NCERT Solution (Part - 3) - Accounting for Partnership : Basic Concepts

# NCERT Solution (Part - 3) - Accounting for Partnership : Basic Concepts | Additional Study Material for Commerce PDF Download

### Q11:

Rahul, Rohit and Karan started partnership business on April 1, 2013 with capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for the year ended March 2014 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.

Interest on Capital

Rahul = 20,00,000 × 5/100 = Rs 1,00,000

Rohit = 18,00,000 × 5/100= Rs 90,000

Karan = 16,00,000 × 5/100 = Rs 80,000

Q12 :
Sunflower and Pink Rose started partnership business on April 01, 2006 with capitals of Rs 2,50,000 and Rs 1,50,000, respectively. On October 01, 2006, 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, 2007.

Product Method

Sunflower

 01 April 2013 to 30 September 2013 2,50,000 × 6 = 15,00,000 01 October 2013 to 31 March 2014 2,00,000 × 6 = 12,00,000 Sum of Product 27,00,000

Pink Rose

 01 April 2013 to 30 September 2013 1,50,000 × 6 = 9,00,000 01 October 2013 to 31 March 2014 2,00,000 × 6 = 12,00,000 Sum of Product 21,00,000

Interest on Capital =

Interest on Sunflower's Capital =

Interest on Pink Rose's Capital =

Alternative Method:

Simple Interest Method

Sunflower

 April 01, 2013 to September 30, 2013 = Rs 12,500 October 01,  2013 to March 31, 2014 = Rs 10,000 Interest on Sunflower’s Capital Rs 22,500

Pink Rose

 April 01, 2013 to September 30, 2013 = Rs   7,500 October 01,  2013 to March 31, 2014 = Rs 10,000 Interest on Pink Rose’s Capital Rs 17,500

Question 13:

On March 31, 2006 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.

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 × (10/100)= Rs 37,000 Hill 2,65,000 × (10/100)= Rs 26,500 Rock 1,60,000 × (10/100)= Rs 16,000

Q14 :

Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2013:

 Balance Sheet as at March 31, 2013 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 2007*) 8,00,000 30,00,000 30,00,000

During the year Mahadev’s drawings were Rs 30,000. Profits during 2013 is Rs 10,00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2013.

* As per the question, this year should be March 2013

Interest on Capital

Neelkant's 10,00,000* (5/100)= Rs 50,000

Mahadev's 10,00,000 * (5/100)= 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).

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## FAQs on NCERT Solution (Part - 3) - Accounting for Partnership : Basic Concepts - Additional Study Material for Commerce

 1. What are the basic concepts of accounting for partnership?
Ans. The basic concepts of accounting for partnership include understanding the concept of partnership, its features, types of partnerships, partnership deeds, capital accounts, profit and loss appropriation accounts, and the preparation of financial statements for partnerships.
 2. What is a partnership deed and why is it important?
Ans. A partnership deed is a legal document that outlines the rights, duties, and responsibilities of partners in a partnership. It includes details such as the name of the partnership, the capital contributed by each partner, profit-sharing ratios, rules for admission or retirement of partners, etc. It is important as it helps in avoiding disputes among partners and provides clarity on various aspects of the partnership.
 3. How are capital accounts maintained in a partnership?
Ans. Capital accounts in a partnership are maintained to record the capital contributed by each partner and any changes in their capital. Initially, the capital accounts are opened with the respective capital contributions of the partners. Any additional investments, withdrawals, and profits/losses are recorded in the capital accounts. At the end of each accounting period, the balances in the capital accounts are adjusted to reflect the changes in the partners' capital.
 4. What is a profit and loss appropriation account in a partnership?
Ans. A profit and loss appropriation account is a part of the partnership's financial statements. It is used to distribute the net profit or loss among the partners based on their profit-sharing ratios. The profits or losses are transferred from the profit and loss account to the profit and loss appropriation account, and then distributed among the partners according to the agreed ratios.
 5. How are financial statements prepared for partnerships?
Ans. Financial statements for partnerships include the profit and loss account, balance sheet, and statement of partners' capital. The profit and loss account shows the net profit or loss of the partnership. The balance sheet presents the financial position of the partnership at a specific date. The statement of partners' capital shows the changes in partners' capital during the accounting period. These statements are prepared using the partnership's accounting records and following the generally accepted accounting principles.

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