CA CPT Exam > CA CPT Notes > Preparing Partner’s Accounts when, capitals are fixed.
Preparing Partner’s Accounts when, capitals are fixed. - CA CPT PDF Download
Tripathi and chauhan are partner in a firm sharing profit and loss in the ratio of 3:2 there capital were 60000rs and 40000rs as on 1 January 2016. during the year they earned a profit of 30000. according to the partnership deed both the partners are entitled to 1000rs per month as salary and 5% in on Capital they are also to be charged as interest of 5% on their drawing irrespective of the period which in 12000rs for tripathi and 8000rs for chauhan?
Ref: https://edurev.in/question/458763/Tripathi-and-chauhan-are-partner-in-a-firm-sharing-profit-and-loss-in-the-ratio-of-32-there-capital-
a) If interest on Capital and Partners’ salaries and interest on drawings is charged against profit, the solution will be as:
b) ) If interest on Capital and Partners’ salaries and interest on drawings is distributed out of profit, the solution will be as:
As the question is silent about the treatment of Interest on Capitals, Salary, Interest on Drawings, so we have prepared the solution by following two methods, namely:
- Charge against Profits
- Out of Profits
This was done deliberately so as to make students aware-off the two above mentioned methods and also to match the answer with that of given in the NCERT. The appropriate answer to the question following Out of Profit Method should be as:
Tripathi's Current A/c balance Rs 3,600 and
Chauhan's Current A/c balance Rs 6,400.
In case no information regarding the treatment of above items is mentioned in the question, then we usually follow the Out of Profits Method.
FAQs on Preparing Partner’s Accounts when, capitals are fixed. - CA CPT
| 1. What is the purpose of preparing partner's accounts in a partnership? |  |
Ans. The purpose of preparing partner's accounts in a partnership is to determine the share of profits or losses of each partner, calculate interest on capital, and maintain a record of the financial transactions related to the partners. This helps in ensuring transparency and accountability within the partnership.
| 2. How are partner's capital accounts calculated when the capitals are fixed? | |
Ans. When the capitals are fixed, the partner's capital accounts are calculated by recording the initial capital contributions made by each partner and any subsequent investments or withdrawals. Fixed capitals are not subject to change based on the profits or losses of the partnership. The capital accounts are updated by adding or subtracting the investments or withdrawals made by the partners.
| 3. What is the significance of maintaining fixed capitals in a partnership? | |
Ans. Maintaining fixed capitals in a partnership ensures that the partners have a predetermined share in the profits and losses of the business. This provides stability and clarity in the distribution of profits and helps in avoiding disputes or conflicts. Fixed capitals also allow partners to have separate accounts for their investments and withdrawals, making it easier to track their individual financial positions within the partnership.
| 4. How is interest on capital calculated for partners with fixed capitals? | |
Ans. Interest on capital is calculated for partners with fixed capitals by applying the agreed-upon rate of interest on their respective capital balances. The interest is calculated for a specific period, usually a year, and is added to the partner's capital account. The interest on capital represents the return on the investment made by the partner and is separate from the share of profits or losses.
| 5. Can the partners' capital contributions be changed if the capitals are fixed? | |
Ans. No, the partners' capital contributions cannot be changed if the capitals are fixed. Fixed capitals imply that the partners' initial investments remain constant and are not affected by the profits or losses of the business. However, if the partners mutually agree to change their capital contributions, it can be done by making additional investments or withdrawals. Any changes in the capital contributions should be properly recorded and documented.
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