Partnership Deed
1. Rajeev and Siddharth are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:
(a) Siddharth wants interest on loan @ 10% p.a. on the loan of Rs. 30,000 advanced by him.
(b) Rajeev claims that he should get a salary of Rs. 5,000 per month for his extra time spent.
(c) Rajeev wants to introduce his son Rahul into his business, but Siddharth objects to it.
(d) Siddharth claims that interest on capital be allowed @ 12% p.a.
{The disputes will be settled as per provisions of Indian Partnership Act, 1932: (a) Siddharth will get Interest on loan @ 6% p.a. Interest = Rs. 30,000 x 6/100 = Rs. 1,800; (b) Rajeev is not entitled to any salary:
(c) Rahul cannot be introduced as a partner without the consent of Siddharth;
(d) No interest is payable to any partner in respect of capital.}
2. In the absence of Partnership Deed, what are the rules relating to: (a) Salaries of Partners; (b) Interest on Partners' capitals; (c) Interest on Partner's loan; (d) Division of Profit, and (e) Interest on Partners' drawings? {CBSE, All India 1996}
{(a) No salary is allowed; (b) Interest on Capital is not allowed; (c) Interest on Partner's loan is given as a
charge @ 6% p.a.; (d) Profits are shared in equal ratio; (e) Interest on Partners' drawings is not charged}
3. M and N are partners in a firm. M has given a loan of Rs. 8,000 to the firm on 1st July, 1997. The Partnership Deed is silent upon the question of provision of interest on partner's loan. Compute the amount of interest payable on the loan advanced by M to the firm, assuming the books are closed on 31st March each year. {CBSE, Delhi 1998}
{According to the provisions of Indian Partnership Act, 1932, M will get Interest on loan @ 6% p.a. from 1s' July to 31st March. Interest = Rs. 8,000 x 6/100 x 9/12 = Rs. 360}
4. Harshad and Dhiman are in partnership since 1st April, 2006. 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 1st October, 2006. Due to long illness, Harshad could not participate in business activities from 1st August to 30th September, 2006. The profit for the year ended 31st March, 2006 amounted to Rs. 1,80,000. Dispute has arisen between Harshad and Dhiman.
• Harshad Claims: (a) He should be given interest @ 10% per annum on capital and loan;
(b) Profit should be distributed in proportion of capital;
• Dhiman Claims: (a) Profits should be distributed equally; (b) He should be allowed Rs. 2,000
p.m. as remuneration for the period he managed the business, in the absence of Harshad;
(c) Interest on Capital and loan should be allowed @ 6% p.a.
Settle the dispute between Harshad and Dhiman. {NCERT}
{The disputes will be settled as per provisions of Indian Partnership Act, 1932.
Harshad's Claim: (a) Harshad is not entitled to any interest on capital, but he is entitled
to interest on loan @ 6% p.a.; (b) Profits will be distributed equally as per act.
Dhiman's Claim: (a) His claim is right that profits should be shared equally; (b) No remuneration will be allowed to Dhiman; (c) Interest on capital will not be given but his claim on interest on loan at a rate of 6% p.a. is right; Harshad's share in Profit = Rs.88,500; Dhiman's share in Profit = Rs.88,500}
5. Mahesh and Ramesh are partners with capitals of Rs. 50,000 and Rs. 60,000 respectively. On 1st January, 2000, Mahesh gives a loan of Rs. 10,000 and Ramesh introduced Rs. 20,000 as additional capital. Profit for the year ended 31st March, 2000 was Rs. 15,200. There is no Partnership Deed. Both Mahesh and Ramesh expect interest @ 10% p.a. on the loan and additional capital advanced by them. Show how the profits would be divided? Give reasons. {CBSE, All India Comptt. 2001}
{The disputes will be settled as per provisions of Indian Partnership Act, 1932. (a) Interest on Partner's loan will be allowed @6%p.a. (b) No interest on capital will be allowed, (c) Profits will be shared equally between partners. Profits divisible after interest on loan of f 150 (= 10,000 x 6/100 x 3/12), the remaining profits of Rs. 15,050 will be distributed between Mahesh and Ramesh equally, i.e. Rs. 7,525 each}
6. A and B are partners in a firm sharing profits in the ratio of 3:1. They had advanced to the firm a sum of Rs. 20,000 as a loan in their profit sharing ratio on 1st July, 1998. The partnership deed is silent on the question of interest on loan from partners. Compute the interest payable by the firm to the partners, assuming the firm closes its books on 31st December every year. {CBSE Delhi 1999}
{According to the provisions of Indian Partnership Act, 1932, A and B will get Interest on loan @ 6% p.a.
Share in Loan Amount: A's Share = 20,000 x 3/4 = f 15,000. B's share = 20,000 x 1/4 = Rs. 5,000;
Interest on Loan: A = 15,000 x 6/100 x 6/12 = Rs.450; B = 5,000 x 6/100 x 6/12 = Rs. 150}
Profit and Loss Appropriation Account
7. Amit and Bimal are partners sharing profits and losses in the ratio of 3:2. Their capitals are Rs. 50,000 and
Rs. 30,000 respectively. The partnership deed provides that interest on capital is to be allowed at 5% p.a..
Bimal is entitled to a salary of Rs. 500 per month. The profit of the firm for the year ended 31st December, 2014 was Rs. 20,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st December, 2014.
{Share of Profit: Amit = Rs. 6,000; Bimal = Rs. 4,000}
8. A and B are partners having capitals of Rs. 2,00,000 and Rs. 1,00,000 respectively. The terms of the partnership agreement are as given under:
(i) A and B to get a annual salary of Rs. 10,000 and Rs. 12,000 respectively.
(ii) Interest on capital is to be allowed @ 10% p.a.
(iii) The interest on drawings being Rs. 4,500 and Rs. 3,500 respectively for A and B.
(iv) Sharing of profit or loss will be in 2:3 ratio.
The profit for the year ended 31.03.14, before making above appropriations was Rs. 1,22,000. Prepare
Profit and Loss Appropriation Account for the year ended 31st March, 2014.
{Share of Profit: A = Rs. 31,200; B = Rs.46,800}
9. X and Y are partners sharing profits and losses equally. Their capitals are Rs. 2,00,000 and Rs. 1,00,000
respectively. The terms of the partnership agrement are as given under:
• Interest on Capital is to be allowed @ 10% p.a.
• X is to be get an annual salary of 1 20,000.
During the year 2014, the profit prior to the calculation of interest on capital but after charging X's salary
amounted to Rs. 1,20,000. A provision of 5% of the profit is to be made in respect of commission to the Manager.
Prepare Profit and Loss Appropriation account for the year ended 31st December, 2014.
{Manager's Commission = 1 7,000 (= 1,40,000 x 5/100);
Divisible Profits after X's salary and interest on capital = 1 83,000;
Share of Profit: X = 141,500;Y= 141,500}
10. X and Y are partners sharing profits and losses in the ratio of 2:1. Their capitals are Rs. 4,00,000 and Rs. 70,000 respectively. X is entitled to interest on capital @ 12% p.a. and Y is entitled to salary @ Rs. 6,000 per month. The net profit before providing for interest on capital and partner's salary for the year ended 31st March, 2014 was Rs. 50,000. Show the distribution of profits.
{X will get Rs. 20,000 as interest on capital and Y will get Rs. 30,000 as Salary. (Total distributable profits of Rs.50,000 will be distributed between X and Y in the ratio of amounts due to them, i. e., in the ratio of 48,000 and 72,000; i.e. in the ratio of 48:72 or 2:3)}
11. Amit, Babu and Charu set up a partnership firm on April 1, 2006. They contributed 1 50,000, Rs. 40,000 and Rs. 30,000, respectively as their capitals and agreed to share profits and losses in the ratio of 3:2:1.
Amit is to be paid a salary of Rs. 1,000 per month and Babu, a Commission of Rs. 5,000. It is also provided that interest to be allowed on capital at 6% p.a. The drawings for the year were Amit Rs. 6,000, Babu Rs. 4,000 and Charu Rs. 2,000. Interest on drawings of 1 270 was charged on Amit's drawings, Rs. 180 on Babu's drawings and Rs. 90, on Charu's drawings. The net profit as per Profit and Loss Account for the year ending March 31,2006 was 1 35,660.
Prepare the Profit and Loss Appropriation Account to show the distribution of profit among the partners. {NCERT}
{Divisible Profits =Rs. 12,000; Share of Profit: Amit =Rs.6,000; Babul =Rs.4,000; Charu =Rs 2,000}
12. A, B and C are partners sharing profits and losses in the ratio of 3:2:1. Their capitals are Rs.5,00,000,Rs. 2,00,000 and Rs.1,00,000 respectively. Partners are entitled to interest on capital @ 10% p.a. and B is entitled to salary @ Rs.2,500 per month. Of the first Rs.30,000 divisible as profits in any year, A is entitled to 40%, B 30% and C 30%. Annual profits in excess of Rs.30,000 are divisible in their profit-sharing ratio.
The profits for the year ended 31st December, 2014 was Rs.2,00,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st December, 2014.
{Divisible Profits = 190,000; Share of Profit: A = Rs.42,000; B = Rs.29,000; C = Rs. 19,000}
13. Reena and Raman are partners with capitals of Rs.3,00,000 and Rs.1,00,000 respectively. The profit (as per Profit and Loss Account) for the year ended March 31,2007 was Rs.1,20,000. Interest on capital is to be allowed at 6% p.a. Raman was entitled to a salary of Rs.30,000 p.a. The drawings of partners were Rs.30,000 and 20,000. The interest on drawings to be charged to Reena was Rs.1,000 and to Raman, 1500. Assuming that Reena and Raman are equal partners. State their share of profit after necessary appropriations. {NCERT}
{Divisible Profits = Rs.67,500; Share of Profit: Reena = Rs.33,750; Raman = Rs.33,750} Partners' Capital Accounts
14. Amit and Sumit are partners with capital of Rs.3,00,000 and Rs. 1,00,000 respectively on 1st January, 2014, sharing profits and losses in the ratio of 3:2. The net profit (before taking into account the provisions of the Deed) for the year ended 31st December, 2014 was Rs.1,20,000. Interest on capitals is to be allowed at 6% per annum. Sumit is entitled to a salary of Rs.30,000 per annum. The drawings of the partners were 130,000 and 120,000; Interest for Amit being Rs.1,000 and Sumit Rs. 500.
Show how the profit will be divided between Amit and Sumit and also show the Capital Accounts:
(i) If the capitals are fluctuating; and
(ii) if the capitals are fixed.
{Share of Prof it: Amit = Rs.40,500; Sumit = Rs.27,000;
Closing Capitals: (i) Fluctuating Capital - Amit's Capital = Rs.3,27,500; Sumit's Capital = Rs.1,42,500;
(H) Fixed Capital - Amit's Capital = 13,00,000; Sumit's Capital = Rs.1,00,000;
Current Accounts: Amit = Rs.27,500; Sumit = Rs.42,500}
15. On 1st January, 2014 Anmol and Bobby enter into partnership contributing Rs. 40,000 and Rs. 30,000 respectively and sharing profits and losses equally. Interest on capitals is to be allowed at 12% per annum. During the year, Anmol withdrew Rs. 10,000 and Bobby Rs. 15,000. Interest charged on drawings was: Anmol Rs. 1,000 and Bobby Rs. 1,500. Profits at the end of the year 2014 before making any of the above adjustments was Rs. 34,000. Prepare Profit and Loss Appropriation Account for the year ending 31st December, 2014 and the Capital Accounts assuming that capitals are fluctuating.
{Share of Profit: Anmol = Rs. 14,050; Bobby = Rs. 14,050; Closing Capitals: Anmol = Rs. 47,850; Bobby = 31,150}
Interest on Drawings
19. Amit is a partner in a firm. He withdrew Rs. 45,000 in 2013-14. The books of the firm close on March 31st every year. Calculate interest on drawings if the rate of interest is 9% p.a.
{Interest on drawings = Rs.2,025}
20. A and B 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 2014 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. {Interest on Drawings: A = Rs. 1,200; B = Rs.800}
21. Hari withdrew Rs. 20,000 in 2014. The Partnership deed provides for charging the interest on drawings @ 12%. Calculate interest on Hari's drawings for the year ending 31st December, 2014.
{Interest on drawings = Rs.2,400}
22. X and Y are partners in a firm. They share profits in the ratio of 2:1, As per their partnership agreement, interest on drawings is to be charged @ 9%. Their drawings during 2014 were Rs. 30,000 and Rs. 20,000, respectively. Calculate interest on drawings {Interest on Drawings: X= Rs.2,700;Y= Rs. 1,800}
23. Ram and Syam are partners sharing profits/losses equally. Ram withdrew Rs. 1,000 p.m. regularly on the first day of every month during the year 2006-07 for personal expenses. If interest on drawings is charged @ 5% p.a. Calculate interest on the drawings of Ram. {NCERT}
{Interest on drawings = Rs. 325}
24. A, B and C are partners in a firm You are informed that:
(i) A draws Rs. 1,000 from the firm at the beginning of every month.
(ii) B draws Rs. 1,000 from the firm at the end of every month, and
(iii) C draws Rs. 1,000 from the firm in the middle of every month.
Interest on drawings is to be charged @ 12% p.a. Calculate interest on partners' drawings.
{(i) Ra. 780; (ii) Rs. 660 and (iii) Rs. 720}
25. John Ibrahm, a partner in Modern Tours and Travels withdrew money during the year ending March 31, 2006 from his capital account, for his personal use. Calculate interest in drawings in each of the following alternative situations, if rate of interest is 9% per annum.
(a) If he withdrew Rs. 3,000 per month at the beginning of the month.
(b) If an amount of Rs. 3,000 per month was withdrawn by him at the end of each month.
(c) If the amounts withdrawn were: Rs. 12,000 on June 01, 2005, Rs. 8,000; on August 31, 2005, Rs.
3,000; on September 30, 2005, Rs. 7,000, on November 30, 2005, and Rs. 6,000 on January 31, 2006. {NCERT}
{(a) Rs. 1,755; (b) Rs. 1,485; (c) Rs. 1,755}
26. A, B and C are partners in a firm. For six months ending 31st March, 2014, A drew regularly Rs. 15,000 in the beginning of every month. B drew regularly 20,000 at the end of every month and C drew regularly Rs. 25,000 in the middle of month. Calculate interest on drawings @ 10% p.a. for six months ending 31st March, 2014.
{Interest on Drawings: A = Rs. 2,625; B = Rs.2,500; C = Rs.3,750}
27. A withdrew regularly Rs. 600 in the middle of every month for ten months ending 31st October, 2014.
Calculate interest on drawings at 15% p.a.
(Interest on drawings = ?375}
28. Calculate the interest on drawings of Mr. Aditya @ 8% p.a. for the year ended 31st March, 2014, in each
of the following alternative cases
(a) If he withdrew Rs. 5,000 in the beginning of each quarter.
(b) If he withdrew Rs. 6,000 at the end of each quarter.
(c) If he withdrew Rs. 10,000 during the middle of each quarter.
{(a) f 1,000; (b) 1720; (c) Rs. 1,600}
29. Verma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings should be charged @ 6% p.a. Verma withdraws X 2,000 per month starting from April 01,2006 to March 31,2007. Kaul withdrew Rs. 3,000 per quarter, starting from April 01,2006. Calculate interest on Partners' drawings. {NCERT}
{Interest on Drawings: Verma = Rs. 780, Kaul = Rs. 450}
30. Kanika and Gautam are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio 2:1 with capitals Rs. 5,00,000 and Rs. 4,00,000 respectively. Kanika withdrew the following amounts during the year to pay the hostel expenses of her son.
(Rs.)
1st April 10,000
1st June 9,000
1st Nov. 14,000
1st Dec. 5,000
Gautam withdrew Rs. 15,000 on the first day of April, July, October and January to pay rent for the accommodation of his family. He also paid Rs. 20,000 per month as rent for the office of partnership which was in a nearby shopping complex.
Calculate interest on Drawings @6% p.a. (CBSE, Sample Paper 2015}
(Interest on Drawings: Kanika = Rs. 1,500; Gautam = Rs.2,250}
Interest on Capital
31. Harish and Gokul share profits and losses equally. They invested capitals of Rs. 2,00,000 and Rs. 1,00,000 respectively. The profits earned by them (before interest on capital) during 2014 is Rs. 50,000. According to the deed, 5% p.a. interest on capital is to be provided as a charge against profits. Compute interest on capital for the year ended 31st December, 2014 and show distribution of profits.
{Interest on Capital: Harish = Rs. 10,000, Gokul = Rs.5,000; Profits: Harish = Rs. 17,500, Gokul= Rs. 17,500}
32. A and B are partners sharing profits and losses equally. They contributed capitals of Rs. 2,00,000 and Rs. 1,50,000 respectively. They decide to allow interest on capital @ 10% p.a. The profit for the year is Rs. 28,000 before allowing for interest on capitals. Show the distribution of profits: (i) Where there is no agreement except for interest on capitals; and (ii) Where there is a clear agreement that the interest on capitals will be allowed even if it involves the firm in loss {(i) Profits of Rs.28,000 will be distributed between A and B in the ratio of their interest on capital; i.e. in ratio of 20,000 and 15,000; i.e. in ratio of 4:3. Interest on Capital: A = Rs. 16,000, B = Rs. 12,000; No profits are left for distribution among the partners;
(ii) Interest on Capital: A = Rs.20,000, B = Rs. 15,000; Loss: A = Rs.3,500, B = Rs. 3,500}
33. Priya and Kajal are partners in a firm, sharing profits and losses in the ratio of 5:3. The balance in their fixed capital accounts, on April 1, 2006 were: Priya, Rs. 6,00,000 and Kajal, Rs. 8,00,000. The profit of the firm for the year ended March 31,2007 is Rs. 1,26,000. {NCERT}
Calculate their shares of profits:
(a) when there is no agreement in respect of interest on capital, and
(b) when there is an agreement that the interest on capital will be allowed @ 12% p.a.
{(a) No interest on capital will be provided. Profits: Priya = Rs. 78,750, Kajal = Rs. 47,250;
(b) Profits of Rs. 1,26,000 will be distributed between Priya and Kajal in the ratio of their interest on capital; i. e. in ratio of 72,000 and 96,000; i. e. in ratio of 3:4.
Interest on Capital: Priya = Rs. 54,000, Kajal = Rs. 72,000; No profits are left for distribution}
34. X and Y are partners sharing profits and losses in the ratio of 3:2. They invested capitals of Rs. 3,00,000 and Rs. 2,00,000 respectively. The profits earned by them (before interest on capital) during 2013-14 is Rs. 30,000. According to deed, interest on capitals will be allowed @ 10% p.a. even if it involves loss to the firm. Compute interest on capital for the year ended 31st March, 2014 and show distribution of profits.
{Interest on Capital: X= Rs.30,000, Y= Rs.20,000;Loss:X= Rs.12,000, Y= Rs.8,000}
35. A and B are partners sharing profits and losses in the ratio of 3:2. They invested capitals of Rs. 1,00,000 and Rs. 50,000 respectively. Compute interest on capital and show distribution of profits in each of the ollowing alternative cases:
(i) If the partnership deed is silent with regards to interest on capital and the profits for the year are Rs. 8,000.
(ii) If the partnership deed provides for interest on capital @ 5% p.a. and the profits for the year are Rs. 7,500.
(iii) If the partnership deed provided for interest on capital @ 5% p.a. and the profits for the year are Rs. 9,000.
(iv) If the partnership deed provided for interest on capital @ 5% p.a. losses for the year are Rs. 6,000.
(v) If the partnership deed provided for Interest on Capital @ 5% and the profits for the year are Rs.3,000.
(vi) If the partnership deed provides for Interest on Capital @ 5% p.a. even if it involves the firm in loss and the profits for they year are Rs. 5,000.
((i) No interest on capital will be provided. Profits: A = Rs.4,800, B = Rs. 3,200;
(ii) Interest on Capital: A = Rs. 5,000, B = Rs. 2,500; No profits are left for distribution among the partners;
(iii) Interest on Capital: A = Rs.5,000, B = Rs.2,500; Profits: A= Rs.900, B = Rs. 600;
(iv) No interest on capital will be provided. Loss: A = Rs.3,600, B = Rs.2,400;
(v) Profits of Rs.3,000 will be distributed between A and B in the ratio of their interest on capital; i.e. in ratio of 5,000 and 2,500; i.e. in ratio of 2:1. Interest on Capital: A = Rs.2,000, B = Rs. 1,000; No profits are left for distribution among the partners; (vi) Interest on Capital: A = Rs.5,000, B = rs.2,500;
Loss: A = Rs. 1,500, B = Rs. 1,000}
36. Ram and Shyam are partners in a firm. Their capitals as on 1.4.2013 were Rs. 3,00,000 and Rs. 2,00,000, respectively. They share profits equally. On 1.9.2013, they decided that their capitals should be Rs. 2,50,000 each. The necessary adjustments in the capitals were made by introducing or withdrawing cash. Interest on capital is allowed at 12% p.a. Compute interest on capital for both the partners for the year ended on 31.3.2014. {Interest on Capital: Ram = Rs. 32,500, Shyam = Rs. 27,500}
37. Saloni and Srishti are partners in a firm. Their capital accounts as on April 01.2005 showed a balance of Rs. 2,00,000 and Rs. 3,00,000 respectively. On July 01, 2005, Saloni introduced additional capital of 7Rs. 50,000 and Srishti, Rs. 60,000. On October 01 Saloni withdrew 7 30,000, and on January 01,2005 Srishti withdraw, Rs. 15,000 from their capitals. Interest is allowed @ 8% p.a. Calculate interest payable on capital to both the partners during the financial year 2005-2006. {NCERT}
{Interest on Capital: Saloni = Rs. 17,800, Srishti = Rs. 27,300}
38. Rani and Suman are in partnership with capitals of Rs. 80,000 and Rs. 60,000 respectively at the end of the year. During the year 2006-2007, Rani withdrew Rs. 10,000 from her capital and Suman 7 Rs.5,000. Profits before charging interest on capital was Rs. 50,000. Ravi and Suman shared profits in the ratio of 3:2.
Calculate the amounts of interest on their capitals @ 12% p.a. for the year ended March 31,2007.
{Interest on Capital: Rani = 7 7,200, Suman = 7 6,600}
39. Amit and Sumit are partners sharing profits and losses in the ratio of 3:2. Their capitals at the end of the year are Rs. 1,50,000 and Rs. 1,80,000 respectively. During the year ended 31st December, 2014, Amit's drawings and Sumit's drawings were Rs. 25,000 and Rs. 30,000 respectively. Profits (before allowing interest on capital) during the year were Rs. 60,000. Calculate the interest on the capital @ 8% p.a. for the year ended 31st December, 2014.
{Opening Capitals: Amit = Rs. 1,39,000, Sumit= Rs. 1,86,000; Interest on Capital: Amit = Rs.11,120, Sumit = Rs. 14,880}
40. Josh and Krish are partners sharing profits and losses in the ratio of 3:1. Their capitals at the end of the financial year 2005-2006 were Rs. 1,50,000 and Rs. 75,000. During the year 2005-2006, Josh's drawings were 7 20,000 and the drawings of Krish were Rs. 5,000, which had been duly debited to partner's capital accounts. Profit before charging interest on capital for the year was Rs.16,000. The same had also been credited in their profit-sharing ratio. Krish had brought additional capital of Rs.16,000 on October 1,2005.
Calculate interest on capital @ 12% p.a. for year 2005-2006. {NCERT}
{Opening Capitals: Josh = Rs. 1,58,000, Krish = Rs.60,000; Interest on Capital:
Josh = Rs. 18,960 Krish = Rs. 8,160}
Commission to Partners
43. A, B and C are partners sharing profits and losses in the ratio of 3:2:1 respectively. B is entitled to a ommission of 10% on the net profit before charging such commission. The net profit before charging commission is Rs. 2,20,000. Find out commission payable to B.
{Commission Payable to B= 10/100 of Rs. 2,20,000 = Rs. 22,000}
44. X and Y are partners sharing profits and losses in the ratio of 2:1. X is entitled to a commission of 5% on the net profit after charging such commission. The net profit before charging commission is Rs. 1,05,000.
Find out commission payable to X. {Commission Payable to X = 5/105 of Rs. 1,05,000 = Rs. 5,000}
45. Amit and Namit are partners in a firm sharing profits and losses equally. Their partnership deed provide1 for the following:
(i) Amit is entitled to a salary of Rs. 5,000 per month.
(ii) Namit is entitled to a commission of 10% of the net profit after charging Amit's salary but before charging any commission.
The net profit before providing for salary and commission for the year ending 31st March, 2014 was Rs. 1,40,000. Determine the amount of commission payable to Namit.
{Commission Payable to Namit = 10/100 of Rs. 80,000 (= 1,40,000 - 60,000) = Rs. 8,000}
46. A and B are partners sharing profits and losses in the ratio of 3:2. They have agreed upon the following terms:
(i) A is entitled to a salary of Rs. 20,000 p.a. and commission of 12% of the net profit after charging his own salary but before charging his commission.
(ii) B is entitled to a commission of 10% of the net profit after charging A's salary, As commission and his own commission.
The net profit before providing for salary and commission for the year ending 31st December, 2014 was Rs. 1,20,000. Determine the amount of commission payable to A and B.
{Commission Payable to A = 12/100 of Rs. 1,00,000 (= 1,20,000 - 20,000) = Rs. 12,000;
Commission Payable to B = 10/110 of Rs. 88,000 (= 1,20,000 - 20,000 - 12,000) = Rs.8,000}
47. A, B and C are partners in a business and their capitals on 1st April, 2013 are Rs. 2,00,000; Rs. 1,60,000
and Rs. 40,000 respectively. The partnership deed provides that:
(i) 5% interest is to be allowed on capitals.
(ii) C gets Rs. 20,000 as annual salary.
(iii) B gets commission @ 10% after charging interest on capital, C's Salary and his own commission.
(iv) Profits to be divided in the ratio of 3:2:1.
The Profits for the year ending on 31st March, 2014 without taking into account the above facts are Rs. 1,72,000. Draw Profit and Loss Appropriation A/c, showing above transactions in the allocation of profits among partners.
{B's Commission =10/110 of Rs.1,32,000 (= 1,72,000 -20,000 -20,000) = Rs. 12,000;
Divisible Profits = Rs. 1,20,000; Share of Profits: A = Rs. 60,000, B = Rs.40,000, C = Rs.20,000}
Interest on Partner's Loan
48. A and B are partners sharing profits and losses in the ratio of 3:2 with capitals of Rs. 2,00,000 and Rs. 1,00,000 respectively. On 1st October, 2013, A and B granted loans of Rs. 40,000 and Rs. 20,000 respectively to the firm. Show the distribution of profits/losses for the year ended 31st March, 2014 in each of the following alternative cases:
Case 1. If the profits before interest for the year amounted to Rs. 4,000.
Case 2. If the profits before interest for the year amounted to Rs. 1,800.
Case 3. If the profits before interest for the year amounted to Rs. 1,200.
Case 4. If the losses before interest for the year amounted to Rs. 600.
{Interest on A's Loan = Rs. 1,200; Interest on B's Loan = Rs.600)
Case 1. Profit: A = Rs. 1,320;B= Rs. 880;Case 2. Profit: A = Nil; B = Rs. Nil;
Case 3. Loss: A = Rs.360; B = Rs.240; Case 4. Loss: A = Rs. 1,440; B = Rs.960}
49. X and Y are partners sharing the profits and losses equally with capitals of Rs. 3,00,000 and Rs. 2,00,000 respectively. On 30th June, 2013, Y granted loan of Rs. 50,000 to the firm. Show the distribution of profits/ losses for the year ended 31st December, 2014 if firm suffered losses (before interest on loan) of Rs. 10,000. {Interest on Y's Loan = Rs. 1,500; Loss: X=Rs.5,750; Y=Rs.5,750}
Profit Distribution and Partners' Capital Accounts
50. Singh and Gupta decided to start a partnership firm to manufacture low cost jute bags as plastic bags were creating many environmental problems. They contributed capitals of Rs. 1,00,000 and Rs. 50,000 on 1st April, 2012 for this. Singh expressed his willingness to admit Shakti as a partner without capital, who is specially abled but a very creative and intelligent friend of his. Gupta agreed to this. The terms of partnership were as follows:
(i) Singh, Gupta and Shakti will share profits in the ratio of 2:2:1.
(ii) Interest on capital will be provided @ 6% p.a.
Due to shortage of capital, Singh contributed Rs. 25,000 on 30th September, 2012 and Gupta contributed Rs. 10,000 on 1st January, 2013 as additional capital. The profit of the firm for the year ended 31st March, 2013 was Rs. 1,68,900.
(a) Identify any two values which the firm wants to communicate to the society.
(b) Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2013.
{CBSE, All India 2014}
{(a) Values highlighted: (Any two) (i) Recognition of talent, (ii) Responsible citizen, (iii) Environment Concern, (iv) Helping, caring and sharing towards specially abled people;
(b)Share of Profit: Singh = Rs. 63,600; Gupta = Rs. 63,600; Shakti = Rs.31,800}
51. Rohit and Sahil started business on April 1,2013 with capitals of 80,000 and Rs. 60,000 respectively. They decided to share profits and losses in the ratio of their capitals. According to the partnership agreement:
(i) Interest on capital and drawings are 12% and 10% p.a. respectively.
(ii) Rohit and Sahil are to get a monthly salary of Rs. 2,000 and Rs. 3,000 respectively.
(iii) The profits for the year ended March 31, 2014 before making above appropriation was
Rs. 1,00,300.
(iv) The drawings of Rohit and Sahil were Rs. 40,000 and Rs. 50,000, respectively.
(v) Interest on drawings amounted to Rs. 2,000 for Rohit and Rs. 2,500 for Sahil.
Prepare Profit and Loss Appropriation Account and partners capital accounts, assuming that capitals are fluctuating.
(Share of Profit: Rohit = Rs. 16,000; Sahil = Rs. 12,000; Closing Capitals: Rohit = Rs.87,600; Sahil = Rs. 62,700}
52. Soumya and Bimal are partners in a firm Sharing profits and losses in the ratio of 3:2. The balance in
their capital and current accounts as on April 01,2006 were as under:
1 Soumya (Rs.) Bimal (Rs.)
Capital Accounts 3,00,000 2,00,000
Current Accounts (Cr.) 1,00,000 80,000
The partnership deed provides that Soumya is to be paid salary @ Rs. 500 per month where as Bimal is to get a commission of Rs. 40,000 for the year. Interest on capital is to be credited at 6% p.a. The drawings of Soumya and Bimal for the year were Rs. 30,000 and Rs. 10,000 respectively. The net profit of the firm before making these adjustment was Rs. 2,49,000. Interest on Soumya's drawings was Rs. 750 and Bimal's drawings, Rs. 250. Prepare Profit and Loss Appropriation Account and Partners' Capital and Current
Accounts. {NCERT}
{Share of Profit: Soumya = Rs. 1,04,400; Bimal = Rs.69,600; Fixed Capitals: Soumya = Rs.3,00,000;
Bimal = Rs.2,00,000; Current Accounts: Soumya = Rs. 1,97,650; Bimal = Rs. 1,91,350}
53. Amitabh and Babul are partners sharing profits in the ratio of 3:2, with capitals of Rs. 50,000 and Rs. 30,000
respectively. Interest on capital is agreed @ 6%p.a. Babul is to be allowed an annual salary of Rs. 2,500.
During the year 2005-06, the profits prior to the calculation of interest on capital but after charging Babul's salary amounted to Rs. 12,500. A provision of 5% of the profit is to be made in respect of commission to the Manager.
Prepare Profit and Loss Appropriation account showing the distribution of profit and the partners' capital accounts for the year ending March 31,2006. {NCERT}
(Share of Profit: Amitabh = Rs.4,170; Babul = Rs.2,780;
Closing Capitals: Amitabh = Rs.57,170; Babul = Rs. 37,080}
Past Adjustments
54. A and B are partners in a firm sharing profits and losses equally. Their capitals were Rs. 3,00,000 and ?
2,00,000. Interest on capital @ 9% p.a. was provided, though there was no provision in their partnership deed. Rectify the above by means of an adjusting entry.
{Dr. A's Capital A/c and Cr. B's Capital A/c by f 4,500}
55. X and Y are partners sharing profits and losses in the ratio of 3:2. Their drawings were Rs. 50,000 and Rs. 40,000. Interest on drawing @ 6% was charged, though there was no provision in their partnership deed. Rectify the above by means of an adjusting entry.
{Dr. X's Capital A/c and Cr. Y's Capital A/c by Rs. 240}
56. 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. {NCERT}
{Dr. Azad's Capital A'c and Cr. Benny's Capital A/c by Rs. 1,000}
57. On 31st March, 2005, after the close of books of accounts, the capital accounts of A, B and C stood at Rs. 24,000; Rs. 20,000 and Rs. 12,000 respectively.The profit for the year? 36,000 was distributed equally.
Subsequently, it was discovered that interest on capital @ 5% p.a. had been omitted. The profit-sharing was 2:2:1. Pass an adjustment Journal entry. {CBSE, All India 2006}
{Dr. C's Capital A/c by Rs. 5,000, Cr. A's Capital A/c by Rs. 2,600 and Cr. B's Capital A/c by Rs. 2,400}
58. Jain and Gupta were partners in a firm sharing profits in 3:2 ratio. Their fixed capitals were Jain Rs. 1,00,000 and Gupta Rs. 1,50,000. After the accounts of the year had been closed, it was discovered that interest on capital @ 10% p.a. as provided in the partnership agreement has not been credited to the Capital Accounts of the Partners before distribution of profits. Pass necessary Journal entry to rectify the error. {CBSE, All India 2007}
{Dr. Jain's Current A/c and Cr. Gupta's Current A/c by Rs. 5,000}
59. Leela, Meera and Neha are partners and have omitted interest on capital @9% p.a. for three years ended March 31st, 2007. Their fixed capitals on which interest was to be allowed throughout were: Leela ?
80,000, Meera Rs. 60,000 and Neha Rs. 1,00,000. Their profit sharing ratio during the last three years were:
1Year Leela Meera Neha
2006-07 2 2 2
2005-06 4 5 1
2004-05 1 2 2
Record adjustment entry. ' {NCERT}
{Dr. Meera's Capital A/c by Rs. 10,440, Cr. Leela's Capital A/c by Rs. 1,440 and Cr. Neha's Capital A/c by Rs. 9,000}
60. Nusrat, Sonu and Himesh are partners sharing profits and losses in the ratio of 5:3:2. The partnership deed provides for charging interest on drawing's @ 10% p.a. The drawings of Nusrat, Sonu and Hirr.esh during the year ending December 2004 amounted to? 20,000,? 15,000 and Rs. 10,000 respectively. After the final accounts have been prepared, it was discovered that interest on drawings has not been taken into consideration. Give necessary adjusting journal entry. {NCERT}
{Dr. Sonu's Capital A/c by Rs. 75, Dr. Himesh's Capital A/c by Rs.50 and Cr. Nusrat's Capital A/c by Rs. 125}
61. Anil, Vineet and Vipul were partners in a firm manufacturing food items. They were sharing profits in the ratio of 5:3:2. Their capitals on 1st April, 2012 were Rs. 4,00,000, Rs. 5,00,000 and Rs. 9,00,000 respectively.
After the floods in Uttaranchal, all partners decided to help the flood victims personally.
For this, Anil withdrew Rs. 30,000 from the firm on 30th September, 2012. Vineet instead of withdrawing cash from the firm took some food items amounting to Rs. 25,000 from the firm and distributed those to flood victims. On the other hand, Vipul withdrew Rs. 2,50,000 from his capital on 1st January, 2013 and built a shelter-home to help flood victims.
The partnership deed provides for charging interest on drawings @ 6% p.a. After the final accounts were prepared it was discovered that interest on drawings had not been charged. Give the necessary adjusting entry and show the working notes clearly. Also state any two values that the partners wanted to communicate to the society. {CBSE, Foreign 2014}
{Dr. Anil's Capital A/c by Rs. 75, Dr. Vineet's Capital A/c by Rs. 255 and Cr. Vipul's Capital A/c by Rs. 330;
Values: (i) Help towards needy flood victims, (ii) Medical Aid in flood affected areas}
62.1 A, B, C and D are partners sharing profits and losses in the ratio of 4:3:3:2. Their fixed capitals on 31st March, 2010 were Rs. 60,000; Rs. 90,000; Rs. 1,20,000 and Rs. 90,000. After preparing the final accounts for the year ended 31st March, 2010 it was discovered that interest on capitals @ 12% p.a was not allowed and interest on drawings amounted to Rs. 2,000; Rs. 2,500; Rs. 1,500 and Rs. 1,000 respectively was also not charged
Pass necessary adjustment Journal entry showing your workings clearly. {CBSE, All India 2011}
{Dr. A's Current A/c by Rs. 6,867, Dr. B's Current A/c by Rs. 750, Cr. C's Current A/c by Rs. 3,850 and Cr. D's Current A/c by Rs. 3,767}
63. Krishna, Sandeep and Karim are partners sharing profits in the ratio of 3:2:1. Their fixed capitals are:
Krishan Rs. 1,20,000, Sandeep Rs. 90,000 and Karim Rs. 60,000. For the year 2006-07, interest was credited to them @ 6% p.a. instead of 5% p.a. Record adjustment entry. {NCERT}
{Dr. Karim's Current A/c and Cr. Krishna's Current A/c by Rs. 150}
64. Malti, Paro and Arti are partners in a firm having fixed capitals of Rs. 80,000; Rs. 40,000 and Rs. 50,000 respectively sharing profits as 7:6:4. The rate of interest on capital was agreed at 10% p.a. but was wrongly credited to them at 12% p.a. Give necessary adjustment entry to adjust the balances of partners' Capital Accounts. {CBSE, Foreign 2003}
{Dr. Malti's Current A/c by Rs.200, Dr. Arti's Current A/c by Rs.200 and Cr. Paro's Current A/c by ?400}
65. A, B and C are partners in a firm having capitals of Rs. 80,000; Rs. 70,000 and Rs. 60,000 respectively after aking the necessary adjustment in respect of drawings (only drawings and not interest on drawings) and 1net profit for the year ended 31.03.15. It was subsequently found that interest on capital @ 10% p.a. and interest on drawings of each partner had been ignored. The drawings the partners have been A: Rs. 10,000, B: Rs. 5,000 and C: Rs. 4,000. The interest on these amounted to Rs. 500, Rs. 300 and Rs. 200 respectively.
The profit for the year already adjusted amounted to Rs. 36,000. The partners share profits and losses equally. Give necessary journal entry for the above adjustment and show your workings clearly.
{Dr. C's Capital A/cbyrs.1,100; Dr. B's Capital A/c by Rs. 100 and Cr. A's Capital A/c by Rs. 1,200}
66. Mohan, Neeraj and Peeyush are partners in a firm. They contributed Rs. 75,000 each as capital three years ago. At that time, Peeyush agreed to look after the business as Mohan and Neeraj were busy. The profits for the past three years were Rs. 45,000, Rs. 30,000 and Rs. 60,000 respectively. While going through the books of accounts, Mohan noticed that profit had been distributed in 1:1:2 ratio. When he enquired from Peeyush about this, Peeyush answered that since he looked after the business he should get more profit. Mohan disagreed and it was decided to distributed profits equally with retrospective effect for the last three years.
(a) You are required to make necessary corrections in the books of accounts of Mohan, Neeraj and Peeyush by passing an adjustment entry.
(b) Identify the value which is being ignored by Peeyush. {CBSE, All India 2013}
{(a) Dr. Peeyush's Capital A/c by Rs.22,500; Cr. Mohan's Capital A/c by
Rs. 11,250 and Cr. Neeraj's Capital A/c by Rs.11,250; (b) Peeyush has ignored the value of fairness and honesty, besides ignoring the provisions of Indian Partnership Act, 1932]
68. A, B and C are partners in a firm. On 1.4.2005, their capitals stood at Rs. 50,000; Rs. 25,000 and Rs. 25,000
respectively. As per the provisions of the Partnership Deed:
(i) C was entitled for a salary of Rs. 5,000 p.a.
(ii) Partners were entitled to interest on capital @ 5% p.a
(iii) Profits were to be shared in the ratio of partners' capitals.
The net profit for the year 2005-06 of Rs. 33,000 was distributed equally without providing for the above terms.
Pass an adjustment entry in Journal to rectify the above error. {CBSE, Delhi Comptt. 2007}
{Dr. B's Capital A/c by rs.4,000, Cr. A's Capital A/c by Rs.3,000 and Cr. C's Capital A/c by Rs. 1,000)
69. Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs. 30,000, Rs. 25,000 and Rs.1
20,000 respectively. In arriving at these figures, the profits for the year ended March 31,2007 amounting
to Rs. 24,000 had been credited to partners in the proportion in which they shared profits. During the year, 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. (NCERT)
{Dr. Anil's Capital A/c and Cr. Mohan's Capital A/c by Rs.450}
70. Kumar and Raja were partners in a firm sharing profits in the ratio of 7:3.Their fixed capitals were: Kumar Rs. 9,00,000 and Raja Rs. 4,00,000. The Partnership Deed provided the following but the profit for the year was distributed without providing for:
(i) Interest on capital @ 9% p.a.
(ii) Kumar's salary Rs. 50,000 per year and Raja's salary Rs. 3,000 per month.
The profit for the year ended 31st March, 2007 was Rs. 2,78,000.
Pass adjustment entry. {CBSE, All India 2008}
{Dr. Kumar's Current A/c and Cr. Raja's Current A/c by Rs. 11,100}
71. A, B and C were partners in a f irm.Their capitals were A: Rs. 30,000; B:Rs. 20,000 and C: Rs. 10,000 respectively.
According to the Partnership Deed, they were entitled to and interest on capital @ 5% p.a. In addition, B was also entitled to draw a salary of k 500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the salary payable to B. The net profits for the year were Rs. 30,000 distributed in the ratio of their capitals without providing for any of the above adjustments. The profits were to be shared in the ratio 2:1:2.
Pass necessary adjustment entry showing the workings clearly. {CBSE, All India 2010}
{Dr. A's Current A/c by Rs. 5,640, Cr. B's Current A/c by Rs. 930 and Cr. C's Current A/c by Rs. 4,710}
Guarantee of Profits
73. X, Y and Z are partners sharing profits in the ratio 5:3:2. As per agreement, Z is to get a minimum share of profit of 10,000 every year. The profit for the year 2007 amounts to Rs. 35,000. Prepare Profit and Loss Appropriation Account to allocate the share of profit of each partner during 2007.
{CBSE, All India 2007. (III)}
{Deficiency of Rs. 3,000 in Z's share will be borne by X and Yin the ratio of 5:3;
Final Share in Profit: X= Rs.. 15,625; Y = Rs. 9,375; Z= Rs. 10,000]
74. Pinki, Deepti and Kaku are partners 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. {NCERT}
{For Distribution of Profits: Dr. Profit and Loss Appropriation A/c by Rs.40,000, Cr. Pinki's Capital A/c by Rs.20,000, Cr. Deepti's Capital A/c by Rs. 16,000 and Cr. Kaku's Capital A/c by Rs.4,000;
For Meeting the Deficiency: Dr. Pinki's Capital A/c by Rs.500, Dr. Deepti's
Capital A/c by Rs. 500 and Cr. Kaku's Capital A/c by Rs. 1,000}
75. A, B and C are partners sharing profit in this ratio of 5:4:1. C is given a guarantee that his share of profits in any year will not be less than Rs. 5,000. The profits for the year ended December 31,1998 amounted to Rs. 40,000. Amount excess given to C will be borne by B. Show distribution of profits.
{Deficiency of f 1,000 in C's share will be borne by B;
Final Share in Profit: A = Rs.20,000; B= rs.15,000; C=75,000]
76. 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 and 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 31,2007 is Rs. 2,00,000, before charging interest on capital. You are required to show distribution of profit. {NCERT}
{Deficiency of Rs. 7,500 in Sohan's share will be borne by Ram and Mohan in the ratio of 3:2;
Final Share in Profit: Ram = Rs.48,000, Mohan = Rs.32,000 and Sohan = Rs.25,000}
77. X, Y and Z are partners in a firm. Their profit sharing ratio is 5:3:2. However, Z is guaranteed a minimum amount of Rs. 10,000 as share of profit every year. Any deficiency arising on that account shall be met by Y The profits for the two years ended 31st December 1993 and 1994 were Rs. 40,000 and Rs. 60,000 respectively. Prepare Profit and Loss Appropriation Account for the two years.
{CBSE, Delhi 1995}
{1993: Deficiency of Rs. 2,000 in Z's share will be borne by Y; Final Share in Profit: X = Rs.20,000;
Y=Rs.10,000; Z=Rs.10.000; 1994: Z is already getting more than the minimum guaranteed amount.
Final Share in Profit: X = Rs.30,000;Y=Rs.18,000; Z= Rs.12,000}
78. 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 2006 are: (i) Rs. 2,50,000; (ii) Rs. 3,60,000. {NCERT}
{(i): Deficiency of Rs.10,000 in Chintu's share will be borne by Arun;
Final Share in Profit: Arun = Rs. 90,000, Boby = Rs. 1,00,000 and Chintu = Rs. 60,000;
(ii): Chintu is already getting more than the minimum guaranteed amount;
Final Share in Profit: Arun = Rs. 1,44,000, Boby = Rs. 1,44,000 and Chintu = Rs. 72,000}
79. Mohit and Rohan share profits and losses in the ratio of 2:1. They admit Rahul as partner with 11A share in profits with a guarantee that his share of profit shall be at least Rs. 50,000. The net profit of the firm for the year ending March 31,2006 was Rs. 1,60,000. Prepare Profit and Loss Appropriation Account.
{NCERT}
{Deficiency of Rs.10,000 in Rahul's share will be borne by Mohit and Rohan in the ratio of 2:1;
Final Share in Profit: Mohit = Rs. 73,333; Rohan = Rs. 36,667; Rahul = Rs.50,000}
80. John and Mathew share profits and losses in the ratio of 3:2. They admit Mohanty into their firm to 1/6 share in profits. John personally guaranteed that Mohanty's share of profit, after charging interest on capital @ 10 per cent per annum would not be less than Rs. 30,000 in any year. The capital provided was as follows:
John Rs. 2,50,000, Mathew Rs. 2.00,000 and Mohanty Rs. 1,50,000. The profit for the year ending March 31,2006 amounted to Rs. 1,50,000 before providing interest on capital. Show the Profit and Loss ppropriation Account if new profit sharing ratio is 3:2:1. {NCERT}
{Distributable Profits = Rs. 90,000 (= 1,50,000- 60,000); Deficiency of Rs. 15,000 in Mohanty's share will be borne by John; Final Share in Profit: John = Rs. 30,000;
Mathew = f30,000; Mohanty = Rs. 30,000}
81. Mahesh and Dinesh share profits and losses in the ratio of 2:1. From January 01,2004 they admit Rakesh into their firm who is to be given a share of 1/10 of the profits with a guaranteed minimum of Rs. 25,000.
Mahesh and Dinesh continue to share profits as before but agree to bear any deficiency on account of guarantee to Rakesh in the ratio of 3:2 respectively. The profits of the firm for the year ending December 31,2006 amounted to Rs. 1,20,000. Prepare Profit and Loss Appropriation Account for the year ending 31 * December, 2006. {NCERT}
{Deficiency of T 13,000 in Rakesh's share will be borne by Mahesh and Dinesh in the ratio of 3:2;
Final Share in Profit: Mahesh = f 64,200; Dinesh = ?30,800; Rakesh = ?25,000}
Manager as a Partner
82. X and Y are partners sharing profits and losses in the ratio of 2:1
They decided to admit Z, their manager, as a partner giving him 1/5th share of profit. Z, while a manager, was receiving a salary of Rs. 25,000 p.a.
plus a commission of 10% of the net profits after charging such salary and commission. It was also agreed that any excess amount which Z receives as a partner (over his salary and commission) will be borne by X. Profit for the year amounted to Rs. 3,22,000, before payment of salary and commission.
Prepare a Profit and Loss Appropriation A/c.
(Z's share: As Manager = Rs.52,000; As Partner = Rs.64,400. Deficiency of Rs. 12,400 to be met by X; Final Share in Profit: X = Rs. 1,67,600; Y = Rs.90,000; Z = Rs. 64,400}
83. Sangeeta and Simran are in partnership.They share profits in the ratio of 3:2.They have a manager, Disha, who gets Rs. 2,500 p.m. plus commission @ 5% of the profit after charging her salary and commission.
Now, they decide to admit Disha as a partner, giving her 1 /5th share in the profits of the firm. Any excess amount which Disha receives as a partner (over her salary and commission) will be borne by Sangeeta.
The profit for the year ended 31st December, 2014 amounted to Rs. 2,10,000 after charging Disha's salary.
Prepare Profit and Loss Appropriation A/c showing the division of profit of the year.
(Disha's share: As Manager = Rs.40,000; As Partner = Rs.48,000. Deficiency of Rs.8,000 to be wet by Sangeeta; Final Share in Profit: Sangeeta = Rs. 1,12,000; Simran = Rs.80,000; Disha = Rs.48,000}
Guarantee by Firm (Gross Fees)
84. A, B and C are partners sharing profits and losses in the ratio of 3:2:1. Their capitals are Rs. 2,00,000, Rs.1,40,000 and Rs. 1,60,000, respectively. Each partner is entitled to interest on capitals @ 8% p.a. B is entitled to a salary of Rs.1,000 per month and C is entitled for commission of Rs. 8,000 p.a.
A guaranteed that the firm would earn a profits of Rs.1,50,000 before allowing interest on capital, partner salaries and commission. The actual profit for the year 2014 before interest, salaries and commission amounted to Rs.1,40,000. Prepare Profit & Loss Appropriation A/c.
{Distributable Profits = Rs.90,000 (= 1,40,000 + 10,000 - 40,000 - 12,000 - 8,000);
Final Share in Profit: A = Rs.45,000; B = Rs.30,000; C = Rs.15,000}
Note: Firm's profit of Rs.1,40,000 is 10,000 less than the amount guaranteed by A. This deficiency of f 10,000 will be debited
to A's Capital A/c and credited to P and L App. A/c.
85. A, B and C are partners in a CA firm, sharing profits and losses in the ratio of 3:2:2. All the partners have agreed to the following terms:
• B's share of profits is guaranteed to be not less than Rs. 35,000 p.a.
• A gives a guarantee to the effect that the gross fee earned by him for the firm will not be less than the average gross fee earned by him during the preceding three years when he was carrying
on the profession alone (the average of which works out at Rs. 60,000).
The profits earned by the firm for the year ended 31st March, 2014 are Rs. 90,000. The gross fees earned by A for the firm is just Rs. 45,000. Prepare the Profit and Loss Appropriation Account, showing your working clearly.
{Distributable Profits = Rs.1,05,000 (= 90,000 + 15,000); Deficiency of Rs.5,000 in B's share will be borne by A and C in 3:2; Final Share in Profit: A = Rs.42,000; B = Rs.35,000; C = Rs.28,000}
Note: The Gross fee earned by A for the firm of Rs. 45,000 is 15,000 less than the amount guaranteed by him. So, the deficiency of 7Rs.15,000 will be debited to A's Capital A/c and credited to P and L App. A/c.
86. 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 31,2007 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).
{NCERT}
{Distributable Profits = Rs. 84,000 (= 75,000 + 9,000);
Deficiency of Rs. 1,000 in Sona's share will be borne by Amit and Babita in 3:2
Final Share in Profit: Amit = Rs.47,400, Babita = Rs.27,600 and Sona = Rs.15,000}
Note: The Gross fee earned by Babita for the firm off Rs.16,000 is 9,000 less than the amount guaranteed by her. So, the deficiency of Rs.9,000 will be debited to Babita's Capital A/c and credited to P and L App. A/c.
Guarantee by Firm (Full Fledged)
87. X, Y and Z are partners sharing profits and losses in the ratio of 4:1:1. Their capitals are 7 3,00,000;
Rs.1,40,000; and Rs.1,60,000 respectively. According to their partnership deed, they have agreed upon the following terms:
• Partners are entitled to interest on capital @ 10%
• X will get salary @ Rs.2,500 per month.
• Z will get 10% commission of net profits after charging X's salary, interest on capital and after his own commission.
• Y's share of profits (excluding interest on capital) has been guaranteed to be not less than Rs.1,15,000.
The profits for the year ended 31st March, 2014 were Rs.7,50,000 before any appropriations. Prepare the Profit and Loss Appropriation Account.
{Distributable Profits = Rs.6,00,000; Z's Commission = Rs.60,000; Total Deficiency of Rs.15,000 borne by X and Z in 4:1; Final Share in Profit: X=Rs.3,88,000;Y=Rs.1,15,000; Z=Rs.97,000}
88. Ram, Shyam, Hari and Krishna are partners having capitals of Rs.3,00,000; Rs.2,00,000; Rs.1,50,000 and Rs.50,000 respectively. They share profits and losses in the ratio of 4:3:2:1. They have agreed upon the following terms:
• Partners are entitled to interest on capital @ 10%.
• Hari will get salary @ Rs.5,000 per month.
• Shyam's share of profits excluding interest on capital has been guaranteed to be not less than Rs.3,70,000.
• Krishna's share of profits (including interest on capital) has been guaranteed by Ram to be notess than Rs.1,10,000.
The profits for the year ended 31st March, 2014 were Rs.11,30,000 before any appropriations. Prepare the Profit and Loss Appropriation Account.
{Distributable Profits = Rs.10,00,000; Deficiency of Rs.70,000 in Shyam's share will be borne by Ram, Hari and Krishna in 4:2:1; Deficiency of Rs.15,000 in Krishna's share will be borne by Ram personally. Final Share in Profit: Ram = Rs.3,45,000; Shyam
= Rs.3,70,000; Hari = Rs.1,80,000; Krishna = Rs.1,05,000}
89. A, B, C and D are partners having capitals of Rs.2,00,000; Rs.1,00,000; Rs.60,000 and Rs.40,000 respectively.
They share profits and losses in the ratio of 3:2:1:1. They have agreed upon the following terms:
• Partners are entitled to interest on capital @ 7%.
• A will get salary @ Rs.1,000 per month.
• B's share of profits (including interest on capital) has been guaranteed to be not less than Rs.2,00,000.
• D's share of profits (excluding interest on capital) has been guaranteed by A to be not less than Rs.95,000.
The profits for the year ended 31st December, 2014 were Rs.6,70,000 before any appropriations. Prepare the Profit and Loss Appropriation Account.
{Distributable Profits = Rs.6,30,000; Deficiency of Rs.13,000 in B's share will be borne by A.C and D in 3:1:1;
Deficiency of 7 7,600 in D 's share will be borne by A personally. Final Share in Profit: A = Rs.2,54,600;
6 = 7 1,93,000; C = Rs.87,400;}
90. Amit and Bimal were partners sharing profits in the ratio of 3:2. Their capitals as on 1st January 2014 were 7 3,00,000 and Rs.2,00,000 respectively. On 1st July 2014, they admitted Charan as a partner for 1/6th share. Charan introduced Rs.1,00,000 as capital and was given a guarantee that his share in firm's profit will not be less than 7 70,000 p.a. Profit for the year ended 31st December 2014 was Rs.2,50,000 and 40% of this profit relate to first half of the year. Prepare Profit and Loss Appropriation Account.
{New Ratio = 3:2:1, Deficiency of Rs.10,000 in Charan's share will be borne by Amit and Bimal in the ratio of 3:2; Final Share in Profit: Amit = Rs.1,29,000; Bimal = Rs.86,000; Charan = Rs.35,000]
91. A and B were partners sharing profits in the ratio of 2:3. Their capitals as on 1st January 2014 were Rs. 1,00,000 each. On 1st May 2014, they admitted C as a partner for 1/5* share. C introduced Rs.50,000 as capital and B personally guaranteed C that his share of profits, after charging interest on capital @ 12% p.a., would not be less than Rs.24,000 p.a. Profit for the year ended 31st December 2014 before interest on capital was Rs.1,00,000 and 25% of this profit relates to first Four months of the year. Prepare Profit and Loss Appropriation Account.
{New Ratio = 8:12:5; Distributable Profits = Rs.72,000 (= 1,00,000-28,000); Deficiency of Rs.5,000 in C's share will be borne by B; Final Share in Profit: A = Rs.24,400; B = Rs.31,600; C= Rs.16,000]
92. Ram, Shyam and Mohan entered into partnership on 1st July, 2014 to share profits and losses in the ratio of 2:2:1. Ram personally guaranteed that Mohan's share of profit after charging interest on capital @ 12% p.a. would not be less than Rs.70,000 p.a. The capital contribution were Ram: Rs.4,00,000;
Shyam: Rs.3,00,000 and Mohan: Rs.2,00,000. The profits for the period ended 31st December, 2014 were Rs.2,04,000. Show the distribution of profits.
{Distributable Profits = Rs.1,50,000 (= 2,04,000 - 54,000); Deficiency of Rs.5,000 in Mohan's share will be borne by Ram; Final Share in Profit: Ram = Rs.55,000; Shyam = Rs.60,000; Mohan= Rs.35,000]
93. A, B and C entered into a partnership on October 1,2004 to share profits and losses in the ratio of 3:2:1.
A, however, personally guaranteed that C's share of profit after charging interest on Capitals at 5% p.a. would not be less than 130,000 in any year. The capital contributions were A: Rs. 3 lakhs, B: 2 lakhs, and C: Rs. 1 lakh. The profit for period ended March 31,2005 were Rs.1,20,000. Show distribution of profits.
{CBSE, Delhi 2006 (I)}
{Distributable Profits = 1 1,05,000 (= 1,20,000 - 15,000);
Final Share in Profit: A = Rs.52,500; B = Rs.35,000; C=Rs.17,500}
94. X, Y and Z are partners having capital of Rs.2,00,000 each. They share profits and losses in the ratio of 2:2:1. Z is guaranteed a minimum profit of Rs.50,000 p.a. The firm incurred a loss of Rs.1,00,000 for the year ended 31 * December, 2014. Prepare the necessary accounts for division of loss and giving effect to minimum guaranteed profit to Z.
{Deficiency of Rs.70,000 (= 20,000 + 50,000) in Z's share will be borne by X and Y in the ratio of 2:2 or 1:1; Dr. X's and Y's Capital A/c by Rs.35,000 each and Cr. Z's Capital A/c by Rs.70,000.
Capital Balances: X = Rs.1,25,000, Y= Rs.1,25,000, Z= Rs.2,50,000}
95. Ankur and Bobby were into the business of providing software solutions in India. They were sharing profits and losses in the ratio 3:2. They admitted Rohit for a 1/5th share in the firm. Rohit, an alumni of NT, Chennai would help them to expand their business to various South African countries where he had been working earlier. Rohit is guaranteed a minimum profit of Rs.2,00,000 for the year. Any deficiency in Rohit's share is to be borne by Ankur and Bobby in the ratio 4:1. Losses for the year were Rs.10,00,000.
Pass the necessary journal entries {CBSE, Sample Paper 2015}
{For distribution of loss: Dr. Ankur's Capital A/c by Rs.4,80,000, Dr. Bobby's Capital A/c by Rs.3,20,000, Dr. Rohit's Capital A/c by Rs.2,00,000 and Cr. Profit and Loss A/c by Rs.10,00,000;
For meeting the deficiency: Dr. Ankur's Capital A/c by Rs.3,20,000, Dr. Bobby's
Capital A/c by 180,000 and Cr. Rohit's Capital A/c by Rs.4,00,000}