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Accounting for Partnership Firms-Fundamentals (Part - 1) | Accountancy Class 12 - Commerce PDF Download

Page No 2.80:

Question 1: In the absence of Partnership Deed, what are the rules relation to :

(a) Salaries of partners,

(b) Interest on partners’ capitals

(c) Interest on partners’ loan

(d) Division of profit, and

(e) Interest on partners’ drawings

ANSWER:
Accounting for Partnership Firms-Fundamentals (Part - 1) | Accountancy Class 12 - Commerce


Page No 2.80:

Question 2: Following differences have arisen among P, Q and R. State who is correct in each case:
(a) P used ₹ 20,000 belonging to the firm and made a profit of ₹ 5,000. Q and R want the amount to be given to the firm?
(b) Q used ₹ 5,000 belonging to the firm and suffered a loss of ₹ 1000. He wants the firm to bear the loss?
(c) P and Q want to purchase goods from A Ltd., R does not agree?
(d) Q and R want to admit C as partner, P does not agree?

ANSWER:
(a) P is bound to pay Rs 20,000 together with profit of Rs 5,000 to the firm because this amount belongs to the firm.

Explanation: As per Principal and Agent relationship, P is principal as well as agent to the firm and to Q and R. As per this rule, any profit earned by an agent (P) by using the firm’s property is attributable to the firm.

(b) Q is liable to pay Rs 5,000 to the firm. As per the Partnership Act, 1932, every partner of a partnership firm is liable to the firm for any loss caused by his/her willful negligence.

Explanation: Here Q is solely responsible for the loss of Rs 1,000 because he used the property of the firm and also represented himself as a principal rather than an agent to the other partners and to the firm.

(c) P and Q may buy goods from A Ltd.

Explanation: As per Partnership Act, 1932, a partner has a right to buy and sell goods without consulting the other partners unless a Public Notice has been given by the partnership firm to restrict the partners to buy and sell.

(d) C will not be admitted because one of the partners P has not agreed to admit C.

Explanation: As per Partnership Act, a new partner cannot be admitted into a firm unless all the existing partners agree on the same decision. In other words, a new partner can be admitted in a partnership firm with the consent of all the existing partners.

Page No 2.81:

Question 3: A, B and C are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the commencement of the firm, they have faced the following problems :
(a) A wants that interest on capital should be allowed to the partners but B and C do not agree.
(b) B wants that the partners should be allowed to draw salary but A and C do not agree.
(c) C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.
(d) A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.
State how you will settle these disputes if the partners approach you for purpose.

ANSWER:
Accounting for Partnership Firms-Fundamentals (Part - 1) | Accountancy Class 12 - Commerce


Page No 2.81:

Question 4: Jaspal and Rosy were partners with capital contribution of ₹ 10,00,000 and ₹ 5,00,000 respectively. They do not have a Partnership Deed. Jaspal wants that profits of the firm should be shared in their capital ratio. Rosy convinced jaspal that profits should be shared equally. Explain how Rosy would have convinced Jaspal for sharing the profit equally.

ANSWER: 

In any partnership firm when there is no partnership deed, then the rule of the Indian Partnership Act of 1932 applies. In the act, when the agreement is not signed then the profit should be distributed equally to all the partners.

In this scenario, Jaspal’s point of view does not align with the partnership Act rule and therefore, Rosy would have convinced her by explaining her the Partnership Act, 1932 provisions.

The document Accounting for Partnership Firms-Fundamentals (Part - 1) | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
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FAQs on Accounting for Partnership Firms-Fundamentals (Part - 1) - Accountancy Class 12 - Commerce

1. What is accounting for partnership firms?
Accounting for partnership firms refers to the process of recording, summarizing, and analyzing financial transactions and activities of a partnership. It involves preparing financial statements, maintaining proper books of accounts, and ensuring compliance with accounting principles and regulations specific to partnership firms.
2. What are the fundamentals of accounting for partnership firms?
The fundamentals of accounting for partnership firms include: - Maintaining separate capital accounts for each partner to track their investments and share of profits or losses. - Recording partnership transactions, such as purchases, sales, expenses, and payments, in the appropriate accounts. - Preparing a profit and loss appropriation account to allocate profits or losses among partners based on their agreed profit-sharing ratio. - Calculating and distributing the interest on partners' capital and drawings. - Ensuring proper valuation and recording of assets and liabilities, including goodwill, if applicable.
3. What are the financial statements prepared for partnership firms?
The financial statements prepared for partnership firms include: - Profit and loss account: It shows the revenues, expenses, and resulting net profit or loss for a specific accounting period. - Balance sheet: It presents the financial position of the partnership firm by listing its assets, liabilities, and capital as of a particular date. - Statement of partners' capital: It summarizes the changes in partners' capital accounts, including investments, withdrawals, and the allocation of profits or losses.
4. How are profits or losses distributed among partners in a partnership firm?
Profits or losses in a partnership firm are typically distributed among partners based on their agreed profit-sharing ratio. The profit and loss appropriation account is prepared to calculate the share of each partner. The remaining profits, after allocating the interest on partners' capital and salaries, if any, are shared among the partners according to their profit-sharing ratio. Similarly, losses are distributed in the same ratio.
5. What is the importance of accounting for partnership firms?
Accounting for partnership firms is important for several reasons: - It helps in maintaining accurate financial records and enables partners to assess the financial performance of the firm. - It provides transparency and accountability within the partnership by ensuring proper recording and reporting of financial transactions. - It facilitates the fair distribution of profits or losses among partners, based on their agreed profit-sharing ratio. - It aids in making informed business decisions, such as determining the financial viability of a partnership and evaluating the profitability of different projects or ventures.
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