Problems Based on Fundamentals - Accounting for Partnership Firms: Fundamentals

Problems Based on Fundamentals - Accounting for Partnership Firms: Fundamentals - Accountancy Class 12 - Commerce

PROBLEMS BASED ON FUNDAMENTALS

Q. 1 A, B, and C were partners in a firm having no partnership agreement. A, B and C
contributed Rs. 2,00,000, Rs. 3,00,000 and 1,00,000 respectively. A and B desire that the
profits should be divided in the ratio of capital contribution. C does not agree to this. How will
the dispute be settled?

ANS: C is correct because in the absence of Partnership deed the profits are to be shared
equally.

Q2 A and B are partners sharing profits in the ratio of 3: 2 with capitals of Rs. 5, 00,000 and
Rs. 3,00,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an
annual salary of Rs. 25000. During 2006, the profits of the year prior to calculation of
interest on capital but after charging B's salary amounted to Rs. 1,25,000. A provision of
5% of the profits is to be made in respect of Manager's commission.
Prepare an account showing the allocation of profits and partners' capital accounts.

571700   370800                                            571700   370800

Q.3 X and Y are partners sharing profits and losses in the ratio of 3: 2 with capitals of Rs. 50,000
and Rs. 30,000 respectively. Each partner is entitled to 6% interest on his capital. X is
entitled to a salary of Rs. 800 per month together with a commission of 10% of net 'Profit
remaining after deducting interest on capitals and salary but before charging any
commission. Y is entitled to a salary of Rs. 600 per month together I. with-a commission of
10% of Net profit remaining after deducting interest on capitals and salary and after
charging all commissions. The profits for the year prior to calculation of interest on capital
but after charging salary of partners amounted to Rs. 40,000. Prepare partners' Capital
Accounts:-
(i) When capitals are fixed, and
(ii) When capitals are. Fluctuating.

Q 4 Give the answer to the following:

(1) P and Q are partners sharing profits and losses in the ratio of 3:2. On 1st April 2009 their
capital balances were Rs.50, 000 and 40,000 respectively. On 1st July 2009 P brought
Rs.10, 000 as his additional capital whereas Q brought Rs.20, 000 as additional capital on
1st October 2009. Interest on capital was provided @ 5% p.a. Calculate the interest on
capital of P and Q on 31st March 2010.

(2) A and B are partners sharing profits and losses in the ratio of 2:1. A withdraws Rs.1500 at
the beginning of each month and B withdrew Rs. 2000 at the end of each month for 12
months. Interest on drawings was charged @ 6% p.a. Calculate the interest on drawings
of A and B for the year ended 31st December 2009.

Q.5 A, B and C are partners in a firm sharing profits and losses in the ratio of 2:3:5. Their
fixed capitals were 15, 00,000, Rs.30, 00,000 and Rs.6, 00,000 respectively. For the year 2009
interest on capital was credited to them @ 12% instead of 10%. Pass the necessary adjustment
entry.

Q.6 From the following balance sheet of X and Y, calculate interest on capitals @ 10% p.a.
payable to X and Y for the year ended 31st December, 2008.

During the year 2008, X's drawings were Rs. 10,000 and Y's Drawing were Rs. 3,000.
Profit during the year, 2008 was Rs.30, 000.

Ans :

(2) Profits for 2008 were Rs. 30,000 and profits of Rs. 20,000· are, shown in the
Balance Sheet, which means only Rs. 10,000 profits were distributed between the
partners.

Q.7 A, B and C entered into partnership on 1st April, 2008 to share profits & losses in the ratio
of 4:3:3. A, however, personally guaranteed that C's share of profit after charging interest
on Capital @ 5% p.a. would not be less than Rs. 40,000 in any year. The Capital
contributions were:

A, Rs. 3, 00,000;

B, Rs. 2, 00,000 and

C, Rs. 1, 50,000.
The profit for the year ended on 31st March, '2008 amounted to Rs. 1, 60,000. Show the
Profit & Loss Appropriation Account.

Q 8 A, and C are partners with fixed capitals of Rs. 2,00,000, Rs. 1,50,000 and Rs.
1,00,000 respectively. The balance of current accounts on 1st January, 2004 were A Rs.
10,000 (Cr.); B Rs. 4,000 (Cr.) and C Rs. 3,000 (Dr.). A gave a loan to the firm of Rs.
25,000 on 1st July, 2004. The Partnership deed provided for the following:-

(i) Interest on Capital at 6%.

(ii) Interest on drawings at 9%. Each partner drew Rs. 12,000 on 1st July, 2004.

(iii) Rs. 25,000 is to be transferred in a Reserve Account.

(iv) Profit sharing ratio is 5:3: 2 up to Rs. 80,000 and above Rs. 80,000 equally. Net
Profit of the firm before above adjustments was Rs. 1,98,360.
From the above information prepare Profit and Loss Appropriation Account, Capital and
Current Accounts of the partners.

Q.9 Ram and Shyam started a partnership business on 1st January, 2007. Their capital
contributions were Rs. 2,00,000 and Rs. 10,0000 respectively. The partnership deed
provided:

i. Interest on capitals @10% p.a.

ii. Ram, to get a salary of Rs. 2,000 p.m. and Shyam Rs. 3,000 p.m.

iii. Profits are to be shared in the ratio of 3:2.

The profits for the year ended 31st December, 2007 before making above appropriations
were Rs. 2,16,000. Interest on Drawings amounted to Rs. 2,200 for Ram and Rs. 2,500 for
Shyam. Prepare Profit and Loss Appropriation Account.

[Q.10 P and Q are partners with capitals of Rs. 6,00,000 and Rs. 4,00,000 respectively. The profit
and Loss Account of the firm showed a net Profit of Rs. 4, 26,800 for the year. Prepare Profit
and Loss account after taking the following into consideration:-

(i) Interest on P's Loan of Rs. 2,00,000 to the firm

(ii) Interest on 'capital to be allowed @ 6% p.a.

(iii) Interest on Drawings @ 8% p.a. Drawings were; P Rs 80,000 and Q Rs.
1000,000.

(iv) Q is to be allowed a commission on sales @ 3%. Sales for the year was Rs.
1000000

(v) 10% of the divisible profits is to be kept in a Reserve Account.

(i) If the rate of interest on Partners' Loan is not given in the question, it is to be wed
@ 6% p.a. according to the Partnership Act.

(ii) Interest on Partners' Loan is treated as a charge against Profit, so it is shown in the
debit of Profit and Loss A/c.

(iii) If the date of Drawings is not given in the question, interest on drawings will be
charged and average period of 6 months. .

(iv) Reserve Fund is calculated at 10% on Rs. 3,00,000 (i.e. Rs. 4,26,800 + Rs. 5,200-
12,000 - Rs. 60,000 - Rs. 60,000.

Guarantee of profit
A, B and C arte partners. They admit D and guarantee that his share of profit will not be less than
Rs. 20,000. Profits to be shared 4:3:3:2 respectively. Total profits were Rs. 96,000. It was agreed
that excess payable to D over his share will be borne by A,B and C in the ratio of 3:2:1.
Calculate share of profit for each partner.

Books of A,B and C
Profit and Loss appropriation account for the year ending………

The document Problems Based on Fundamentals - Accounting for Partnership Firms: Fundamentals | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
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Accountancy Class 12

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FAQs on Problems Based on Fundamentals - Accounting for Partnership Firms: Fundamentals - Accountancy Class 12 - Commerce

 1. What are the fundamentals of accounting for partnership firms?
Ans. The fundamentals of accounting for partnership firms include maintaining a proper record of all financial transactions, preparing financial statements like balance sheet, profit and loss account, and cash flow statement, calculating and distributing profits among partners, and complying with legal and regulatory requirements.
 2. How are profits distributed among partners in a partnership firm?
Ans. Profits in a partnership firm are usually distributed among partners based on the agreed profit-sharing ratio specified in the partnership deed. The profit-sharing ratio is decided based on factors like the capital invested, the contribution of each partner to the business, and the risks involved.
 3. What are the legal and regulatory requirements for a partnership firm in terms of accounting?
Ans. A partnership firm is required to maintain proper books of accounts, prepare financial statements, file income tax returns, and comply with GST regulations if applicable. The firm may also be required to get its accounts audited if its turnover exceeds a certain threshold.
 4. How do partnership firms account for drawings by partners?
Ans. Drawings by partners are treated as a reduction in their capital accounts. The amount of drawings is deducted from the partner's capital account and reflected in the balance sheet. Drawings do not affect the calculation of profits or loss.
 5. What is the difference between appropriation account and capital account in a partnership firm?
Ans. The appropriation account is used to record items like interest on capital, salary, commission, and profits shared among partners. These items are deducted from the net profit to arrive at the distributable profit. The capital account, on the other hand, reflects the partner's capital contribution to the business and any changes in the capital due to profits or losses, drawings, or additional capital infusion.

Accountancy Class 12

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