{"id":19500,"date":"2021-03-04T16:44:55","date_gmt":"2021-03-04T11:14:55","guid":{"rendered":"https:\/\/mcqbooks.com\/?p=19500"},"modified":"2022-03-06T20:37:06","modified_gmt":"2022-03-06T15:07:06","slug":"ncert-solutions-for-class-12-accountancy-chapter-2","status":"publish","type":"post","link":"https:\/\/mcqbooks.com\/ncert-solutions-for-class-12-accountancy-chapter-2\/","title":{"rendered":"NCERT Solutions for Class 12 Accountancy Chapter 2 Accounting for Partnership: Basic Concepts"},"content":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for 12 Accountancy<\/a> Chapter 2 Accounting for Partnership: Basic Concepts Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.<\/p>\n

Accounting for Partnership: Basic Concepts NCERT Solutions for Class 12 Accountancy Chapter 2<\/h2>\n

Accounting for Partnership: Basic Concepts Questions and Answers <\/span>Class 12 Accountancy Chapter 2<\/h3>\n


\nTest Your Understanding-I [Page No. 67 – 68]<\/span><\/p>\n

Question 1.
\nMohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:
\n(i) Mohan is an active partner. He wants a salary of Rs. 10,000 per year
\n(ii) Shyam had advanced a loan to the firm. He claims interest @ 10% per annum;
\n(iii) Mohan has contributed Rs. 20,000 and Shyam Rs. 50,000 as capital. Mohan wants equal share in profits.
\n(iv) Shyam wants interest on capital to be credited @ 6% per annum.
\nAnswer :
\n(i) Not valid, because in the absence of partnership deed, Mohan is not entitled to any salary.
\n(ii) Not valid, because in the absence of partnership deed, Shyam is entitled to interest only at the rate of 6% per annum.
\n(iii) Valid, because profit and losses will be shared equally in the absence of partnership deed.
\n(iv) Not valid, because in the absence of partnership deed, Shyam is not entitled to any interest on capital.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nState whether the following statements are true or false:
\n(i) Valid partnership can be formulated even without a written agreement between the partners;
\n(ii) Each partner carrying on the business is the principal as well as the agent for all the other partners;
\n(iii) Maximum number of partners in a banking firm can be 20
\n(iv) Methods of settlement of dispute among the partners can’t be part of the partnership deed;
\n(v) If the deed is silent, interest at the rate of 6% p.a. would be charged on the drawings made by the partner;
\n(vi) Interest on partner’s loan is to be given @ 12% p.a. if the deed is silent about the rate.
\nAnswer :
\n(i) True
\n(ii) True
\n(iii) True
\n(iv) False
\n(v) False
\n(vi) False<\/p>\n

Test your Understanding-II [Page No. 77]<\/span><\/p>\n

Question 1.
\nRaju and Jai commenced business in partnership on April 1, 2006. No partnership agreement was made whether oral or written. They contributed Rs. 4,00,000 and Rs. 1,00,000 respectively as capitals. In addition, Raju advanced Rs. 2,00,000 as loan to the firm on October 1, 2006. Raju met with an accident on July 1, 2006 and could not attend the business up to September 30, 2006. The profit for the year ended March 31, 2007 amounted to Rs. 50,600. Disputes have arisen between them on sharing the profits of the firm.
\nRaju Claims:
\n(i) He should be given interest at 10% p.a. on capital and so also on loan.
\n(ii) Profit should be distributed in the proportion of capitals.
\nJai Claims:
\n(i) Net profit should be shared equally.
\n(ii) He should be allowed remuneration of Rs. 1,000 p.a. during the period of Raju’s illness.
\n(iii) Interest on capital and loan should be given @ 6% p.a.
\nState the correct position on each issue as per the provisions of the Partnership Act, 1932.
\nAnswer :
\n(i) Raju Claims :
\n(a) As per the provisions of the Indian Partnership Act, 1932, Raju is not entitled to any interest on capital but he is only entitled to interest on loan only at the rate of 6% not at a 10% per annum.
\n(b) Profits should be distributed equally as per Act.<\/p>\n

(ii) Jai Claims:
\n(a) His claim is perfectly right that Net Profit should be shared equally.
\n(b) He should not allowed any remuneration during the period of Raju’s illness.
\n(c) No interest is given on the capital but his claim on interest on loan at a rate of 6% is right.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nReena 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, Rs. 500. Assuming that Reena and Raman are equal partners. State their share of profit after necessary appropriations.
\nAnswer :
\n\"NCERT
\n\"NCERT<\/p>\n

Test your Understanding-III [Page No. 82]<\/span><\/p>\n

Question 1.
\nRani and Suman are in partnership with capitals of Rs. 80,000 and Rs. 60,000, respectively. During the year 2006-2007, Rani withdrew Rs. 10,000 from her capital and Suman Rs. 15,000. Profits before charging interest on capital was Rs. 50,000. Rani 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.
\nAnswer:
\nInterest on capital always calculated on opening capital
\nRani’s Opening Capital = Rs. 80,000
\nRate of Interest 12% p.a.
\nInterest on Capital = Rs. 80,000 x \\(\\frac{12}{100}\\) = Rs- 9,600
\nSuman’s Opening Capital = Rs. 60,000
\nRate of Interest = 12% p.a.
\nInterest on Capital = Rs. 60,000 x \\(\\frac{12}{100}\\)
\n= Rs. 7,200.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nPriya 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. Calculate their shares of profits:
\n(a) when there is no agreement in respect of interest on capital, and
\n(b) when there is an agreement that the interest on capital will be allowed @ 12% p.a.
\nAnswer:
\n(a) When there is not any agreement in respect of interest on capital, then interest on capital will not be given to partners. Only the profits distributed among them in profit sharing ratio
\nPriya get share of profit = Rs. 1,26,000 x \\(\\frac{5}{8}\\) = Rs. 78,750
\nKajal get share of profit = Rs. 1,26,000 x \\(\\frac{3}{8}\\) = Rs. 47,250<\/p>\n

(b) When there is an agreement that the interest on capital will be allowed @ 12% p.a., then the amount of interest on capital is greater than of the profit. Therefore, the payment of interest will be restricted to the amounts of profits. In that case, the profit will be effectively distributed in the ratio of interest on capital of each partner.
\nInterest @ 12% p.a.
\nFor Priya = Rs. 72,000
\nand for Kajal = Rs. 96,000
\nRatio of interest = 72 : 96 = 3 : 4
\nProfit distributed in this ratio as interest on capital
\nPriya get Rs. 1,26,000 x \\(\\frac{3}{7}\\)= Rs, 54,000
\nKajal get = Rs. 1,26,000 x \\(\\frac{4}{7}\\)= Rs. 72,000<\/p>\n

Do it Yourself [Page No. 72-73]<\/span><\/p>\n

Question 1.
\nSoumya 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:
\n\"NCERT
\nThe partnership deed provides that Soumya is to be paid salary @ Rs. 500 per month whereas 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 Partner’s Capital and Current Accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nSoniya, Charu and Smita started a partnership firm on April 1, 2006. They contributed Rs. 5,00,000; Rs. 4,00,000 and Rs. 3,00,000 respectively as their capitals and decided to share profits and losses in the ratio of 3:2:1. The partnership provides that Soniya is to be paid a salary of Rs. 10,000 per month and Charu a commission of Rs. 50,000. It also provides that interest on capital be allowed @ 6% p.a.<\/p>\n

The drawings for the year were Soniya Rs. 60,000; Charu Rs. 40,000 and Smita Rs. 20,000. Interest on drawings was charged as Rs. 2,700 on Soniya’s drawings; Rs. 1,800 on Charu’s drawings and Rs. 900 on Smita’s drawings. The net amount of profit as per Profit and Loss Account for the year 2006-07 was Rs. 3,56,600.
\n(i) Record necessary journal entries.
\n(ii) Prepare Profit and Loss Appropriation Account
\n(iii) Show capital accounts of the partners.
\nAnswer:
\n(i) journal Entries
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

\"NCERT
\n\"NCERT<\/p>\n

Do it Yourself [Page No. 87-88]<\/span><\/p>\n

Question 1.
\nGovind is a partner in a firm. He withdrew the following amounts during the year 2006-07 :<\/p>\n

(Rs.)<\/p>\n

April 30, 2006\u00a0 – 6,000
\nJune 30,2006\u00a0 \u00a0– 4,000
\nSept. 30, 2006\u00a0 – 8,000
\nDec. 31, 2006\u00a0 – 3,000
\nJan. 31,2007\u00a0 – 5,000
\nThe interest on drawings is to be charged @ 6% p.a. The books are closed on March 31, every year.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Interest on Drawings = Rs. 1,69,000 \\(\\times \\frac{6}{100} \\times \\frac{1}{12}\\)
\n= Rs. 845.<\/p>\n

Question 2.
\nRam 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.
\nAnswer:
\nTotal Amount Withdrawn = Rs. 1,000 x 12
\n= Rs. 12,000 Rate = 5% p.a.
\nInterest on Drawings = Rs. 12,000 x \\(\\times \\frac{5}{100} \\times \\frac{6}{12}\\)
\nRam’s Interest on Drawings = Rs. 300<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nVer ma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings should be charged @ 6% p.a. Verma withdraw; Rs. 2,000 per month starting from April 01, 2006 to March 31,2007. K. ul withdrew Rs. 3,000 per quarter, starting from April 01, 2006. Calculate interest on partner’s drawings.
\nAnswer:
\nTotal Amount Withdrawn by Verma
\n= Rs. 2000 x 12 = Rs. 24,000
\nRate = 6% p.a.
\nTime period =\\(6 \\frac{1}{2}\\) month because drawings are regular starting from April 1, 2006
\nVerma’s Interest on Drawings = Rs. 24,000 x \\(\\frac{6}{100} \\times \\frac{61 \/ 2}{12}\\)
\n= Rs. 24,000 x \\(\\times \\frac{6}{100} \\times \\frac{13}{24}\\)
\n= Rs. 780
\nTotal Amount Withdrawn by Kaul = Rs. 3,000 per quarter
\n= Rs, 3,000 x 4 = Rs. 12,000
\nRate = 6% p.a.<\/p>\n

Time Period = \\(7 \\frac{1}{2}\\) month because drawings are regular starting from April 1, 2006.
\nKaul\u2019s Interest on Drawings = Rs. 12,000 x \\(\\times \\frac{6}{100} \\times \\frac{71 \/ 2}{12}\\)
\n= Rs. 12,000 \u00d7 \\(\\times \\frac{6}{100} \\times \\frac{15}{24}\\)
\n= Rs.450
\n
\nDo it Yourself [Page No. 93]<\/span><\/p>\n

Question 1.
\nKavita and Lalit are partners sharing profits in the ratio of 2:1. They decide to admit Mohan with share in profits with a guaranteed amount of Rs. 25,000 Both Kavita and Lalit undertake to meet the liability arising out of guaranteed amount to Mohan in their respective profit sharing ratio. The profit sharing ratio between Kavita and Lalit does not change. The firm earned profits of Rs. 76,000 for the year 2006-07. Show the distribution of profit amongst the partners.
\nAnswer:
\n\"NCERT<\/p>\n

Do it Yourself [Page No. 95]<\/span><\/p>\n

Question 1.
\nGupta and Sarin are partners in a firm sharing profits in the ratio of 3:2. Their fixed capitals are: Gupta 2,00,000 and Sarin 3,00,000. After the accounts for the year are prepared it is discovered that interest on capital @ 10% p.a. as provided in the partnership agreement, has not been credited in the capital accounts of partners before distribution of profits. Record adjustment entry to rectify the error.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nKrishna, Sandeep and Karim are partners sharing profits in the ratio of 3:2:1. Their fixed capitals are: Krishna 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.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 3.
\nLeela, Meera and Neha are partners and have omitted interest on capital @ 9% p.a. for three years ended March 31, 2007. Their fixed capitals on which interest was to be allowed throughout were: Leela Rs. 80,000; Meera Rs. 60,000 and Neha Rs. 1,00,000. Their profit sharing ratio during the last three years were:
\n\"NCERT
\nRecord adjustment entry.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Short Answer Type Questions (Theoretical)<\/span><\/p>\n

Question 1.
\nDefine Partnership Deed.
\nAnswer:
\nA partnership is formed by an agreement, it is essential that there must be some terms and conditions agreed upon by all the partners. These terms and conditions or Agreement may be written or oral. Though the Partnership Act does not expressly require that there should be an agreement in writing.<\/p>\n

But in order to avoid all misunderstanding and disputes, it is always the best course to have a written agreement duly signed and registered under the Act.<\/p>\n

\"NCERT<\/p>\n

A document in written which contain the terms of agreement for the partnership is called ‘Partnership Deed’. This document contains the details about all the aspects affecting the relationship between the partners including the objectives of business, contribution of capital by each partner, ratio in which the profit and losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan, etc. The clauses of partnership deed can be altered with the consent of all the partners.<\/p>\n

Contents of Partnership Deed\u2014
\n1. Names and Addresses of the firm and its main business.
\n2. Names and Addresses of all partners.
\n3. Amount of capital contributed or to be contributed by each partner.
\n4. Accounting period of the firm. ‘
\n5. Date of commencement of partnership firm.
\n6. Rules regarding operations of bank account.
\n7. Profit and loss sharing ratio.
\n8. Duration of partnership, if any.
\n9. Rate of interest on capital, loan, drawings etc.
\n10. Salaries, commissions etc., if payable to any partner(s).
\n11. The rights, duties and liabilities of each partner.
\n12. Mode of auditor’s appointment, jf any.
\n13. Rules to be followed in case of admission, retiiement, death of a partner.
\n14. Rules to be followed in case of insolvency of one or more partners.
\n15. Settlement of accounts on dissolution of the firm.
\n16. Rules for the settlement of disputes among the partners.
\n17. Safe custody of the books of accounts and other documents of the firm.
\n18. Any other matter relating to the conduct of business.<\/p>\n

Question 2.
\nExplain in 50 words as to why it is considered desirable to make to partnership agreement in writing.
\nAnswer:
\nIt is essential that certain terms and conditions agreed upon by all the partners. Such terms and conditions may be either oral or written. Although it is not compulsory under Indian Partnership Act, 1932 to make this agreement in writing, but written agreement has certain merits inherited in it.<\/p>\n

It avoids all misunderstandings and disputes later on among the partners or their parties making conduct with the firm. It will be much better that the agreement must be duly signed and registered under Partnership Act, 1932.<\/p>\n

Question 3.
\nList the items which may be debited or credited in capital accounts of the partners when :
\n(i) Capitals are fixed
\n(ii) Capitals are fluctuating
\nAnswer:
\n(i) Capitals are fixed :
\nItems appears in Credit side of Capital A\/c :
\n(i) Original capital invested by the partners
\n(ii) Additional capital introduced<\/p>\n

Items appears in Debit side Capital A\/c :
\n(i) Permanent amount withdrawn from capital i.e. Drawings
\n(ii) Capitals are fluctuating :<\/p>\n

\"NCERT<\/p>\n

Items appears in Credit side of Capital A\/c :
\n(i) Capital introduced or the Opening balance of Capital
\n(ii) Additional Capital introduced during the year, if any
\n(iii) Interest on Capital, if any
\n(iv) Salary to partners, if any
\n(v) Commission and bonus to the partners, if any
\n(vi) Share of profit<\/p>\n

Items appears in Debit side of Capital A\/c :
\n(i) Drawings made during the year, if any
\n(ii) Interest on drawings, if any
\n(iii) Share of loss, if any
\n(iv) Withdrawal of Capital, if any
\n(v) Closing Balance<\/p>\n

Question 4.
\nWhy is Profit and Loss Adjustment Account prepared? Explain.
\nAnswer:
\nIn partnership, net profit after adjustment of partner’s interest on capital, salary and commission to partners, interest on drawings etc. distributed among the partners in the agreed profit sharing ratio. For this purpose, a separate account is prepared called ‘Profit and Loss Adjustment Account’ or ‘Profit and Loss Appropriation Account’.<\/p>\n

It is merely an extension of the Profit and Loss Account. All adjustments in respect of partner’s commission and salary, interest on capital and on drawings etc. are made through this account. It starts with the net profit\/net loss as per Profit and Loss Account is transferred to this account.<\/p>\n

Question 5.
\nGive two circumstances under which the fixed capitals of partners may change.
\nAnswer :
\nTwo circumstances are following under which the fixed capitals of partners may change :
\n(i) The capitals of the partners shall remain fixed unless some additional capital is introduced.
\n(ii) Some amount of capital is withdrawn permanently as per the agreement among the partners.<\/p>\n

Question 6.
\nIf a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?
\nAnswer:
\nIf a fixed amount is withdrawn on the first day of every quarter, then the interest is calculated on the total amount withdrawn during the year, for a period of seven and half months i.e. 7 \\(\\frac{1}{2}\\) months.<\/p>\n

Question 7.
\nIn the absence of partnership deed, specify the rules relating to the following :
\nAnswer:
\n(i) Sharing of profits and losses.
\n(ii) Interest on partner’s capital.
\n(iii) Interest on partner’s drawings.
\n(iv) Interest on partner’s loan.
\n(v) Salary to a partner.<\/p>\n

In the absence of partnership deed, the rules relating to the following as per Indian Partnership Act, 1932 are :
\n(i) Sharing of profits and losses : If the partnership deed is silent about the profit sharing ratio, the profit and losses of the firm are to be shared equally by partners.<\/p>\n

(ii) Interest on partner’s capital: No interest on capital is given, in absence of partnership deed.<\/p>\n

(iii) Interest on partner’s drawings : In absence of partnership deed, no interest is to be charged on the drawings made by the partners.<\/p>\n

(iv) Interest on partner’s loan: If partner advances loan to firm then he is entitled to get an interest on the amount of loan at the rate of 6 per cent per annum, in absence of partnership deed.<\/p>\n

(v) Salary to a partner: No partner is entitled to get salary from the firm, in absence of partnership deed.<\/p>\n

\"NCERT<\/p>\n

Long Answer Type Questions<\/span><\/p>\n

Question 1.
\nWhat is Partnership? What are its chief characteristics? Explain.
\nAnswer:
\nMeaning of Partnership\u2014
\nPartnership is an agreement written\/oral between two or more persons who have agreed to do some lawful business and to share profit or loss arising from business. According to Indian Partnership Act, 1932, Section 4 “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”<\/p>\n

In partnership, two or more persons join hands to set-up a business and share its profits and losses.Persons who have entered into partnership with one another are called individually partners and collectively ‘a firm’ and the name under which their business is carried on is called the ‘firm name’. A partnership firm is not a separate legal entity apart from the partners constituting it.<\/p>\n

There must be minimum of two persons to form a partnership firm, according to Indian Partnership Act, 1932, but it does not specify the maximum number of partners. In this issue Section 11 of the Companies Act, 1956 limits the number of partners to 10 for a partnership carrying on banking business and 20 for a partnership carrying on any other type of business.<\/p>\n

Characteristics of Partnership:
\n1. Two or More Persons\u2014There must be minimum of two persons to form a partnership firm, according to Indian Partnership Act, 1932, but it does not specify the maximum number of partners. In this issue Section 11 of the Indian Companies Act, 1956 limits the number of 174 N.D. Study Material Based On partners to 10 (ten) for a partnership carrying on banking business and 20 (twenty) for a partnership carrying on any other type of business.<\/p>\n

2. Agreement\u2014Partnership comes into existence on account of an agreement among the partners, and not from status or operations of law. The agreement becomes the basis of relationship between the partners. It may be written or oral. It may be for a fixed period or for a particular venture or at will.<\/p>\n

3. Business\u2014Partnership can be formed for the purpose of carrying on some lawful business with the intention of earning profits. Mere co-ownership of a property does not amount to partnership.<\/p>\n

4. Mutual Agency\u2014The partnership business may be carried on by all the partners or any of them acting for all. This statement means that every partner is entitled to participate in the conduct of the affairs of its business and there exists a relationship of mutual agency between all the partners.<\/p>\n

Partners are agents as well as principals for all other partners. Each partner can bind other partners by his acts and also is bound by the acts of other partners with regard to business of the firm. Relationship of mutual agency is so important feature of partnership that one can say that there would be no partnership, if this feature is absent.<\/p>\n

5. Sharing of Profit\u2014The agreement between the partners must be to share the profits (or losses). Though the definition of partnership, according to Partnership Act, describes partnership as relation between people who agree to share the profits of a business, the sharing of loss is implied. If some persons join hands for the purpose of some charitable activity, it will not be termed as partnership.<\/p>\n

6. Liability of Partnership\u2014The liability of partnership is unlimited. Each partner is liable jointly with all the other partners and also individually to the third party for all the acts of the firm done while he is a partner.<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nDiscuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.
\nAnswer:
\nNormally, the partnership deed covers ah matters relating to the mutual relationship of partners amongst
\nthemselves. But if there is no partnership deed, the provisions of the Indian Partnership Act, 1932 shall apply.<\/p>\n

The important provisions affecting partnership accounts are\u2014
\n(i) Profit Sharing Ratio\u2014In absence of deed or agreement, according to act, the profit sharing ratio is equal i.e. the profit and loss of the firm are to be shared equally by the partners, irrespective of their capital contribution in the firm.<\/p>\n

(ii) Interest on Capital\u2014No interest on capital shall be allowed to the partners. In case deed provides for payment of interest on capital but does not specify the rate, the interest will be paid at the rate of 6% p.a., only from the profits of the firm. It is not payable, if firm incurs losses during the period.<\/p>\n

(iii) Interest on Drawings\u2014No interest is to be charged on drawings.<\/p>\n

(iv) Interest on Loan, Advances\u2014If any partner, apart from his capital, provide loan to the firm, he is entitled to get an interest at the rate of 6% per annum. Such interest shall be paid even if there are losses to the firm.<\/p>\n

(v) Remuneration to Partners\u2014No partner is entitled to any salary or commission for participating in the business of the firm.<\/p>\n

Apart from the above, the Indian Partnership Act specifies that subject to contract between the partners :
\n(i) If a partner derives any profit for himself\/herself from any transaction of the firm or from the use of the property or business connection of the firm or the firm name, he\/she shall account for the profit and pay it to the firm.<\/p>\n

(ii) If a partner carries on any business of the same nature as and competing with that of the firm, he\/she shall account for and pay to the firm, all profit made by him\/her in that business.<\/p>\n

Question 3.
\nExplain why it is considered better to make a partnership agreement in writing.
\nAnswer:
\nA partnership can be formed only through an agreement between two or more persons. It is essential that certain terms and conditions agreed upon by all partners such terms and conditions may be either oral or written. Although it is not compulsory under Indian Partnership Act, 1932, to make this agreement in writing, but written agreement has certain merits inherited in it.<\/p>\n

A written agreement is preferable because it serves as a record for future. It avoids all misunderstanding and disputes later on among the partners or their parties making conduct with the firm. It will be much better that the agreement must be duly signed and registered under Partnership Act, 1932.<\/p>\n

Question 4.
\nIllustrate how interest on drawings will be calculated under various situations.
\nAnswer:
\nDrawings is the amount withdrawn, in cash or in kind, for the personal use by the partner(s). Interest on drawings is calculated with reference to the date of withdrawal.<\/p>\n

The calculation of interest on drawings under different situations is shown as under :<\/p>\n

(1) Amount of drawings, rate of interest and date of withdrawal is given:
\nThe following example will clarify the above situation : Suppose, Dhruv is a partner, who withdraw Rs. 50,000 on October 1st, 2006, interest on drawings is charged @ 10% per annum. The books of firm are closed on March 31st. The calculation of interest on drawings will be follows:
\n= Rs. 50,000 \\(\\times \\frac{10}{100} \\times \\frac{6}{12}\\) [Oct. 2006 to March 2007]
\n= Rs. 2,500<\/p>\n

(2) Amount and rate of interest are given but date of withdrawal is not specified : Suppose, Mr. Daksh Kumar is a partner who withdraws Rs. 50,000 and interest on drawings is charged @ 10% per annum. The calculation of interest on drawings will be as follows :
\n= Rs. 50,000 \\(\\times \\frac{10}{100} \\times \\frac{6}{12}\\)
\n= Rs. 2,500<\/p>\n

\"NCERT<\/p>\n

(3) Fixed amount is withdrawn at regular intervals :
\n(a) If withdrawal is made in the beginning of each month interest is calculated for 6\\(\\frac{1}{2}\\) months.<\/p>\n

(b) If withdrawal is made during the .month (assumed in the middle of each months), interest is calculated for 6 months.<\/p>\n

(c) If withdrawal is made at the end of each month, interest is calculated for 5\\(\\frac{1}{2}\\) months.<\/p>\n

(d) If the withdrawal is made in the beginning of each quarter, the interest is calculated on total drawings for a period of seven and a half months i.e. 7 \\(\\frac{1}{2}\\) months.<\/p>\n

(e) If the amount is withdrawn at the end of each quarter, interest is calculated on total drawings for a period of 4 \\(\\frac{1}{2}\\)months.<\/p>\n

Example : A partner Priti Sharma makes a drawing of Rs. 2,000 regularly. Under the partnership agreement, interest is to be charged at 10% per annum. What is the interest that should be charged to Priti Sharma, if the drawings is made :
\n(i) in the beginning of the month
\n(ii) in the middle of the month
\n(iii) at the end of the month
\n(iv) in the beginning of the quarter
\n(v) at the end of the each quarter
\nAnswer :
\nTotal amount of drawings for (i), (ii) and (iii)
\n= Rs. 2,000 x 12
\n= Rs. 24,000
\nTotal amount of drawings for (iv) and (v)
\n= Rs. 2,000 x 4
\n= Rs. 8,000<\/p>\n

(i) When drawings is made in the beginning of the month :
\n= Rs. 24,000 \\(\\times \\frac{10}{100} \\times \\frac{61 \/ 2}{12}\\)
\n= Rs. 1,300<\/p>\n

(ii) When drawings is made in the middle of the month :
\n= Rs. 24,000 \\(\\frac{10}{100} \\times \\frac{6}{12}\\)
\n= Rs. 1,200<\/p>\n

(iii) When drawings is made at the end of the month :
\n= Rs. 24,000 \\(\\frac{10}{100} \\times \\frac{51 \/ 2}{12}\\)
\nRs. 1,100<\/p>\n

(iv) When drawings is made in the beginning of each quarter:
\n= Rs.8,000 x \\(\\frac{10}{100} \\times \\frac{772}{12}\\)
\n= Rs.500<\/p>\n

(v) When drawings is made at the end of each quarter:
\n= Rs.8,00 x \\(\\frac{10}{100} \\times \\frac{41 \/ 2}{12}\\)
\n= Rs.300<\/p>\n

4. Different amount are withdrawn at different intervals : When the partners withdraw different amount of money at different time intervals, the interest is calculated using the product method. In this method, each amount of drawing is multiplied by the number of days\/months from the date of drawings to the last date of financial year to find out the product and then all the products are totalled. Here, the total product and interest for I month at the given rate is calculated.<\/p>\n

\"NCERT<\/p>\n

Interest on Drawings = Total of Product x \\(\\frac{\\text { Rate }}{100} \\times \\frac{1}{12} \\text { or } \\frac{1}{365}\\)
\nFor example, Varan withdraw Rs. 2,000 on 1st March, Rs 4,000 on 30th June, Rs. 2,000 on 1st November and Rs. 4,000 on 31st, December. Interest on drawing is charged at 10% per annum. In this case, interest is calculated as follows :
\n\"NCERT<\/p>\n

Question 5.
\nWrite a note on guarantee of profit to a partner.
\nAnswer:
\nSometimes a partner may be guaranteed a minirpum amount of profit by one or some or by all the partners in the existing profit sharing ratio or some other agreed ratio. The minimum guaranteed amount shall be paid to a partner when his share of profit as per the profit sharing ratio is less than the guaranteed amount.<\/p>\n

The following steps may be follows in this case :
\n(i) Calculate the share of profit of the partner who has been guaranteed a minimum amount of profit as per profit sharing ratio. If this amount is more than or equal to the amount guaranteed, no adjustment is required.<\/p>\n

(ii) If the share of profit of that partner is less than the guaranteed amount, then we have to find out the difference between the guaranteed amount and share of profit of that partner.<\/p>\n

(iii) Then, we add this difference to the share of the profit of the partner and deduct the difference from the share of profit of other partners or partner who have guaranteed the amount in the agreed ratio.<\/p>\n

For Example : Ash. sh and Pradeep admit Sumit into partnership and offer him \\(\\frac{1}{6} \\text { th }\\) share of the profits. They further guarantee that\u00a0 Sumit will receive a minimum of Rs. 10,000 as his share of profit. Now suppose the total profit of the firm is Rs. 36,000 only.<\/p>\n

Sumit’s share comes to Rs. 6,000. Under such circumstances Sumit will be paid the guaranteed minimum of Rs. 10,000 and the balance profit (36,000 – 10,000) will be divided between Ashish and Pradeep in their profit sharing ratio.<\/p>\n

Question 6.
\nHow will you deal with a change in profit sharing ratio among existing Partners? Take imaginary figures to illustrate your answer?
\nAnswer:
\nExisting partners may decide to change their profit sharing ratio. In such a case, any profit or loss up to the date of change is credited or debited in the capital account of the partners in their old profit sharing ratio.<\/p>\n

Any undistributed profit like general reserve etc. is also credited to partners capital A\/c’s in their old profit sharing ratio. In case if the revaluation of assets and liabilities takes place, than profit or loss on revaluation is also distributed between partners in their old profit sharing ratio.<\/p>\n

However, when the profit sharing ratio is changed in the existing partners, some partners might gain while other might loose. Therefore, gaining partner shall be compensate the sacrificing partner to the extent of his gain.<\/p>\n

Journal Entry:
\nGaining Partner’s Capital A\/c Dr
\nTo Sacrificing Partner’s Capital A\/c<\/p>\n

For Example : X, Y and Z are partners in a firm sharing profit in the ratio of 3:3:2. They decided to share profits equally with effect from 1st April, 2006. On that date, the profit and loss account showed the credit balance of Rs. 36,000. Instead of closing the profit and loss account, it was decided to record on adjustment entry reflecting the change in the profit sharing ratio. It can be done as :
\n\"NCERT<\/p>\n

Numerical Questions<\/span>
\nFixed and Fluctuating Capitals<\/span><\/p>\n

Question 1.
\nTripathi and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals were Rs. 60,000 and Rs. 40,000 as on January 01,2005. During the year they earned a profit of Rs. 30,000. According to the partnership deed both the partners are entitled to Rs. 1,000 per month as salary and 5% interest on their capital. They are also to be charged an interest of 5% on their drawings, irrespective of the period, which is Rs. 12,000 for Tripathi, Rs. 8,000 for Chauhan. Prepare Partner’s Accounts when, capitals are fixed.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 2.
\nAnubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital were Rs. 90,000 and Rs. 60,000. The profit during the year were Rs. 45,000. According to partnership deed, both partners are allowed salary, Rs. 700 per month to Anubha and Rs. 500 per month to Kajal. Interest allowed on capital @ 5% p.a. The drawings at the end of the period were Rs. 8,500 for Anubha and Rs. 6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings. Prepare partners capital accounts, assuming that the capital account are fluctuating.
\nAnswer:
\n\"NCERT<\/p>\n

Distribution of Profits<\/p>\n

Question 3.
\nHarshad and Dhiman are in partnership since April 01, 2006. No Partnership agreement was made. They contributed Rs. 4,0, 000 and 1,00,000 respectively as capital. In addition, Harshad advanced an amount of Rs. 1,00,000 to the firm, on October 01,2006. Due to long illness, Harshad could not participate in business activities from August 1,2006 to September 30,2006. The profits for the year ended March 31,2006 amounted to Rs. 1,80,000. Dispute has arisen between Harshad and Dhiman.
\nHarshad Claims:
\n(i) He should be given interest @ 10% per annum on capital and loan.
\n(ii) Profit should be distributed in proportion of capital. Dhiman Claims:
\n(i) Profits should be distributed equally.
\n(ii) He should be allowed Rs. 2,000 p.m. as remuneration for the period he managed the business, in the absence of Harshad.
\n(iii) Interest on Capital and loan should be allowed @ 6% p.a. You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 4.
\nAakriti and Bindu entered into partnership for making garment on April 01,2006 without any Partnership agreement. They introduced Capitals of Rs. 5,00,000 and Rs. 3,00,000 respectively on October 01, 2006. Aakriti advanced Rs. 20,000 by way of loan to the firm without any agreement as to interest.<\/p>\n

Profit and Loss Account for the year ended March, 2007 showed profit of Rs. 43,000. Partners could not agreed upon the question of interest and the basis of division of profit. You are required to divide the profits between them giving reason for your solution.
\nAnswer:
\n\"NCERT<\/p>\n

Reasons : In the absence of any partnership deed, No partner is allowed to take interest on capital, salary and commission etc. however only interest on loan is allowed at the rate of 6% p.a. and profit sharing ratio should be equal.<\/p>\n

Question 5.
\nRakhi and Shikha are partners in a firm, with capitals of Rs. 2,00,000 and Rs. 3,00,000 respectively. The profit of the firm, for the year ended 2006-07 is Rs. 23,200. As per the Partnership agreement, they share the profit in their capital ratio, after allowing a salary of Rs. 5,000 per month to Shikha and interest on Partner’s capital at the rate of 10% p.a. Dining the year Rakhi withdrew Rs. 7,000 and Shikha Rs. 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 6.
\nLokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs. 50,000 and Rs. 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of Rs. 2,500 p.a. During 2006, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to Rs. 12,500, A provision of 5% of profits is to be made in respect of manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 7.
\nThe partnership agreement between Maneesh and Girish provides that:
\n(i) Profits will be shared equally;
\n(ii) Maneesh will be allowed a salary of Rs. 400 p.m.
\n(iii) Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
\n(iv) 7% interest will be allowed on partner’s fixed capital;
\n(v) 5% interest will be charged on partner’s annual drawings;
\n(vi) The fixed capitals of Maneesh and Girish are Rs. 1,00,000 and Rs. 80,000, respectively. Their annual drawings were Rs. 16,000 and Rs. 14,000, respectively. The net profit for the year ending March 31, 2006 amounted to Rs. 40,000; Prepare firm’s Profit and Loss Appropriation Account.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 8.
\nRam, Raj and George are partners sharing profits in the ratio 5:3:2. According to the partnership agreement George is to get a minimum amount of Rs. 10,000 as his share of profits every year. The net profit for the year 2006 amounted to Rs. 40,000. Prepare the profit and Loss Appropriation Account.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 9.
\nAmann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of Rs. 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending December 31, 2005 and December 31, 2006 were Rs. 40,000 and Rs. 60,0, respectively. Prepare the Profit and Loss Appropriation Account for the two years.
\nAnswer:
\n\"NCERT\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 10.
\nSimmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The Profit and Loss Account of the firm for the year ending March 31, 2006 shows a net profit of Rs. 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
\n(i) Partners\u2019 capital on April 1, 2005: Simmi, Rs. 30,000 Sonu, Rs. 60,000;
\n(ii) Current Accounts balances on April 1, 2005; Simmi, Rs. 30,000 (cr.); Sonu, Rs. 15,000 (cr.)
\n(iii) Partners drawings during the year amounted to Simmi, Rs. 20,000; Sonu, Rs. 15,000
\n(iv) Interest on capital was allowed @ 5% p.a.
\n(v) Interest on drawings was to be charged @ 6% p.a. at an average of six months
\n(vi) Partners\u2019 salaries: Simmi Rs. 12,000 and Sonu Rs. 9,000. Also, show the partner\u2019s current accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 11.
\nRamesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were Rs. 80,000 and Rs. 60,000 respectively. The firm started business on April 1, 2005. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of Rs. 2,000 and Rs. 3,000, respectively.<\/p>\n

The profits for year ended March 31,2006 before making above appropriations was Rs. 1,00,300. The drawings of Ramesh and Suresh were Rs. 40,000 and Rs. 50,000, respectively. Interest on drawings amounted to Rs. 2,000 for Ramesh and Rs. 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts, assuming that their capitals are fluctuating.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 12.
\nSukesh and Vanita were partners in a firm. Their partnership agreement provides that:
\n(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
\n(ii) 5% interest is to be allowed on capital;
\n(iii) Vanita should be paid a monthly salary of Rs. 600.
\nThe following balances are extracted from the books of the firm, on December 31, 2006:
\n\"NCERT
\nNet profit for the year, before charging interest on capital and after charging partner’s salary was Rs. 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Calculation of Interest on Capital and Interest on Drawings<\/p>\n

Question 13.
\nRahul, Rohit and Karan started partnership business on April 1, 2006 with capitals of Rs. 20,00,000; Rs. 18,00,000 and Rs. 16,00,000, respectively. The profit for the year ended March 2007 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.
\nAnswer:
\nInterest on Capital:
\nRohit’s Interest on Capital = Rs. 2,00,000 \u00d7 \\(\\frac{5}{100}\\) =\u00a0 Rs. 1,00,000
\nRohit’s Interest on Capital = Rs. 18,00,000 \u00d7 \\(\\frac{5}{100}\\) = Rs. 90,000.
\nKaran’s Interest on Capital = Rs. 16,00,000 \u00d7 \\(\\frac{5}{100}\\) = Rs. 80,000.<\/p>\n

\"NCERT<\/p>\n

Question 14.
\nSunflower 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.
\nAnswer:
\n\"NCERT<\/p>\n

Question 15.
\nOn 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.
\nAnswer:
\nOpening Capital = Closing Capital + Drawings\u00a0– Share of Profit
\nMountain’s Opening Capital = Rs. 4,00,000 + Rs. 20,000 – \\(\\frac{1}{3}\\) of Rs. 1,50,000
\n= Rs. 4,00,000 + Rs. 20,000 – Rs. 50,000
\n= Rs. 3,70,000.
\nHill’s Opening Capital = Rs. 3,00,000 + Rs. 15,000 – Rs. 50,000
\n= Rs. 2,65,000.
\nRock’s Opening Capital = Rs. 2,00,000 + Rs. 10,000 – Rs. 50,000
\n= Rs. 1,60,000.<\/p>\n

Interest on Capital:
\nInterest on Mountain’s Capital = Rs. 3,70,000 \u00d7 \\(\\frac{10}{100}\\) = Rs 37,000
\nInterest on Hill’s Capital = Rs. 2,65,000 \u00d7 \\(\\frac{10}{100}\\) = Rs 26,500
\nInterest on Rock’s Capital = Rs. 1,60,000 \u00d7 \\(\\frac{10}{100}\\) = Rs 16,000<\/p>\n

Question 16.
\nFollowing is the extract of the Balance Sheet of, Neelkant and Mahadev as on March 31,2007:
\nAnswer:
\n\"NCERT
\nDuring the year Mahadev’s drawings were Rs. 30,000. Profits during 2007 is Rs. 10,00,000. Calculate interest on capital @ 5% p.a. for the year ending March 31,2007.
\nAnswer:
\nInterest on Capital:
\nOn Neelkant’s Capital = Rs. 10,00,000 \\(\\times \\frac{5}{100}\\) = Rs. 50,000.
\nOn Mahadev’s Capital = Rs. 10,00,000 \\(\\times \\frac{5}{100}\\) = Rs. 50,000.<\/p>\n

Question 17.
\nRishi is a partner in a firm. He withdrew the following amounts during the year ended March 31,2007:
\nMay 01,2006\u00a0 – Rs. 12,000
\nJuly 31, 2006 – Rs. 6,000
\nSeptember 30, 2006\u00a0 – Rs. 9,000
\nNovember 30,2006 – Rs. 12,000
\nJanuary 01,2007 – Rs. 8,000
\nMarch 31,2007 – Rs. 7,000
\nInterest on drawings is charged @ 9% p.a. Calculate interest on drawings.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 18.
\nHie capital accounts of Moli and Golu showed balances of Rs. 40,000 and Rs. 20,000 as on April 01,2006. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @ 12 p.a. Golu advanced a loan of Rs. 10,000 to the firm on August 01,2006.<\/p>\n

During the year, Moli withdrew Rs. 1,000 per month at the beginning of every month whereas Golu withdrew Rs. 1,000 per month at Use end of every month. Profit for the year, before the above- mentioned adjustments was Rs. 20,950. Calculate interest on drawings show distribution on profits and prepare partner’s capital accounts.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 19.
\nRakesh and Rohan are partners, sharing profits in the ratio of 3:2 with capitals of Rs. 40,000 and Rs. 30,000, respectively. They withdrew from the firm the following amounts, for their personal use:
\n\"NCERT
\nInterest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that books of accounts are closed on March 31, 2007, every year.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 20.
\nHimanshu withdraws Rs. 2.500 at the end of each month. The partnership deed provides for charging the interest on drawings @ 12% p.a. Calculate interest on Himanshu’s drawings for the year ending 31st December, 2006.
\nAnswer:
\nHimanshu’s Drawings = Rs. 2,500 x 12
\n= Rs. 30,000.
\nInterest on Drawings = Rs. 30,000 x \\(\\times \\frac{12}{100} \\times \\frac{5 1 \/ 2}{12}[latex]
\n= Rs. 1,650.<\/p>\n

Question 21.
\nBharam is a partner in a firm. He withdraws Rs. 3,000 at the starting of each month for 12 months. The books of the firm closes on March 31 every year. Calculate interest on drawings if the rate of interest is 10% p.a.
\nAnswer:
\nBharam’s Drawings = Rs. 3,000 x 12
\n= Rs. 36,000.
\nInterest on.Drawings = Rs. 36,000 x [latex]\\times \\frac{10}{100} \\times \\frac{6 1 \/ 2}{12}\\) x = Rs. 1,950.<\/p>\n

Question 22.
\nRaj and Neeraj are partners in a firm. Their capitals as on April 01, 2005 were Rs. 2,50,000 and Rs. 1,50,000, respectively. They share profits equally. On July 01,2005, they decided that their capitals should be Rs. 1,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31,2006.
\nAnswer:
\nInterest on Ram’s capital:
\nOn Rs. 2,50,000 for 3 months and on Rs. 1,00,000 for 9 months
\n\"NCERT<\/p>\n

Question 23.
\nAmit and Bhola 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 2006 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.
\nAnswer:
\nAmit’s Drawings = Rs. 24,000
\nInterest on Drawings = Rs. 24,000 x \\(\\times \\frac{10}{100} \\times \\frac{6}{12}\\) Rs. 1,200
\nBhola’s Drawings = Rs. 16,000
\nInterest on Drawings = Rs. 16,000 x \\(\\times \\frac{10}{100} \\times \\frac{6}{12}\\)<\/p>\n

\"NCERT<\/p>\n

Question 24.
\nHarish is a partner in a firm. He withdrew the amounts during the year 2006 :<\/p>\n

(Rs.)<\/p>\n

February 01 – 4,000
\nMay 01 – 10,000
\nJune 30 – 4,000
\nOctober 31 – 12,000
\nDecember 31 – 4,000
\nInterest on drawings is to be charged @ 7 1\/2 % p.a.
\nCalculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2006.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 25.
\nMenon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs. 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn: (i) in the beginning of every month, (ii) in the middle of every month and (iii) at the end of every month.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 26.
\nOn March 31,2003, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of Rs. 24,000; Rs. 18,000 and Rs. 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2003, amounted to Rs. 36,000 and the partner’s drawings had been Ram, Rs. 3,600; Shyam, Rs. 4,500 and Mohan, Rs. 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 27.
\nAmit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’s share in profit has been guaranteed by Amit and Sumit to be a minimum sum of Rs. 8,000. Profits for the year ended March 31,2006 was Rs. 36,000. Divide profit among the partners.
\nAnswer:
\n\"NCERT<\/p>\n

Question 28.
\nPinki, Deepati and Kaku are partner’s 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 bome’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.
\nAnswer:
\n\"NCERT
\nKaku’s share in profit = Rs. 40,000 x \\(\\frac{1}{10}\\) = Rs. 4,000
\nDeficiency of Kaku’s (5,000 – 4,000) i.e. Rs. 1,000 will be shared by Pinki and Deepati equally.
\n\u2234 Pinki will get Rs. 20,000 – 500 = Rs. 19,500
\nDeepati will get Rs. 16,000 – 500 = Rs. 15,500
\nKaku will get Rs. 4,000 + 1,000 = Rs. 5,000<\/p>\n

Question 29.
\nAbhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs. 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31,2006 and 2007 are Rs. 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

\"NCERT
\nNote: Here Kusum will getting more than her guaranteed amount i.e. Rs. 10,000, so there is no need of adjustment.<\/p>\n

Question 30.
\nRadha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than Rs. 5,000. The profits for the year ending March 31,2006 amounts to Rs. 35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show the distribution of profit among partner.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 31.
\nX, Y and Z are in partnership, sharing profits and losses in the ratio of 3:2:1 respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs. 8,000. The net profit for the year ended March 31, 2006 was Rs. 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 32.
\nAran, 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 Aran. 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) 3,60,000.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Note : Here Chintu is getting more than his guaranteed amount of Rs. 60,000 so there is no need of adjustments.<\/p>\n

Question 33.
\nAshok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2:2:1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than Rs. 20,000. The net profit for the year ended March 31, 2006 amounted to Rs. 70,000. Prepare Profit and Loss Appropriation Account.
\nAnswer:
\n\"NCERT
\n\"NCERT
\nAshok will get Rs. (28,000 – 3,000) = Rs. 25,000
\nBrijesh will get Rs. (28,000 – 3,000) = Rs. 25,000
\nCheena will get Rs. (14,000 + 3,000 + 3,000) = Rs. 20,000.<\/p>\n

Question 34.
\nRam, Mohan and Sohan are partners with capitals of Rs. 5,00,000, Rs. 2,50,000 and Rs. 2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as follows:
\nRam \\(\\frac{1}{2}\\), Mohan \\(\\frac{1}{3}\\) and Sohan \\(\\frac{1}{6}\\). But Ram and Mohan have 2 guaranteed that Sohan’s share in the profit shall not be less than Rs. 25,0, 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.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 35.
\nAmit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3:2:1, subject to the following :
\n(i) Sona’s share in the profits, guaranteed to be not less than Rs. 15,000 in any year.
\n(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.
\nYou are required to show Profit and Loss Appropriation Account (after giving effect to the alone).
\nAnswer:
\n\"NCERT
\n\"NCERT
\nSona’s was guaranteed a minimum sum of Rs. 15,000. Hence the deficiency of Rs. 1,000 will be borne by Amit and Babita in the ratio of 3:2.
\n\"NCERT
\n\u2234 Amit will get Rs. [42,000 600] = R. 41,400
\nBabita will g\u00e8t Rs. [28,000 –\u00a0 400] = Rs. 27,600
\nSona will get Rs. [14,000 + 600 + 4001 = Rs. 15,000.<\/p>\n

Past Adjustment:<\/p>\n

Question 36.
\nThe net profit of X, Y and Z for the year ended March 31, 2006 was Rs. 60,000 and the same was distributed among them in their agreed ratio of 3:1:1. It was subsequently discovered that the under-mentioned transactions were not recorded in the books:
\n(i) Interest on Capital @ 5% p.a.
\n(ii) Interest on drawings amounting to X Rs. 700, Y Rs. 500 and Z Rs. 300.
\n(iii) Partner’s Salary: X Rs, 1,000, Y Rs. 1,500 p.a.
\nThe capital accounts of partners were fixed as: X Rs. 1,00,000, Y Rs. 80,000 and Z Rs. 60,000. Record the adjustment entry.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 37.
\nThe firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2:2:1, have existed for same years. Ali wants that he should get equal share in the profits with Harry and Porter and he further wishes that the change in the profit sharing ratio should come into effect retrospectively were for the last three year. Harry and Porter have agreement on this account.
\nThe profits for the last three years were :<\/p>\n

(Rs.)<\/p>\n

2003-04 – 22,000
\n2004-05 – 24,000
\n2005-06 – 29,000
\nShow adjustment of profits by means of a single adjustment journal entry.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 38.
\nMannu and Shristhi are partners in a firm sharing profit in the ratio of 3:2. Following is the balance sheet of the firm as on March 31,2006:
\n\"NCERT
\nProfit for the year ended March 31, 2006 was Rs. 5,000 which was divided in the agreed ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired. Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 39.
\nOn March 31,2006 the balance in the capital accounts of Eluin. Monu and Ahmed, after making adjustments for profits, drawings, etc. were Rs. 80,000; Rs. 60,000 and Rs. 40,000; respectively. Subsequently, it was discovered that interest on capital and interest on drawings had been omitted.<\/p>\n

The partners were entitled to interest on capital @ 5% p.a. The drawings during the year were Eluin Rs. 20,000; Monu, Rs. 15,000 and Ahmed, Rs. 9,000. Interest on drawings chargeable to partners were Eluin Rs. 500; Monu Rs. 360 and Ahmed Rs. 200. The net profit during the year amounted to Rs. 1,20,000. The profit sharing ratio was 3:2:1. Pass necessary adjustment entries.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 40.
\nAzad 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.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT
\nQuestion 41.
\nKavita and Pradeep are partners, sharing profits in the ratio of 3:2. They employed Chandan as their manager, to whom they paid a salary of Rs. 750 per month. Chandan deposited Rs. 20,000 on which interest is payable @ 9% p.a. At the end of 2001 (after the division of profit), it was decided that Chandan should be treated as partner w.e.f. Jan. 1,1998 with \\(\\frac{1}{6} \\text { th }\\) share in profits. His deposit being considered as capital carrying interest @ 6% p.a. like capital of other partners. Firm’s profits after allowing interest on capital were as
\n\"NCERT
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 42.
\nMohan, Vijay and Anil are partners, the balance on their capital accounts being Rs. 30,000; Rs. 25,000 and Rs. 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:
\n(a) Interest on Capital, at the rate of 10% p.a., was not charged
\n(b) Interest on Drawings: Mohan Rs. 250, Vijay Rs. 200, Anil Rs. 150 was not recorded in the books.
\nRecord necessary corrections through journal entries.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 43.
\nAnju, Manu and Mamta are partners whose fixed capitals were Rs. 10,000; Rs. 8,000 and Rs. 6,000, respectively. As per the partnership agreement, there is a provision for allowing interest on capitals @ 5% p.a. but entries for the same have not been made for the last three years. The profit sharing ratio during three years remained as follows:<\/p>\n

\"NCERT<\/p>\n

\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

Question 44.
\nDinker and Ravinder were partners sharing profits and losses in the ratio to 2:1. The following balances were extracted from the books of account, for the year ended December 31, 2005.
\n\"NCERT
\n\"NCERT
\n\"NCERT
\nPrepare final accounts for the year ended December 31, 2005,with following adjustment:
\n(a) Stock on December 31, 2005, was Rs. 42,500.
\n(b) A provision is to be made for bad debts at 5% debtors.
\n(c) Rent outstanding was Rs. 1,600.
\n(d) Wages outstanding were Rs. 1,200.
\n(e) Interest on capital to be allowed on capital @4% per annum and interest on drawings to be charged @ 6% per annum.
\n(f) Dinker and Ravinder are entitled to a Salary of Rs. 2,000 per annum.
\n(g) Ravinder is entitled to a commission Rs. 1,500.
\n(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery 6% and Furniture and fixtures 5%.
\n(i) Outstanding interest on loan amounted to Rs. 350
\nAnswer:
\n\"NCERT
\n\"NCERT\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 45.
\nKajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following Balances were extracted from the books of account for the year ended March 31, 2006.
\n\"NCERT
\n\"NCERT
\n\"NCERT
\nPrepare final accounts for the year ended December 31, 2005, with following adjustment:
\n(a) Stock on December 31, 2005, was Rs. 42,500.
\n(b) A provision is to be made for bad debts at 5% debtors.
\n(c) Rent outstanding was Rs. 1,600.
\n(d) Wages outstanding were Rs. 1,200.
\n(e) Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be charged @ 6% per annum.
\n(f) Dinker and Ravinder are entitled to a Salary of Rs. 2,000 per annum.
\n(g) Ravinder is entitled to a commission Rs. 1,500.
\n(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery 6% and Furniture and fixtures 5%.
\n(i) Outstanding interest on loan amounted to Rs. 350
\nAnswer:
\n\"NCERT
\n\"NCERT
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n","protected":false},"excerpt":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for 12 Accountancy Chapter 2 Accounting for Partnership: Basic Concepts Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation. Accounting for Partnership: Basic Concepts NCERT Solutions for Class 12 Accountancy Chapter 2 Accounting for Partnership: Basic Concepts … Read more<\/a><\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":""},"categories":[3],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts\/19500"}],"collection":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/comments?post=19500"}],"version-history":[{"count":1,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts\/19500\/revisions"}],"predecessor-version":[{"id":37896,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts\/19500\/revisions\/37896"}],"wp:attachment":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/media?parent=19500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/categories?post=19500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/tags?post=19500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}