is one humdred. However, it must be noted that the maximum number of partners is not limited in case an association or partnership is formed by professionals such as chartered accountants, lawyers, company secretaries, etc. These professionals are governed by their the special laws as formed by their respective professional institutions. Prior to the enforcement of Companies Act of 2013, the earlier act of 1956, imposed restrictions on the maximum number of partners to 10 in case of banking business and 20 in case of any other kind of business. However, with effect from April 01, 2014, Companies Act of 1956 has been replaced by Companies Act of 2013.

2.Partnership Deed: The partnership among the partners should be backed up by a partnership deed. A partnership deed is an agreement among the partners governing them in carrying out the proposed business. The deed may be oral or written.

3.Business: A partnership is formed to carry out a legal business. Partnerships in smuggling, black marketing etc. are illegal business activities and hence, the partnership is also illegal.

4. Sharing of profit: The profit or loss earned by a partnership firm must be distributed as per the partnership deed or equally among the partners (in absence of partnership deed). It is a very important feature of partnership. If a group is formed for charitable purpose, not to earn profit then this group will not be regarded as a partnership.

5.Liability: Liability of a partnership firm is unlimited and each partner is liable for firm’s liabilities whether individually and jointly with other partners to the third party. Moreover, each partner along with his/her co-partners is responsible for all the acts of the partnership firm.

6. Mutual agency: Partnership may be carried on by all or any one of them acting on behalf of all. It means all the partners of a firm are equally entitled to participate in the activities of the business or any one of them who is acting on behalf of all. Every partner acts as an agent for others and binds others by his/her act and in turn is bound by others by their act.

Note: In case of any question regarding the permissible limit on the maximum number of partners in a partnership firm, the students shall take the limit as 50.

Page No 101:

Question 2:

Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.

Answer:

The following are the main provisions of the Indian partnership Act, 1932 that are relevant to the partnership accounts in absence of partnership deed.

1.Profit Sharing Ratio: If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.

2.Interest on Capital: If the partnership deed is silent on interest on partner’s capital, then according to the Partnership Act of 1932, no interest on capital should be given to the partners of the firm. However, interest on capital is given only out of the profits, if mutually agreed by all the partners.

3.Interest on Drawings: If the partnership deed is silent on interest on partner’s drawings, then according to the Partnership Act of 1932, no interest on drawing should be charged from the partners of the firm for the amount of capital withdrawn in the form of drawings.

4.Interest on Partner’s Loan: If the partnership deed is silent on interest on partner’s loan, then according to the Partnership Act of 1932, the partners are entitled for 6% p.a. interest on the loan forwarded by them to the firm.

5.Salary to Partner: If the partnership deed is silent on salary to a partner, then according to the Partnership Act of 1932, no salary should be given to any partner.

Page No 101:

Question 3:

Explain why it is considered better to make a partnership agreement in writing.

Answer:

A partnership deed forms the basis of a partnership firm. A partnership deed consists of all the pre-determined terms and conditions that are agreed to by all the partners while forming the partnership. Generally the following details are included in a partnership deed.

1. Objective of business of the firm

2. Name and address of the firm

3. Name and address of all partners

4. Profit and loss sharing ratio

5. Contribution to capital by each partner

6. Rights, types of roles and duties of partners

7. Duration of partnership

8. Rate of interest on capital, drawings and loans

9. Salaries, commission, if payable to partners.

10. Rules regarding admission, retiring, death and dissolution of the firm, etc. It ensures the

A partnership deed can both be oral or written. Although, it is not compulsory to form partnership agreement in writing under the Partnership Act of 1932, however, written partnership deed is more desirable than the oral agreements. This is because it ensures the smooth functioning of the business of the partnership firm. It helps in avoiding disputes and misunderstandings among the partners. Also, it helps in settling t the disputes (as the case may be) among the partners, as written partnership deed can be referred to anytime. If written partnership deed is duly signed and registered under Partnership Act, then it can be used as evidence in the court of law. Moreover, any changes (if needed) in the partnership deed cannot be made without the consent of all the partners of the firm. Therefore, it is desirable to form partnership deed in writing because of the merits associated with written documents over its oral counterparts.

Page No 101:

Question 4:

Illustrate how interest on drawings will be calculated under various situations.

Answer:

When a partner withdraws any amount, either in cash or in any other form, from the firm for his/her personal use, then it is termed as drawings. The interest charged by the firm on the amount of drawings is termed as interest on drawings. The method of calculating interest on drawings depends on the information available for time and frequency of the drawings made by the partner. The following different situations of drawings made illustrate the calculation of interest charged on drawings.

Situation 1: When information regarding Amount, Date and Rate of Interest on drawings are given.

If a partner withdrew Rs 10,000 on May 01 and interest on drawing is charged at 10% p.a. and the firm closes its books on December 31 every year then interest of drawings amounts to Rs 667.

Situation 2: When information regarding Amount, Rate of Interest on drawings is given

Case I: If the Amount and Rate of Interest on drawings (per annumn) is given but date is not mentioned

If the details regarding the amount of drawings and rate of interest of drawings (p.a.) is given but the date of drawings is not mentioned then interest is charged on average basis and the period of drawings is taken as 6 months.

Example- If a partner withdrew Rs 10,000 and rate of interest on drawings is 10% p.a. then the interest of drawings amounts to Rs 500

Case II: If the Amount and Rate of Interest on drawings is given but the date and per annumn rate of interest is not mentioned

If the date and the rate of interest are given but per annum is not specified, then annual interest is charged.

Example- If a partner withdrew Rs 20,000 and interest rate is 10% , then the interest on drawings amounts to Rs 2,000.

Situation 3: When a fixed amount is withdrawn at regular interval

Case I: If a fixed amount is withdrawn at the beginning of each month, then the interest is calculated for 6.5 months.

Example- If a partner withdraws Rs 1,000 in the beginning of every month and the rate of interest is 10% p.a., then the interest on drawings amount to Rs 650.

Interest on drawings

Case II: If a fixed amount is withdrawn at the end of each month, then the interest is calculated for 5.5 months

Example- If a partner withdraws Rs 1,000 at the end of each month and rate of interest is 10% p.a., then the interest on drawings amount to Rs 550.

Case III: If a fixed amount is withdrawn in the middle of every month then assuming that the drawings are made on15th of every month then interest on drawings is calculated for 6 months

Example- If a partner withdraws Rs 1,000 on 15th of every month and the rate of interest is 10% p.a., then the interest on drawings amount to Rs 600.

Case IV: If a fixed amount is withdrawn in the beginning of every quarter then the interest is calculated for 7.5 months

Example- If a partner withdraws Rs 3,000 in the beginning of every quarter and the rate of interest is 10% p.a. then the interest on drawings amount to Rs 750

Case V: If a fixed amount is withdrawn at the end of every quarter, then the interest is calculated for 4.5 months

Example- If a partner withdraws Rs 3,000 at the end of every quarter and the rate of interest is 10% p.a., then the interest on drawings amounts to Rs 450.

Situation 4:

When different amount is at different intervals

If different amount is withdrawn by a partner at different points of time then the interest is calculated by Product Method. The period of drawings is calculated from the date of withdrawal to the last date of the accounting year.

Example- A partner withdraws Rs 5,000 on Feb 01, Rs 3000 on May 01, Rs 5,000 on Sep. 30 and Rs 1000 on Dec. 31 and the rate of interest on drawings is 10% p.a. The firm closes its book on December 31.

Calculation of Interest on Drawings by Product Method

 

Interest on Drawings

 

Date

Amount

Rs

Outstanding Period

Product

Feb. 01

5,000

11

5,000 ´ 11

=

55,000

May. 01

3,000

8

3,000 ´ 8

=

24,000

Sep. 30

5,000

3

5,000 ´ 3

=

15,000

Dec. 31

1,000

0

1,000 ´ 0

=

0

 

 

 

 

 

94,000

 

 

Page No 101:

Question 5:

How will you deal with a change in the profit sharing ratio among existing partners?

Take imaginary figures to illustrate your answer?

Answer:

Usually due to the admission, retirement or death of a partner or sometimes due to the general agreement among the partners, they may decide to change the profit sharing ratio. Various adjustments that should be considered during the change in the profit sharing ratio are , goodwill, reserves and accumulated profits, profit or loss on the revaluation of assets and liabilities and adjustment of capitals, etc. The general reserves and accumulated profits (if any) and profit (or loss) on revaluation on assets and liabilities should be credited (debited) in the Partner's Capital Account in their old profit sharing ratio.

But if the existing partners decide to change the profit sharing ratio then some partners gain (gaining partners) at the cost of other partners (sacrificing partners). Thus, the former should compensate the latter. Therefore, the gaining Partners’ Capital Account s are debited to the extent of their gain and sacrificing Partners' Capital Accounts are credited to extent of their sacrifice. The following Journal entry is passed.

 

Gaining Partner's Capital A/c

Dr.

To Sacrificing Partner's Capital A/c

 

(Adjustment entry passed)

 

 

Example:

A, B, C are partners in a firm sharing profit and loss in 3:2:1 ratio. They decide to share profit and loss equally in future. On that date, the books of the firm shows Rs 1,20,000 as general reserve, profit due to revaluation of building Rs 30,000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.

 

Particulars

A

B

C

Share of profit as per 3:2:1 

60,000

40,000

20,000

Profit on revaluation of building

15,000

10,000

5,000

 

 

 

 

 

75,000

50,000

25,000

Share of profit as per 1:1:1

50,000

50,000

5,000

 

 

 

 

Difference (Gain or Loss)

25,000

-

25,000

 

(Loss)

 

(Gain)

 

 

 

 

 

Hence, in this example, C gains at the cost of A, so the partner A needs to be compensated by C with the amount of Rs 25,000. The following adjustment entry is passed.

 

Adjustment entry:

 

 

 

 

 

C's Capital A/c

Dr.

25,000

 

To A's Capital A/c

 

 

25,000

( Adjustment entry passed)

 

 

 

 

 

 

 

 

         

 

 



Page No 102:

Question 3:

Harshad and Dhiman are in partnership since April 01, 2016. No Partnership agreement was made. They contributed Rs 4,00,000 and 1,00,000 respectively as capital. In addition, Harshad advanced an amount of Rs 1,00,000 to the firm, on October 01, 2016. Due to long illness, Harshad could not participate in business activities from August 1, to September 30, 2017. The profits for the year ended March 31, 2017 amounted to Rs 1,80,000. Dispute has arisen between Harshad and Dhiman.

 

Harshad Claims:

(i)    He should be given interest @ 10% per annum on capital and loan;

(ii)   Profit should be distributed in proportion of capital;

 

Dhiman Claims:

(i)    Profits should be distributed equally;

(ii)   He should be allowed Rs 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 Adjustment Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Partner’s Loan

 

 

Profit and Loss

 

1,80,000

Harshad 1,00,000 × (6/100) × (6/12)

3,000

 

 

 

Profit and Loss Appropriation

1,77,000

 

 

 

 

 

1,80,000

 

 

1,80,000

 

 

 

 

 

 

 

Profit and Loss Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss Adjustment

 

1,77,000

Harshad’s Capital

88,500

 

 

 

Sharma’s Capital

88,500

 

 

 

 

 

 

 

 

 

 

1,77,000

 

 

1,77,000

 

 

 

 

 

 

 

 

Page No 102:

Question 4:

Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any Partnership agreement. They introduced Capitals of Rs 5,00,000 and Rs 3,00,000 respectively on October 01, 2016. Aakriti Advanced. Rs 20,000 by way of loan to the firm without any agreement as to interest. Profit and Loss account for the year ended March 2017 showed profit of Rs 43,000. Partners could not agree upon the question of interest and the basis of division of profit. You are required to divide the profits between them giving reason for your solution.

Answer:

 

Profit and Loss Adjustment Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Partner’s Loan

 

 

Profit and Loss

 

43,000

Aakriti 20,000 × (6/100) × (6/12)

600

 

 

 

Profit transferred to

 

 

 

 

 

Aakriti’s Capital

21,200

 

 

 

 

Bindu’s Capital

21,200

42,400

 

 

 

 

 

43,000

 

43,000

 

 

 

 

               

 

Reason

a) Interest on partners loan shall be allowed at 6% p.a. because there is no partnership agreement.

b) Interest on capital shall not be allowed because there is no agreement on interest on capital.

c) Profit shall be distributed equally because profit sharing ratio has not been given.

 

 

Page No 102:

Question 5:

Rakhi and Shikha are partners in a firm, with capitals of Rs 2,00,000 and Rs 3,00,000 respectively. The profit of the firm, for the year ended 2016-17 is Rs 23,200. As per the Partnership agreement, they share the profit in their capital ratio, after allowing a salary of Rs 5,000 per month to Shikha and interest on Partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew Rs 7,000 and Shikha Rs 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.

Answer:

If interest on capital and Partners’ salaries will be provided even if firm involves in loss.

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partner’s Salaries

 

 

Profit and Loss

 

23,200

Shikha

 

60,000

Loss transferred to

 

 

 

 

 

 

Rakhi Capital

34,720

 

Interest on Capital

 

 

Shikha’s Capital

52,080

86,800

Rakhi

20,000

 

 

 

 

Shikha

30,000

50,000

 

 

 

 

 

1,10,000

 

1,10,000

 

 

 

 

                   

  

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Rakhi

Shikha

Particulars

Rakhi

Shikha

Drawings

7,000

10,000

Balance b/d

2,00,000

3,00,000

Profit & Loss Appropriation

34,720

52,080

Partner’s Salaries

 

60,000

Balance c/d

1,78,280

3,27,920

Interest on Capital

20,000

30,000

 

 

 

 

 

 

 

2,20,000

3,90,000

 

2,20,000

3,90,000

 

 

 

 

 

 

 

If interest on capital and salaries will be provided out of profit

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partner’s Salaries

 

 

Profit and Loss

23,200

Shikha  {23,200 × (6/11)}

 

12,655

 

 

Interest on Capital

 

 

 

 

Rakhi {23,200 × (2/11)}

4,218

 

 

Shikha {23,200 × (3/11)}

6,327

 

 

 

 

 

23,200

 

23,200

 

 

 

 

               

 

If profit is less than the sum of distributable items, distribution shall be in proportion of items for distribution.

 

Partners Salaries

Ratio

 

 

Shikhar (Rs 60,000)

6

23,200 × (6/11)

12,655

Interest on Capital

 

 

 

Rakhi (Rs 20,000)

2

23,200 × (2/11)

4,218

Shikhar (Rs 30,000)

3

23,200 × (3/11)

6,327

 

11

 

23,200

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Rakhi

Shikha

Particulars

Rakhi

Shikha

Drawings

7,000

10,000

Balance b/d

2,00,000

3,00,000

 

 

 

Partner’s Salaries

 

12,655

Balance c/d

1,97,218

3,08,972

Interest on Capital

4,218

6,327

 

 

 

 

 

 

 

2,04,218

3,18,972

 

2,04,218

3,18,972

 

 

 

 

 

 

 

 

Page No 102:

Question 6:

Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs 50,000 and Rs 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of Rs 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to Rs 12,500. A provision of 5% of profits is to be made in respect of manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.

Answer:

 

Profit and Loss Adjustment Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital

 

 

By Profit and Loss (12,500 + 2,500)

15,000

Lokesh

3,000

 

 

 

 

Azad

1,800

4,800

 

 

 

 

 

 

 

 

 

Partner’s Salaries

 

 

 

 

 

Azad

 

2,500

 

 

 

 

 

 

 

 

 

 

Provision for

Manager’s Commission 15,000 × (5/100)

750

 

 

 

Profit transferred to

 

 

 

 

Lokesh Capital

4,170

 

 

 

 

Azad Capital

2,780

6,950

 

 

 

 

 

15,000

 

 

15,000

 

 

 

 

 

 

             

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Lokesh

Azad

Particulars

Lokesh

Azad

 

 

 

Balance b/d

50,000

30,000

 

 

 

Interest on Capital

3,000

1,800

Balance c/d

57,170

37,080

Partner’s Salaries

 

2,500

 

 

 

Profit and Appropriation

4,170

2,780

 

57,170

37,080

 

57,170

37,080

 

 

 

 

 

 

 

 



Page No 103:

Question 7:

The partnership agreement between Maneesh and Girish provides that:

 

(i)    Profits will be shared equally;

(ii)   Maneesh will be allowed a salary of Rs 400 p.m;

(iii)  Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;

(iv)  7% interest will be allowed on partner’s fixed capital;

(v)   5% interest will be charged on partner’s annual drawings;

(vi)  The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs 80,000, respectively. Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015 amounted to Rs 40,000;

 

Prepare firm’s Profit and Loss Appropriation Account.

 

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partner’s Salary

 

 

Profit and Loss

40,000

Maneesh

 

4,800

Interest on Drawings

 

 

 

 

 

Maneesh

800

 

Partner’s commission

 

 

Girish

700

1,500

Girish {(40,000 – 4,800) × (10/100)}

3,520

 

 

 

Interest on Capital

 

 

 

 

Mannesh

7,000

 

 

 

 

Girish

5,600

12,600

 

 

 

 

 

 

 

 

Profit transferred to

 

 

 

 

Maneesh’s Current

10,290

 

 

 

 

Girish’s Current

10,290

20,580

 

 

 

 

41,500

 

 

41,500

 

 

 

 

 

               

 

 

Page No 103:

Question 8:

Ram, Raj and George are partners sharing profits in the ratio 5 : 3 : 2. According to the partnership agreement George is to get a minimum amount of Rs 10,000 as his share of profits every year. The net profit for the year 2013 amounted to Rs 40,000. Prepare the Profit and Loss Appropriation Account.

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

40,000

Ram’s Capital (20,000 – 1,250)

18,750

 

 

Raj’s Capital (12,000 – 750)

11,250

 

 

 

 

 

 

George’s Capital (8,000 + 1,250 + 750)

10,000

 

 

 

40,000

 

40,000

 

 

 

 

 

 

Page No 103:

Question 9:

Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of Rs 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending December 31, 2016 and December 31, 2017 were Rs 40,000 and Rs 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.

Answer:

 

Profit and Loss Appropriation Account for the year 2016

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

40,000

Amann’s Capital  16,000

16,000

 

 

Babita’s Capital (16,000 – 2,000)

14,000

 

 

Suresh’s Capital (8,000 + 2,000)

10,000

 

 

 

 

 

 

 

40,000

 

40,000

 

 

 

 

 

Profit and Loss Appropriation Account for the year 2017

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

60,000

Amann’s Capital 

24,000

 

 

Babita’s Capital

24,000

 

 

Suresh’s Capital

12,000

 

 

 

 

 

 

 

60,000

 

60,000

 

 

 

 

 

 

Page No 103:

Question 10:

Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:

 

(i)    Partners capital on April 1, 2016;

        Simmi, Rs 30,000; Sonu, Rs 60,000;

(ii)   Current accounts balances on April 1, 2016;

        Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.);

(iii)  Partners drawings during the year amounted to

        Simmi, Rs 20,000; Sonu, Rs 15,000;

(iv)  Interest on capital was allowed @ 5% p.a.;

(v)   Interest on drawing was to be charged @ 6% p.a. at an average of six months;

(vi)  Partners’ salaries : Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current accounts.

 

 

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital

 

 

Profit and Loss Account

1,50,000

Simmi

1,500

 

Interest on Drawings

 

Sonu

3,000

4,500

Simmi

600

 

 

 

 

Sonu

450

1,050

Partners’ Salaries

 

 

 

 

 

Simmi

12,000

 

 

 

 

Sonu

9,000

21,000

 

 

 

 

 

 

 

 

 

Profit transferred to

 

 

 

 

Simmi’s Current

94,162

 

 

 

 

Sonu’s Current

31,388

1,25,550

 

 

 

 

 

 

 

 

 

 

 

1,51,050

 

 

1,51,050

 

 

 

 

 

 

               

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

 

 

 

Balance b/d

30,000

60,000

Balance c/d

30,000

60,000

 

 

 

     

 

 

 

 

30,000

60,000

 

30,000

60,000

 

 

 

 

 

 

 

Partners’ Current Account

Dr.

 

 

 

 

Cr.

Particulars

Simmi

Sonu

Particulars

Simmi

Sonu

Drawings

20,000

15,000

Balance b/d

30,000

15,000

Interest on Drawings

600

450

Interest on Capital

1,500

3,000

 

 

 

Partners’ Salaries

12,000

9,000

Balance c/d

1,17,662

43,388

Profit and Loss Appropriation

94,162

31,388

 

1,37,662

58,388

 

1,37,662

58,388

 

 

 

 

 

 

 

 



Page No 104:

Question 11:

Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were Rs 80,000 and Rs 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of Rs 2,000 and Rs 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was Rs 1,00,300. The drawings of Ramesh and Suresh were Rs 40,000 and Rs 50,000, respectively. Interest on drawings amounted to Rs 2,000 for Ramesh and Rs 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.
 

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital 

 

 

Profit and Loss

 

1,00,300

Ramesh

9,600

 

Interest on Drawings

 

 

Suresh

7,200

16,800

Ramesh

2,000

 

   

 

 

Suresh

2,500

4,500

Partners’ Salaries

 

 

 

 

Ramesh

24,000

 

 

 

 

Suresh

36,000

60,000

 

 

 

 

 

 

 

 

 

Profit Transferred to

 

 

 

 

 

Ramesh’s Capital {28,000 × (4/7)}

16,000

 

 

 

Suresh’s Capital {28,000 × (3/7)}

12,000

 

 

 

 

 

1,04,800

 

 

1,04,800

 

 

 

 

 

 

               
               

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Ramesh

Suresh

Particulars

Ramesh

Suresh

Drawings

40,000

50,000

Cash

80,000

60,000

Interest on Drawings

2,000

2,500

Interest on Capital

9,600

7,200

Balance c/d

87,600

62,700

Partners’ Salaries

24,000

36,000

 

 

 

Profit & Loss Appropriation

16,000

12,000

 

1,29,600

1,15,200

 

1,29,600

1,15,200

 

 

 

 

 

 

                                               

Capital Ratio

=

Ramesh

:

Suresh

 

 

80,000

:

60,000

 

 

4

:

3

 

 

 

Page No 104:

Question 12:

Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

 

(i)    Profits would be shared by Sukesh and Vanita in the ratio of 3:2;

(ii)   5% interest is to be allowed on capital;

(iii)  Vanita should be paid a monthly salary of Rs 600.

 

The following balances are extracted from the books of the firm, on March 31, 2017.

 

 

Sukesh

Verma*

 

Rs

Rs

Capital Accounts

40,000

40,000

Current Accounts

(Cr.)   7,200

(Cr.)   2,800

Drawings

10,850

8,150

 

Net profit for the year, before charging interest on capital and after charging partner’s salary was Rs 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.

 

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital 

 

 

Profit and Loss

 

9,500

Sukesh

2,000

 

 

 

 

Vanita

2,000

4,000

 

 

 

 

 

 

 

 

 

 

 

 

Profit transferred to

 

 

 

 

 

Sukesh’s Current {5,500 × (3/5)}

3,300

 

 

 

Vanita’s Current {28,000 × (2/5)}

2,200

 

 

 

 

 

9,500

 

 

9,500

 

 

 

 

 

 

               

  

Partner’s Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Sukesh

Vanita

Particulars

Sukesh

Vanita

 

 

 

Balance b/d

40,000

40,000

Balance c/d

40,000

40,000

 

 

 

 

40,000

40,000

 

40,000

40,000

 

 

 

 

 

 

 

Partner’s Current Account

Dr.

 

 

 

 

Cr.

Particulars

Sukesh

Vanita

Particulars

Sukesh

Vanita

Drawings

10,850

8,150

Balance b/d

7,200

2,800

 

 

 

Partner’s Salaries

 

7,200

 

 

 

Profit and Loss Appropriation

3,300

2,200

Balance c/d

1,650

6,050

Interest on capital

2,000

2,000

 

12,500

14,200

 

12,500

14,200

 

 

 

 

 

 

 

 



Page No 105:

Question 13:

Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for the year ended March 2017 amounted to Rs 1,35,000 and the partner’s drawings had been Rahul Rs 50,000, Rohit Rs 50,000 and Karan Rs 40,000. The profits are distributed among partner’s in the ratio of 3:2:1. Calculate the interest on capital @ 5% p.a.

Answer:

Interest on Capital

Rahul = 20,00,000 × = Rs 1,00,000

Rohit = 18,00,000 × = Rs 90,000

Karan = 16,00,000 × = Rs 80,000

Page No 105:

Question 14:

Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of Rs 2,50,000 and Rs 1,50,000, respectively. On October 01, 2016, they decided that their capitals should be Rs 2,00,000 each. The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.

Answer:

 

Product Method

 

Sunflower

 

01 April 2016 to 30 September 2016

2,50,000 × 6 =

15,00,000

01 October 2016 to 31 March 2017

2,00,000 × 6 =

12,00,000

 

Sum of Product

27,00,000

 

Pink Rose

 

01 April 2016 to 30 September 2016

1,50,000 × 6 =

9,00,000

01 October 2016 to 31 March 2017

2,00,000 × 6 =

12,00,000

 

Sum of Product

21,00,000

 

Interest on Capital =

Sum of Product ×

Rate

×

1

100

12

 

Interest on Sunflower's Capital =

27,00,000 ×

10

×

1

Rs 22,500

100

12

 

Interest on Pink Rose's Capital =

21,00,000 ×

10

×

1

Rs 17,500

100

12

 

Alternative Method:

 

Simple Interest Method

 

Sunflower

April 01, 2016 to September 30, 2016

2,50,000 ×

10

×

6

=

 

Rs 12,500

 

100

12

 

October 01,  2016 to March 31, 2017

2,00,000 ×

10

×

6

=

 

Rs 10,000

 

100

12

 

Interest on Sunflower’s Capital

Rs 22,500

 

Pink Rose

April 01, 2016 to September 30, 2016

1,50,000 ×

10

×

6

=

 

Rs   7,500

 

100

12

 

October 01,  2016 to March 31, 2017

2,00,000 ×

10

×

6

=

 

Rs 10,000

 

100

12

 

Interest on Pink Rose’s Capital

Rs 17,500

 

Page No 105:

Question 15:

On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at Rs 4,00,000, Rs 3,00,000 and Rs 2,00,000, respectively. Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted to Rs 1,50,000 and the partner’s drawings had been Mountain: Rs 20,000, Hill Rs 15,000 and Rock Rs 10,000. Calculate interest on capital.

Answer:

Generally interest on Capital is calculated on opening balance of capital. If additional capital is not given.

 

Mountain

Hill

Rock

Closing Capital

4,00,000

3,00,000

2,00,000

Add: Drawings

20,000

15,000

10,000

Less: Profit (1:1:1)

(50,000)

(50,000)

(50,000)

Opening Capital

3,70,000

2,65,000

1,60,000

 

 

Interest on Capital

Mountain

3,70,000 ×= Rs 37,000

Hill

2,65,000 × = Rs 26,500

Rock

1,60,000 × = Rs 16,000

Page No 105:

Question 16:

 

Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2017:

 

Balance Sheet as at March 31, 2017

 

 

Amount

 

Amount

Liabilities

Rs

Assets

Rs

Neelkant’s Capital

10,00,000

Sundry Assets

30,00,000

Mahadev’s Capital

10,00,000

 

 

Neelkant’s Current Account

1,00,000

 

 

Mahadev’s Current Account

1,00,000

 

 

Profit and Loss Apprpriation

 

 

 

(March 2017)

8,00,000

 

 

 

30,00,000

 

30,00,000

 

 

 

 

During the year Mahadev’s drawings were Rs 30,000. Profits during 2017 is Rs 10,00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.

 

Answer:

Interest on Capital

Neelkant’s 10,00,000 ×= Rs 50,000
Mahadev’s 10,00,000 × = Rs 50,000

 

Note: In this question, as the balances of both Partner's Capital Account and of Partner's Current Account are mentioned, so it has been assumed that the capital of the partners is fixed.

As we know, when the capital of the partners is fixed, drawings and interest on capital does not affect the capital balances of the partners. Rather, it would affect their current account balances. Therefore, in this case, capital at the beginning (i.e. opening capital) and capital at the end (i.e. closing capital) of the year would remain same. Thus, the interest on capital is calculated on fixed capital balances (given in the Balance Sheet of the question).



Page No 106:

Question 17:

Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2018.

 

May 01, 2017

Rs 12,000

July 31, 2017

Rs   6,000

September 30, 2017

Rs   9,000

November 30, 2017

 Rs 12,000

January 01, 2018

Rs   8,000

March 31, 2018

Rs   7,000

 

Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.

 

Answer:

Product Method

 

Drawings × Period

Product

01 May, 2017 to 31 March 2018

12,000 × 11 =

1,32,000

31 July, 2017 to 31 March 2018

6,000 × 8 =

48,000

30 September, 2017 to 31 March 2018

9,000 × 6 =

54,000

30 Nov. 2017 to 31 March 2018

12,000 × 4 =

48,000

01 Jan. 2018 to 31 March 2018

8,000 × 3 =

24,000

31 March 2018 to 31 March 2018

7,000 × 0 =

0

 

Sum of Product

3,06,000

 

Here the formula will be

Interest on Drawings = Product ×

= 3,06,000 ×

= Rs 2,295

Page No 106:

Question 18:

The capital accounts of Moli and Golu showed balances of Rs 40,000 and Rs 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @ 12 p.a. Golu advanced a loan of Rs 10,000 to the firm on August 01, 2016. During the year, Moli withdrew Rs 1,000 per month at the beginning of every month whereas Golu withdrew Rs 1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was Rs 20,950. Calculate interest on drawings show distribution of profits and prepare partner’s capital accounts.

Answer:

Interest on Moli’s Drawing = Total Drawings ×

=

= Rs 780

Interest on Golu’s Drawings = Total Drawing ×

=

= Rs 660

Profit and Loss Adjustment Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital

 

 

Profit and Loss Account

 

20,950

Moli

4,000

 

Interest on Drawings

 

 

Golu

2,000

6,000

Moli

780

 

 

 

 

Golu

660

1,440

Interest on Partner’s Loan

 

 

 

 

 

Golu’s {10,000 × (6/100) × (8/12)}

400

 

 

 

 

 

 

 

 

 

Profit transferred to

 

 

 

 

Moli’s Capital {15,990 × (3/5)}

9,594

 

 

 

 

Golu’s Capital {15,990 × (2/5)}

6,396

15,990

 

 

 

 

 

 

 

 

 

 

 

22,390

 

 

22,390

 

 

 

 

 

 

                 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Moli

Golu

Particulars

Moli

Golu

Drawings

12,000

12,000

Balance b/d

40,000

20,000

Interest on Drawing

780

660

Interest on Capital

4,000

2,000

Balance c/d

40,814

15,736

Profit and Loss Adjustment

9,544

6,396

 

 

 

 

 

 

 

 

 

 

 

 

 

53,594

28,396

 

53,594

28,396

 

 

 

 

 

 

 

 

Page No 106:

Question 19:

Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of Rs 40,000 and Rs 30,000, respectively. They withdrew from the firm the following amounts, for their personal use:

 

Rakesh

Month

Rs

 

May 31, 2016

600

 

June 30, 2016

 500

 

August 31, 2016

1,000

 

November 1, 2016

400

 

December 31, 2016

1,500

 

January 31, 2017

 300

 

March 01, 2017

 700

Rohan

At the beginning of each month

 400

 

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts are closed on March 31, 2017, every year.

 

Answer:

Rakesh’s Interest on Drawings

 

Drawings × Period

Product

31 May 2016 to 31 March 2017

600 × 10 =

6,000

30 June 2016 to 31 March 2017

500 ×   9 =

4,500

31 August 2016 to 31 March 2017

1,000 ×   7 =

7,000

1 November 2016 to 31 March 2017

400 ×   5 =

2,000

31 December 2016 to 31 March 2017

1,500 ×   3 =

4,500

31 January 2017 to 31 March 2017

300 ×   2 =

6,00

01 March 2017 to 31 March 2017

700 ×   1 =

700

 

Sum of Product

25,300

 

 

Interest = Sum of Product ×

=

= Rs 126.5

Interest on Rohan’s Capital

= Total Drawing ×

= Rs 156
 

Page No 106:

Question 20:

Himanshu withdrews Rs 2,500 at the end Month of each month. The Partnership deed provides for charging the interest on drawings @ 12% p.a. Calculate interest on Himanshu’s drawings for the year ending 31st December, 2017.

Answer:

Total Drawing of Himanshu = Rs 2,500 × 12 = Rs 30,000

Interest on Drawing = Total Drawings ×

= Rs 1,650



Page No 107:

Question 21:

Bharam is a partner in a firm. He withdraws Rs 3,000 at the starting of each month for 12 months. The books of the firm closes on March 31 every year. Calculate interest on drawings if the rate of interest is 10% p.a.

Answer:

Total Drawing of Bharam = Rs 3,000 ×12 = Rs 36,000

Interest on Drawing = Total Drawings ×

= Rs 1,950

Page No 107:

Question 22:

Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were Rs 2,50,000 and Rs 1,50,000, respectively. They share profits equally. On July 01, 2017, they decided that their capitals should be Rs 1,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31, 2018.

Answer:

Interest on Capital

Raj

 

 

Capital × Period

Product

1 April 2017 to 30 June 2017

2,50,000 × 3 =

7,50,000

1 July 2017 to 31 March 2018

1,00,000 × 9 =

9,00,000

 

Sum of Product

16,50,000

 

 

Interest = Sum of Product ×

= 16,50,000 ×

= Rs 11,000

Neeraj

 

 

Capital × Period

Product

1 April 2017 to 30 June 2017

1,50,000 × 3 =

4,50,000

1 July 2017 to 31 March 2018

1,00,000 × 9 =

9,00,000

 

Sum of Product

13,50,000

 

 

Interest = 13,50,000 × = Rs 9,000

Page No 107:

Question 23:

Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during 2017 were Rs 24,000 and Rs 16,000, respectively. Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly, throughout the year.

Answer:

Interest on Drawings = Drawings ×

Amit = 24,000 × = Rs 1,200

Bhola = 16,000 × = Rs 800

Page No 107:

Question 24:

Harish is a partner in a firm. He withdrew the following amounts during the year 2017 :

 

 

Rs

February 01

4,000

May 01

10,000

June 30

4,000

October 31

12,000

December 31

 4,000

 

Interest on drawings is to be charged @ 7.5 % p.a.

Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.

 

Answer:

Calculation of interest on Harish’s drawings

 

Drawings × Period

Product

01 Feb. 17 to 31 Dec. 17

4,000 × 11 =

44,000

01 May 17 to 31 Dec. 17

10,000 ×   8 =

80,000

30 June 17 to 31 Dec. 17

4,000 ×   6 =

24,000

31 Oct. 17 to 31 Dec. 17

12,000×   2 =

24,000

31 Dec. 17 to 31 Dec. 17

4,000 ×   0 =

0

 

Sum of Product

1,72,000

 

 

Interest on drawings = 1,72,000 × = Rs 1,075

Page No 107:

Question 25:

Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn: (i) in the beginning of every month, (ii) in the middle of every month, and (iii) at the end of every month.

Answer:

Case (i)

If they withdraw money in the beginning of each month

Interest of drawings = Total drawings × Rate ×

Menon’s = 24,000 × = Rs 1,300

Thomas’s = 24,000 × = Rs 1,300

Case (ii)

If they withdraw in the middle of every month

Interest on Drawings = Total drawings ×

Menon’s = 24,000 × = Rs 1,200

Thomas’s = 24,000 × = Rs 1,200

Case (iii)

If they withdraw at the end of every month.

Interest on drawings = Total drawings ×

Menon’s = 24,000 × = Rs 1,100

Thomas’s = 24,000 × = Rs 1,100

Page No 107:

Question 26:

On March 31, 2017, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of Rs 24,000 Rs 18,000 and Rs 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017, amounted to Rs 36,000 and the partner’s drawings had been Ram, Rs 3,600; Shyam, Rs 4,500 and Mohan, Rs 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.
 

Answer:

 

 

Ram

Shyam

Mohan

Capital on March 31

24,000

18,000

12,000

Add: Drawings

3,600

4,500

2,700

Less: Profit (3:2:1)

(18,000)

(12,000)

(6,000)

Capital April 01, 2012

9,600

10,500

8,700

 

Here, Interest on Capital = Opening Capital ×

Ram’s = = Rs 480

Shyam’s = = Rs 525

Mohan’s = 8,700 × = Rs 435



Page No 108:

Question 27:

Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’ share in profit has been guaranteed by Amit and Sumit to be a minimum sum of Rs 8,000. Profits for the year ended March 31, 2017 was Rs 36,000. Divide profit among the partners.

Answer:

 

Guarantee of Profit to the partners

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss

36,000

Amit’s Capital

18,000

 

 

 

Less: Gurantee to Samiksha

 {2,000 × (3/5)}

(1,200)

16,800

 

 

 

 

 

 

 

Sumit’s Capital

12,000

 

 

 

Less: Gurantee to Samiksha

 {2,000 × (2/5)}

(800)

11,200

 

 

 

 

 

 

 

Samiksha Capital

6,000

 

 

 

Add: Amit’s Guarantee

1,200

 

 

 

Add: Sumit’s Guarantee

800

8,000

 

 

 

 

 

 

 

 

 

36,000

 

36,000

 

 

 

 

               

 

 

Page No 108:

Question 28:

Pinki, Deepati and Kaku are partner’s sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than Rs 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to Rs 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.

Answer:

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit & Loss

 

40,000

Pinki’s Capital

20,000

 

 

 

 

Less: Gurantee to Kaku 
{1,000 × (1/2)}

(500)

19,500

 

 

 

 

 

 

 

 

 

 

 

Deepti’s Capital

16,000

 

 

 

 

Less: Guarantee to Kaku 
{1,000 × (1/2)}

(500)

15,500

 

 

 

 

 

 

 

 

 

Kaku’s Capital

4,000

 

 

 

 

Add: Deficiency received from

 

 

 

 

 

Pinki

500

 

 

 

 

Deepti

500

5,000

 

 

 

 

 

 

 

 

 

 

 

 

40,000

 

 

40,000

 

 

 

 

 

 

 

 

Page No 108:

Question 29:

Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.

Answer:

 

Profit and Loss Appropriation Account as on March 31, 2016

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss

 

40,000

Abhay’s Capital

 

20,000

 

 

 

 

 

 

 

 

 

 

Siddharth’s Capital

12,000

 

 

 

 

Less: Guarantee to Kusum’s

(2,000)

10,000

 

 

 

 

 

 

 

 

 

Kusum’s Capital

8,000

 

 

 

 

Add: Deficiency received from Siddharth

2,000

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,000

 

 

40,000

 

 

 

 

 

 

                       
                         

 

Profit and Loss Appropriation Account as on March 31, 2017

Dr.

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

60,000

Abhay’s Capital

30,000

 

 

Siddharth’s Capital

18,000

 

 

Kusum’s Capital

12,000

 

 

 

 

 

 

 

60,000

 

60,000

 

 

 

 

           

   

Page No 108:

Question 30:

Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than Rs 5,000. The profits for the year ending March 31, 2017 amounts to Rs 35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show distribution of profit among partner.

Answer:

 

Profit and Loss Appropriation Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss

 

35,000

Radha’s Capital

17,500

 

 

 

 

Less: Fatima’s Deficiency {1,500 × (3/5)}

(900)

16,600

 

 

 

 

 

 

 

 

 

 

 

Mary’s Capital

14,000

 

 

 

 

Less: Fatima’s Deficiency {1,500 × (2/5)}

(600)

13,400

 

 

 

 

 

 

 

 

 

Fatima’s Capital

3,500

 

 

 

 

Add: Deficiency born by

 

 

 

 

 

Radha

900

 

 

 

 

Mary

600

5,000

 

 

 

 

 

 

 

 

 

 

 

 

35,000

 

 

35,000

 

 

 

 

 

 

                       

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

 

 

 

 

 

 

Profit and Loss Appropriation A/c

Dr.

 

35,000

 

 

To Radha’s Capital A/c

 

 

 

16,600

 

To Mary’s Capital A/c

 

 

 

13,400

 

To Fatima’s Capital A/c

 

 

 

5,000

 

(Profit distributed among Partners)

 

 

 

 

 

 

 

 

 

 

 

Alternative Method

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Profit and Loss Appropriation A/c

Dr.

 

35,000

 

 

To Radha’s Capital A/c

 

 

 

17,500

 

To Mary’s Capital A/c

 

 

 

14,000

 

To Fatima’s Capital A/c

 

 

 

3,500

 

(Profit distributed among Partners)

 

 

 

 

 

 

 

 

 

 

 

Radha’s Capital A/c

Dr.

 

900

 

 

Mary’s Capital A/c

Dr.

 

600

 

 

To Fatima’s Capital A/c

 

 

 

1,500

 

(Deficiency of Fatima’s Share taken from Radha and

Mary) 

 

 

 

 

 

 

 

 

 

 

 

Page No 108:

Question 31:

X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3 : 2 : 1, respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The net profit for the year ended March 31, 2017 was Rs 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.

Answer:

 

Profit and Loss Appropriation Account as on March 31, 2017

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss

 

30,000

X’s Capital

15,000

 

 

 

 

Less: Z’s Deficiency {3,000 × (3/5)}

(1,800)

13,200

 

 

 

 

 

 

 

 

 

 

 

Y’s Capital

10,000

 

 

 

 

Less: Z’s Deficiency {3,000 × (2/5)}

(1,200)

8,800

 

 

 

 

 

 

 

 

 

Z’s Capital

5,000

 

 

 

 

Add: Share of Deficiency born by

 

 

 

 

 

Radha

1,800

 

 

 

 

Mary

1,200

8,000

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

30,000

 

 

 

 

 

 

                       

 

 

Page No 108:

Question 32:

Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of Rs 60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are: (i) Rs 2,50,000; (ii) 3,60,000.

Answer:

 

Case (i)

 

Profit and Loss Appropriation Account as on March 31, 2015

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss

 

2,50,000

Arun’s Capital

1,00,000

 

   

 

Less: Chintu’s share of deficiency

(10,000)

90,000

     

 

 

 

 

     

 

Bobby’s Capital

 

1,00,000

   

 

 

 

 

   

 

Chintu’s Capital

50,000

 

   

 

Add: Deficiency received from Arun

10,000

60,000

   

 

 

 

 

 

   

 

 

 

2,50,000

   

2,50,000

 

 

 

   

 

                         
                         

 

Case (ii)

 

Profit and Loss Appropriation Account as on March 31, 2015

Dr.

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

3,60,000

Arun’s Capital {3,60,000 × (2/5)}

1,44,000

 

 

Bobby’s Capital {3,60,000 × (2/5)}

1,44,000

 

 

Chintu’s Capital {3,60,000 × (1/5)}

72,000

 

 

 

 

3,60,000

 

3,60,000

 

 

 

 

 

             
             

 

 



Page No 109:

Question 33:

Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2 : 2 : 1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than Rs 20,000. The net profit for the year ended March 31, 2017 amounted to Rs 70,000. Prepare Profit and Loss Appropriation Account.

Answer:

 

Profit and Loss Appropriation Account as on March 31, 2017

Dr.

       

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

 

Profit and Loss 

70,000

Ashok’s Capital

28,000

 

 

 

Less: Cheena’s share of deficiency {6,000 × (1/2)}

(3,000)

25,000

 

 

 

 

 

 

 

Brijesh’s Capital

28,000

 

 

 

Less: Cheena’s share of deficiency {6,000 × (1/2)}

(3,000)

25,000

 

 

 

 

 

 

 

Cheena’s Capital

14,000

 

 

 

Add: Deficiency received from

 

 

 

 

Ashok

3,000

 

 

 

Brijesh

3,000

20,000

 

 

 

 

 

 

 

70,000

 

70,000

  

 

 

 

                       
                         

 

 

Page No 109:

Question 34:

Ram, Mohan and Sohan are partners with capitals of Rs 5,00,000, Rs 2,50,000 and 2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as follows:

Ram 1/2 , Mohan 1/3 Sohan 1/6 . But Ram and Mohan have guaranteed that Sohan’s share in the profit shall not be less than Rs 25,000, in any year. The net profit for the year ended March 31, 2017 is Rs 2,00,000, before charging interest on capital. You are required to show distribution of profit.

Answer:

 

Profit and Loss Appropriation A/c as on 31 March 2017

 

Dr.

 

 

 

Cr.

 

Particulars

 

Amount

Rs

Particulars

Amount

Rs

Interest on Capital

 

 

Profit and Loss

2,00,000

Ram

50,000

 

 

 

Mohan

25,000

 

 

 

Sohan

20,000

95,000

 

 

 

 

 

 

 

Profit Transferred to

 

 

 

 

Ram’s Capital

52,500

 

 

 

Less: Share of deficiency {7,500 × (3/5)}

(4,500)

48,000

 

 

 

 

 

 

 

Mohan’s Capital

35,000

 

 

 

Less: Share of deficiency {7,500 × (2/5)}

(3,000)

32,000

 

 

 

 

 

 

 

Sohan’s Capital

17,500

 

 

 

Add: Deficiency received from

 

 

 

 

Ram

4,500

 

 

 

Mohan

3,000

25,000

 

 

 

 

 

 

 

 

 

 

2,00,000

 

2,00,000

 

 

 

 

 

               

 

 

Page No 109:

Question 35:

Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3 : 2 : 1, subject to the following :

(i)

Sona’s share in the profits, guaranteed to be not less than Rs 15,000 in any year.

(ii)

Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is Rs 25,000). The net profit for the year ended March 31, 2017 is Rs 75,000. The gross fee earned by Babita for the firm was Rs 16,000.

You are required to show Profit and Loss Appropriation Account (after giving effect to the alone).

Answer:

 

 

Profit and Loss Appropriation Account as on March 31, 2017

 

Dr.

 

 

 

Cr.

 

Particulars

 

Amount

Rs

Particulars

Amount

Rs

 

Profit Transferred to

 

 

Profit and Loss

75,000

 

Amit’s Capital {84,000 × (3/6)}

42,000

 

Babita’s Capital

9,000

 

Less: Sona’s share of deficiency {1,000 × (3/5)}

(600)

41,400

(Deficiency  of Fees 25,000 – 16,000)

 

 

 

 

 

 

 

 

Babita’s Capital {84,000 × (2/6)}

28,000

 

 

 

 

Less: Sona’s share of deficiency {1,000 × (2/5)}

(400)

27,600

 

 

 

 

 

 

 

 

 

Sona’s Capital {84,000 × (1/6)}

14,000

 

 

 

 

Add: Deficiency received from

 

 

 

 

 

Amit

600

 

 

 

 

Babita

400

15,000

 

 

 

 

 

 

 

 

 

 

 

 

84,000

 

84,000

 

 

 

 

 

 

 

               

 

 

Page No 109:

Question 36:

The net profit of X, Y and Z for the year ended March 31, 2016 was Rs 60,000 and the same was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently discovered that the under mentioned transactions were not recorded in the books :

(i)

Interest on Capital @ 5% p.a.

(ii)

Interest on drawings amounting to X Rs 700, Y Rs 500 and Z Rs 300.

(iii)

Partner’s Salary : X Rs 1000, Y Rs 1500 p.a.

The capital accounts of partners were fixed as : X Rs 1,00,000, Y Rs 80,000 and Z Rs 60,000. Record the adjustment entry.

Answer:

 

Past Adjustment

 

X

Y

Z

 

Total

Interest on Capital

5,000

4,000

3,000

=

12,000

Less: Interest on Drawings

(700)

(500)

(300)

=

(1,500)

Add: Partner’s Salaries

1,000

1,500

NIL

=

2,500

Right distribution of Rs 13,000

5,300

5,000

2,700

=

13,000

Less: Wrong distribution of Rs 13,000 (3:1:1)

(7,800)

(2,600)

(2,600)

=

(13,000)

 

(2,500) Dr.

2,400 Cr

100 Cr

=

NIL

 

Explanation:

Capital have credit balance if it deducted will be debited and if it is added it will be credited.

Here X wrongly taken excess Rs 2,500 hence Rs 2,500 will be deducted from X capital Account on the other hand Y and Z taken less amount as they should have been taken, hence capital account of Y and Z will be added.

 

Date

Particulars

 

L.F

Debit Amount Rs

Credit Amount Rs

 

X’s Capital A/c

Dr.

 

2,500

 

 

 

To Y’s Capital A/c

 

 

 

2,400

 

 

To Z’s Capital A/c

 

 

 

100

 

(Profit adjusted among partners)

 

 

 

 

 

 

 

 

 

 

 

 

Page No 109:

Question 37:

The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for same years. Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit sharing ratio should come into effect retrospectively were for the last three year. Harry and Porter have agreement on this account. The profits for the last three years were:

 

 

Rs

2014-15

22,000

2015-16

24,000

2016-17

29,000

 

Show adjustment of profits by means of a single adjustment journal entry.

 

Answer:

Distribution of Profit

 

Old Ratio (2:2:1)

Harry

Porter

Ali

 

Total

Year

 

 

 

 

 

2014 – 15

(8,800)

(8,800)

(4,400)

=

(22,000)

2015 – 16

(9,600)

(9,600)

(4,800)

=

(24,000)

2016 – 17

(11,600)

(11,600)

(5,800)

=

(29,000)

 

 

 

 

=

 

Total Profit of 3 years in old ratio

(30,000)

(30,000)

(15,000)

=

(75,000)

Distribution of 3 years profit in new Ratio (1:1:1)

25,000

25,000

25,000

=

75,000

Adjusted Profit

(5,000)

(5,000)

10,000

 

NIL

 

Journal (Adjusting entry)

 

Date

 

Particulars

 

L.F

Debit Amount Rs

Credit Amount Rs

 

 

 

 

 

 

 

Harry's Capital A/c

Dr.

 

5,000

 

 

Porter's Capital A/c

Dr.

 

5,000

 

 

To Ali's Capital A/c

 

 

 

10,000

 

(Profit adjusted due to change in profit sharing ratio)

 

 

 

 

 

 

 

 

 

 



Page No 110:

Question 38:

Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3 : 2. Following is the balance sheet of the firm as on March 31, 2017.

 

 

Amount

 

 

Amount

Liabilities

Rs

Assets

Rs

Mannu’s Capital

30,000

 

Drawings :

 

 

Shristhi’s Capital

10,000

40,000

Mannu

4,000

 

 

 

 

Shristhi

2,000

6,000

 

 

 

Other Assets

34,000

 

 

40,000

 

 

40,000

 

 

 

 

 

 

 

Profit for the year ended March 31, 2017 was Rs 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.

Answer:

 

Adjustment of Profit

 

 

Mannu’s

Shrishti

 

Total

Interest on Capital

1,500

500

=

2,000

Less: Interest on Drawings

(120)

(60)

=

(180)

Right distribution of Rs 1,820

1,380

440

=

1,820

Less: Wrong distribution of Rs 1,820 (3 : 2)

(1,092)

(728)

=

(1,820)

Adjusted Profit

288

(288)

=

NIL

 

Adjusting Journal Entry

 

Date

 

Particulars

 

L.F

Debit Amount 

Rs

Credit Amount 

Rs

 

Shrishti's Capital A/c

Dr.

 

288

 

 

To Mannu's Capital A/c

 

 

 

288

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

Page No 110:

Question 39:

On March 31, 2017 the balance in the capital accounts of Eluin, Monu and Ahmed, after making adjustments for profits, drawing, etc; were Rs 80,000, Rs 60,000 and Rs 40,000 respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin Rs 20,000; Monu, Rs 15,000 and Ahmed, Rs 9,000. Interest on drawings chargeable to partners were Eluin Rs 500, Monu Rs 360 and Ahmed Rs 200. The net profit during the year amounted to Rs 1,20,000. The profit sharing ratio was 3 : 2 : 1. Pass necessary adjustment entries.

Answer:

 

In this question interest on capital shall be calculated on opening capital

 

 

Eluin

Monu

Ahmed

Capital  on 31 Mar. 2017 (Closing Capital)

80,000

60,000

40,000

Add: Drawings

20,000

15,000

9,000

Less: Profit Rs 120,000 (3:2:1)

(60,000)

(40,000)

(20,000)

Capital on April 01, 2016 (Opening Capital)

40,000

35,000

29,000

 

Adjustment of Profit

 

 

Eluin

Monu

Ahmed

 

Total

Interest on Capital (on Opening Capital)

2,000

1,750

1,450

=

5,200

Less: Interest on Drawings

(500)

(360)

(200)

=

(1,060)

Right distribution of Rs 4,140

1,500

1,390

1,250

=

4,140

Less: Wrong distribution of Rs 4,140 (in the ratio 3:2:1)

(2,070)

(1,380)

(690)

=

(4,140)

 

(570)

10

560

=

NIL

 

Adjusting Journal Entry

 

Date

 

Particulars

 

L.F.

Debit Amount

Rs

Credit Amount Rs

 

 

 

 

 

 

 

Eluin's Capital A/c

Dr.

 

570

 

 

To Monu's Capital A/c

 

 

 

10

 

To Ahmed's Capital A/c

 

 

 

560

 

(Adjustment of Profit made)

 

 

 

 

 

 

 

 

 

 

 

 

Page No 110:

Question 40:

Azad and Benny are equal partners. Their capitals are Rs 40,000 and Rs 80,000, respectively. After the accounts for the year have been prepared it is discovered that interest at 5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts before distribution of profits. It is decided to make an adjustment entry at the beginning of the next year. Record the necessary journal entry.

Answer:

 

Interest on Capital

 

Azad =

40,000 Ă—

5

 = Rs 2,000

100

 

Benny =

80,000 Ă—

5

 = Rs 4,000

100

 

Adjustment of Profit

 

Azad

Benny

Total

Interest on Capital

2,000

4,000

=

6,000

Less: Wrong distribution of Profit Rs 6,000 (1: 1)

(3,000)

(3,000)

=

(6,000)

Adjusted Profit

(1,000)

(1,000)

=

NIL

  

Adjusting Journal Entry

 

Date

 

Particulars

 

L.F

Debit Amount

Rs

Credit Amount

Rs

 

 

 

 

 

 

 

Azad's Current  A/c

Dr.

 

1,000

 

 

To Benny's Current A/c

 

 

 

1,000

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

 



Page No 111:

Question 41:

 

Kavita and Pradeep are partners, sharing profits in the ratio of 3 : 2. They employed Chandan as their manager, to whom they paid a salary of Rs 750 p.m. Chandan deposited Rs 20,000 on which interest is payable @ 9% p.a. At the end of 2017 (after the division of profit), it was decided that Chandan should be treated as partner w.e.f. Jan. 1, 2014 with 1/6 th share in profits. His deposit being considered as capital carrying interest @ 6% p.a. like capital of other partners. Firm’s profits after allowing interest on capital were as follows:

 

 

 

Rs

2014

Profit

59,000

2015

Profit

62,000

2016

Loss

(4,000)

2017

Profit

78,000

 

Record the necessary journal entries to give effect to the above.

Answer:

 

 

 

 

Interest on

Loan

+

Salary

=

Total

2014

59,000

+

1,800

+

9,000

=

69,800

2015

62,000

+

1,800

+

9,000

=

72,800

2016

(4,000)

+

1,800

+

9,000

=

6,800

2017

78,000

+

1,800

+

9,000

=

88,800

 

1,95,000

+

7,200

+

36,000

=

2,38,200

 

 

Chandan received as Manager = Interest on Loan + Salary = 7,200 + 36,000 = Rs 43,200

 

Total Profit of 4 years before interest on Chandan’s Loan and Salary = 2,38,200

Interest on Chandan’s Caiptal for 4 years ={20,000 × (6/100) = 1,200}

= 1,200 × 4 = Rs 4,800

 

Profit after interest on all partners Capital

= Total Profit of four years before interest on Chandan’s loan and Salary – Interest on Chandan’s Capital for four years

= 2,38,200 – 4,800

= Rs 2,33,400

 

Wrong Distribution – Distribution of 4 years

 

Profit when Chandan as a Manager

 

Kavita {1,95,000 × (3/5)}

=

1,17,000

 

Pradeep {1,95,000 × (2/5)}

=

78,000

Chandan received as manager = Interest on Loan + Salary

 

= 7,200 + 36,000

=

43,200

 

 

 

2,38,200

         

 

Right Distribution – Division of Profit when Chandan as Partner

 

Chandan Share of Profit {2,33,400 × (1/6)}

38,900

Interest on Capital

4,800

 

43,700

 

Kavita’s Share of Profit {(2,33,400 – 38,900) ×(3/5)} =

1,16,700

Pradeep’s share of Profit {(2,33,400 – 38,900) × (2/5)} =

77,800

 

 

Adjustment of Profit

 

Kavita

 

Pradeep

 

Chandan

=

Total

Distribution of profit when Chandan as partner

1,16,700

 

77,800

 

43,700

=

2,38,200

Less: Distribution of profit when Chandan as manager

(1,17,000)

 

(78,000)

 

(43,200)

=

(2,38,200)

Right distribution of Rs 4,140

(300)

 

(200)

 

(500)

=

NIL

 

 

Date

 

Particulars

 

L.F.

Debit Amount Rs

Credit Amount Rs

 

Kavita's Capital A/c

Dr.

 

300

 

 

Pradeep's Capital A/c

Dr.

 

200

 

 

To Chandan's Capital A/c

 

 

 

500

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

 

Page No 111:

Question 42:

Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs 30,000, Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for the year ended March 31, 2017 amounting to Rupees 24,000 had been credited to partners in the proportion in which they shared profits. During the tear their drawings for Mohan, Vijay and Anil were Rs 5,000, Rs 4,000 and Rs 3,000, respectively. Subsequently, the following omissions were noticed:

(a)

Interest on Capital, at the rate of 10% p.a., was not charged.

(b)

Interest on Drawings: Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded in the books.

Record necessary corrections through journal entries.

Answer:

 

Interest on Capital shall be calculated on opening capital.

 

 

Mohan

Vijay

Anil

Closing Capital

30,000

25,000

20,000

Add: Drawings

5,000

4,000

3,000

Less: Profit (1:1:1)

(8,000)

(8,000)

(8,000)

Opening Capital

27,000

21,000

15,000

 

Interest on Capital

 

Mohan = 27,000 ×

10

 = Rs 2,700

100

 

Vijay = 21,000 ×

10

 = Rs 2,100

100

 

Anil = 15,000 ×

10

 = Rs 1,500

100

 

Adjustment of Profit

 

 

Mohan

Vijay

Anil

 

Total

Interest on Capital (on Opening Capital)

2,700

2,100

1,500

 

6,300

Interest on Drawings

(250)

(200)

(150)

 

(600)

 

2,450

1,900

1,350

 

5,700

Wrong distribution

(1,900)

(1,900)

(1,900)

=

(5,700)

 

550

NIL

(550)

 

 

 

Adjusting Journal Entry

 

Date

 

Particulars

 

L.F

Debit Amount

Rs

Credit Amount

Rs

 

 

 

 

 

 

 

Anil's Capital A/c

Dr.

 

550

 

 

To Vijay’s Capital A/c

 

 

 

550

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 111:

Question 43:

Anju, Manju and Mamta are partners whose fixed capitals were Rs 10,000, Rs 8,000 and Rs 6,000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during there years remained as follows:

 

Year

Anju

Manju

Mamta

2014

4

3

5

2015

3

2

1

2016

1

1

1

 

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan. 2017.

 

Answer:

Interest on Capital

    Anuj = 10,000 ×

5

 = Rs 500

100

 

Manju = 8,000 ×

5

 = Rs 400

100

 

Mamta = 6,000 ×

5

 = Rs 30

100

Adjustment of profit

Year 2014

 

Anuj

 

Manju

 

Mamta

=

Total

Interest on Capital

500

 

400

 

300

 

1,200

Wrong distribution of Rs 1,200 (4:3:5)

(400)

 

(300)

 

(500)

=

(1,200)

 

100

 

100

 

(200)

 

NIL

 

Year 2015

 

Anuj

 

Manju

 

Mamta

=

Total

Interest on Capital

500

 

400

 

300

 

1,200

Wrong distribution of Rs 1,200 (3:2:1)

(600)

 

(400)

 

(200)

=

(1,200)

 

(100)

 

NIL

 

100

 

NIL

Year 2016

 

Anuj

 

Manju

 

Mamta

=

Total

Interest on Capital

500

 

400

 

300

 

1,200

Wrong distribution of Rs 1,200 (1:1:1)

(400)

 

(400)

 

(400)

=

(1,200)

 

100

 

NIL

 

(100)

 

NIL

Final Adjustment

 

Anuj

 

Manju

 

Mamta

2014

100

 

100

 

(200)

2015

(100)

 

NIL

 

100

2016

100

 

NIL

 

(100)

 

100

 

100

 

(200)

Adjusting Journal Entry

Date

 

Particulars

 

L.F

Debit Amount

Rs

Credit Amount

Rs

Jan. 2017

 

 

 

 

 

 

Mamta's Capital A/c

Dr.

 

200

 

 

To Anuj’s Capital A/c

 

 

 

100

 

To Manju Capital A/c

 

 

 

100

 

(Adjustment of profit made)

 

 

 

 

 

 

 

 

 

 

 

 

Page No 111:

Question 44:

 

Dinker and Ravinder were partners sharing profits and losses in the ratio of 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2017.

 

Account Name

Debit

Amount

Rs

Credit

Amount

Rs

Capital

 

 

Dinker

 

2,35,000

Ravinder

 

1,63,000

Drawings

 

 

Dinker

 6,000

 

Ravinder

 5,000

 

Opening Stock

35,100

 

Purchases and Sales

2,85,000

3,75,800

Carriage inward

2,200

 

Returns

3,000

2,200

Stationery

1,200

 

Wages

12,500

 

Bills receivables and Bills payables

45,000

32,000

Discount

900

400

Salaries

12,000

 

Rent and Taxes

18,000

 

Insurance premium

2,400

 

Postage

300

 

Sundry expenses

1,100

 

Commission

 

3,200

Debtors and creditors

95,000

40,000

Building

1,20,000

 

Plant and machinery

80,000

 

Investments

1,00,000

 

Furniture and Fixture

26,000

 

Bad Debts

 2,000

 

Bad debts provision

 

 4,600

Loan

 

35,000

Legal Expenses

200

 

Audit fee

1,800

 

Cash in Hand

13,500

 

Cash at Bank

23,000

 

 

8,91,200

8,91,200

 

 

 

 

Prepare final accounts for the year ended December 31,2017, with following adjustment:

 

(a)  Stock on December 31,2017, was Rs 42,500.

(b)  A Provision is to be made for bad debts at 5% on debtors

(c)  Rent outstanding was Rs 1,600.

(d) Wages outstanding were Rs 1,200.

(e)  Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.

(f)  Dinker and Ravinder are entitled to a Salary of Rs 2,000 per annum

(g)  Ravinder is entitled to a commission Rs 1,500.

(h)  Depreciation is to be charged on Building @ 4%, Plant and Machinery, 6%, and furniture and fixture, 5%.

(i)   Outstanding interest on loan amounted to Rs 350.

 

Answer:

 

Financial Statement as on December 31, 2017

Trading Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

 

Opening Stock

 

35,100

Sales

3,75,800

 

 

Purchases

 

2,85,000

 

Less: Sales Return

(3,000)

3,72,800

 

Less: Purchases Return

(2,200)

2,82,800

 

 

 

 

 

 

 

Closing Stock

42,500

 

Carriage Inwards

 

2,200

 

 

 

 

 

Wages

12,500

 

 

 

 

 

Add: Outstanding

1,200

13,700

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

81,500

 

 

 

 

 

 

 

 

 

 

 

 

 

4,15,300

 

 

4,15,300

 

 

 

 

 

 

 

 

                       

 

Profit and Loss Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Stationery

 

1,200

Gross Profit

 

81,500

Discount Allowed

 

900

Discount Received

 

400

Salaries

 

12,000

Commission

 

3,200

Rent & Taxes

18,000

 

 

 

 

Add: Outstanding

1,600

19,600

 

   

 

 

 

 

 

   

 

Insurance Premium

 

2,400

 

   

 

Postage

 

300

 

   

 

Sundry Expenses

 

1,100

 

   

 

Depreciation on

 

 

 

 

 

Building

 

4,800

 

 

 

Plant and Machinery

 

 

4,800

 

 

 

Fixtures and Fittings

 

1,300

 

 

 

 

 

 

 

 

 

 

Provision for Bad Debts

4750

 

 

 

 

Add: Bad Debt

2,000

 

 

 

 

 

 

6,750

 

 

 

 

Less: (Old) Provision for Bad Debt

(4,600)

2,150

 

 

 

 

 

 

 

 

 

Legal Expenses

 

200

 

 

 

Audit Fee

 

1,800

 

 

 

Outstanding Interest on Loan

350

 

 

 

Profit and Loss Appropriation

 

32,200

 

 

 

 

 

 

 

 

 

 

 

85,100

 

 

85,100

 

 

 

 

 

 

 

 

 

 

 

 

                   

 

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Interest on Capital

 

 

Net Profit

 

32,200

Dinker

9,400

 

Interest on Drawings

 

Ravinder

6,520

15,920

Dinker

180

 

 

 

 

Ravinder

150

330

Partner’s Salaries

 

 

 

 

 

Dinker

2,000

 

 

 

 

Ravinder

2,000

4,000

 

 

 

 

 

 

 

 

 

 

Commission (Ravinder)

 

1,500

 

 

 

Profit transferred to

 

 

 

 

 

Dinker’s Capital

7,407

 

 

 

 

Ravinder’s Capital

3,703

11,110

 

 

 

 

 

 

 

 

 

 

 

32,530

 

 

32,530

 

 

 

 

 

 

               

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Dinker

Ravinder

Particulars

Dinker

Ravinder

Drawings

6,000

5,000

Balance b/d

2,35,000

1,63,000

Interest on Drawings

180

150

Interest on Capital

9,400

6,520

Balance c/d

2,47,627

1,71,573

Partner’s Salaries

2,000

2,000

 

 

 

Profit & Loss Appropriation

7,407

3,703

 

 

 

Commission

 

1,500

 

2,53,807

1,75,223

 

2,53,807

1,75,223

 

 

 

 

 

 

             

 

Balance Sheet

Liabilities

Amount 

Rs

Assets

Amount 

Rs

Bills Payable

32,000

Bills Receivables

45,000

Creditors

40,000

Debtors

95,000

 

Loan

35,000

 

Less: 5% Provision for Bad Debts

(4,750)

90,250

Add: Outstanding Interest

350

35,350

 

 

 

 

Building

1,20,000

 

Rent Outstanding

1,600

Less: 4% Depreciation

(4,800)

1,15,200

Wages outstanding

1,200

 

 

Capital:

 

Plant and Machinery

80,000

 

Dinker

2,47,627

 

Less: 6% Depreciation

(4,800)

75,200

Ravinder

1,71,573

4,19,200

 

 

 

 

Investments

1,00,000

 

 

Furniture and Fixtures

26,000

 

 

 

Less: 5% Depreciation

(1,300)

24,700

 

 

 

Cash in Hand

13,500

 

 

Cash at Bank

23,000

 

 

Closing Stock

42,500

 

5,29,350

 

5,29,350

 

 

 

 

               

 

 



Page No 113:

Question 45:

 

Kajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following Balances were extracted from the books of account for the year ended March 31, 2015.

 

Account Name

Debit Amount Rs

Credit Amount Rs

Capital

 

 

Kajol

 

1,15,000

Sunny

 

91,000

Current accounts [on 1-04-2005*]

 

 

Kajol

 

4,500

Sunny

3,200

 

Drawings

 

 

Kajol

6,000

 

Sunny

3,000

 

Opening stock

22,700

 

Purchases and Sales

1,65,000

2,35,800

Freight inward

1,200

 

Returns

 2,000

3,200

Printing and Stationery

 900

 

Wages

 5,500

 

Bills receivables and Bills payables

25,000

21,000

Discount

 400

 800

Salaries

6,000

 

Rent

7,200

 

Insurance premium

2,000

 

Traveling expenses

700

 

Sundry expenses

 1,100

 

Commission

 

1,600

Debtors and Creditors

74,000

78,000

Building

85,000

 

Plant and Machinery

70,000

 

Motor car

60,000

 

Furniture and Fixtures

15,000

 

Bad debts

1,500

 

Provision for doubtful debts

 

2,200

Loan

 

25,000

Legal expenses

300

 

Audit fee

900

 

Cash in hand

7,500

 

Cash at bank

 12,000

 

 

5,78,100

5,78,100

 

 

 

 

Prepare final accounts for the year ended March 31,2015, with following adjustments:

(a)   Stock on March 31,2015 was Rs37,500.

(b)   Bad debts Rs3,000; Provision for bad debts is to be made at 5% on debtors

(c)   Rent Prepaid were Rs1,200.

(d)   Wages outstanding were Rs 2,200.

(e)   Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be charged @ 5% per annum.

(f)    Kajol is entitled to a Salary of Rs 1,500 per annum.

(g)   Prepaid insurance was Rs 500.

(h)   Depreciation was charged on Building, @ 4%; Plant and Machinery, @ 5%; Motor car, @ 10% and furniture and fixture, @ 5%.

(i)    Goods worth Rs 7,000 were destroyed by fire on January 20,2015. The Insurance company agreed to pay Rs 5,000 in full settlement of the claim.


*As per the question, this year should be 01-04-2014

 

Answer:

 

Financial Statement as on March 31, 2015

Trading Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

 

Opening Stock

 

22,700

Sales

2,35,800

 

 

Purchases

 

1,65,000

 

Less: Sales Return

(2,000)

2,33,800

 

Less: Purchases Return

(3,200)

 

 

 

 

Less: Goods Lost by Fire

(7,000)

1,54,800

Closing Stock

37,500

 

 

 

 

 

 

 

 

 

Freight Inward

 

1,200

 

 

 

 

Wages

5,500

 

 

 

 

 

Add: Outstanding

2,200

7,700

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

84,900

 

 

 

 

 

 

 

 

 

 

 

 

 

2,71,300

 

 

2,71,300

 

 

 

 

 

 

 

 

                     

 

 

Profit and Loss Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

 

Printing and Stationery

 

900

Gross Profit

 

84,900

 

Discount Allowed

 

400

Discount Received

 

800

 

Salaries

 

6,000

Commission

 

1,600

 

Rent

7,200

 

Insurance Co. (Claim)

 

5,000

 

Less: Prepaid

(1,200)

6,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Premium

2,000

 

 

 

 

 

 

Less: Prepaid

(500)

1,500

 

 

 

 

 

Travelling Expenses

 

700

 

 

 

 

 

Sundry Expenses

 

1,100

 

 

 

 

 

 

 

 

 

 

 

 

 

Bad Debt

1,500

 

 

 

 

 

Add: Further Bad debt

3,000

 

 

 

 

 

Add: Provision for Bad Debts

3,550

 

 

 

 

 

 

 

8,050

 

 

 

 

 

Less: Provision for Bad Debt (Old)

(2,200)

5,850

 

 

 

 

 

 

 

 

 

 

 

Legal Expenses

 

300

 

 

 

 

Audit Fee

 

900

 

 

 

 

Goods Lost by Fire

 

7,000

 

 

 

 

Depreciation on

 

 

 

 

 

 

Building

 

3,400

 

 

 

 

Plant and Machinery

 

3,500

 

 

 

 

Motor Car

 

6,000

 

 

 

 

Furniture and Fixture

 

750

 

 

 

 

Net Profit  

48,000

 

 

 

 

 

 

 

 

 

 

 

 

 

92,300

 

 

92,300

 

 

 

 

 

 

 

 

                   

 

Profit and Loss Appropriation Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

Rs

Particulars

Amount

Rs

 

Interest on Capital

 

 

Net profit

 

48,000

 

Kajol

6,900

 

 

 

 

Sunny

5,460

12,360

Interest on Drawings

 

 

 

 

 

Kajol

300

 

 

Partner’s Salaries

 

 

Sunny

150

450

 

Kajol

 

1,500

 

 

 

 

 

 

 

 

 

 

 

 

Profit & Loss – Gross Profit

 

 

 

 

 

 

Kajol’s Current

20,754

 

 

 

 

 

Sunny’s Current

13,836

34,590

 

 

 

 

 

 

 

 

 

 

 

 

 

48,450

 

 

48,450

 

 

 

 

 

 

 

 

                 

 

Partners’ Capital Account

Dr.

 

 

 

 

Cr.

Particulars

Kajol

Sunny

Particulars

Kajol

Sunny

 

 

 

Balance b/d

1,15,000

91,000

Balance c/d

1,15,000

91,000

 

 

 

 

 

 

 

 

 

 

1,15,000

91,000

 

1,15,000

90,000

 

 

 

 

 

 

 

Partners’ Current Account

Dr.

 

 

 

 

Cr.

Particulars

Kajol

Sunny

Particulars

Kajol

Sunny

Balance b/d

 

3,200

Balance b/d

4,500

 

Drawings

6,000

3,000

Interest on Capital

6,900

5,460

Interest on Drawings

300

150

Partner’s Salaries

1,500

 

Balance c/d

27,354

12,946

Profit and Loss Appropriation

20,754

13,836

 

 

 

 

 

 

 

33,654

19,296

 

33,654

19,296

 

 

 

 

 

 

 

Balance Sheet as on March 31, 2015

 

 

Liabilities

Amount

Rs

Assets

Amount

Rs

Bills Payable

21,000

Bills Receivable

25,000

Creditors

78,000

Debtors

74,000

 

Loan

25,000

Less: Further Bad debt

(3,000)

 

Wages Outstanding

2,200

71,000

 

Capital:

 

Less: 5% Provision for Bad Debt

(3,550)

67,450

Kajol

1,15,000

 

 

 

Sunny

91,000

2,06,000

Building

85,000

 

 

 

Less: 5% Depreciation

(3,400)

81,600

Current:

 

 

 

Kajol

27,354

 

Plant and Machinery

70,000

 

Sunn

12,946

40,300

 Less: 5% Depreciation

(3,500)

66,500

 

 

 

 

 

 

 

Motor Car

60,000

 

 

 

Less: 10% Depreciation

(6,000)

54,000

 

 

 

 

 

 

Furniture & Fixture

15,000

 

 

 

Less: 5% Depreciation

(750)

14,250

 

 

Cash in Hand

7,500

 

 

Cash at Bank

12,000

 

 

Closing Stock

37,500

 

 

Prepaid Rent

1,200

 

 

Prepaid Insurance

500

 

 

Insurance Co. (Claim)

5,000

 

3,72,500

 

3,72,500

 

 

 

 

                 

 

 



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