Wednesday, January 23, 2019

AHSEC Accountancy Question Bank: Basics of Partnership


Rules regarding Absence of Partnership Deed
1.      In the absence of Partnership Deed, what are the rule relating to:
a)      Salaries of partners,
b)      Interest on partner’s capitals,

c)      Interest on partner’s loan,
d)      Division of profit and
e)      Interest on partner’s drawings?
2.      Following differences have arisen among P, Q and R. State who is correct in each case:
a)      P used Rs. 20,000 belonging to the firm and made a profit of Rs. 5,000. Q and R want the amount to be given to the firm?
b)      Q used Rs. 5,000 belonging to the firm and suffered a loss of Rs. 1,000. 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?

3.      A, B and C are partners in a firm. They have not partnership agreements for their guidance. 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 this disputes if the partners approach you for the purpose.
4. A and B are Partners. They do not have any agreement (Partnership Deed). What should be done in the following cases:
a)      A spends twice the time that B devotes to business. A claims that he should get a salary of Rs. 3,000 per month for his extra time spent.
b)      B has provided a capital of Rs. 25,000, whereas, A has provided Rs. 5,000 only as a capital. A, however, has provided Rs. 15,000 as loan to the firm. What interest (if any) will be given to A and B?
c)      B wants that profit should be distributed in the ratio of capitals but A wants that it should be distributed equally.
d)      B wants to admit his son C as a partner but a objects it.
e)      A wants to purchase goods from his relative but B objects it.
f)       A spend Rs.10,000 on behalf of his firm and he wants that it should be reimbursed by the firm to him.
g)      A has given his building to firm to carry on business activity. He wants Rs. 5,000 as rent which is reasonable.
5. X and Y started a business on 1st January, 2019 be contributing Rs. 50,000 and Rs. 25,000, respectively as capital. On 1st April, 2019, X made an advance to the firm to the tune of Rs. 20,000. Y alone was looking after the business of the firm. During the year ended on 31st December, 2019, they earned a net profit of Rs. 40,900. There was no partnership agreement – oral or written. At the time of distribution of profit:
X claims:
(i) Interest to be given on capital and loan @ 12% p.a.; and
(ii) The profit should be distributed in the capital ratio.
Y claims:
(i) Salary @ Rs. 1,000 p.m. for his service; and
(ii) Interest on capital and loan should be given @ 8% p.a. only.
How will you settle the dispute?
6. Mahesh and Ramesh are partners with capitals of Rs. 50,000 and Rs. 60,000 respectively. On 1st January, 2018, Mahesh gives a loan of Rs. 10,000 and Ramesh introduced Rs. 20,000 as additional capital. Profit for the year ended 31st March, 2018 was Rs. 15,200. There is no Partnership Deed. Both Mahesh and Ramesh expect interest @ 10% p.a. on the loan and additional capital advanced by them. Show how the profits would be divided? Give reasons.
Journal Entries
1. Pass necessary entries to record the following transactions in the books of A & B firm before distributing profits.
a)      Interest on capital A Rs. 4,000 and B Rs. 2,000.
b)      Interest on Drawings A Rs. 400 and B Rs. 200.
c)      Salary to A Rs. 3,000.
d)      Commission to A Rs. 5,000.
e)      Bonus to B Rs. 1,000.
f)       Fines charged on A Rs. 500.
g)      Transfer to General Reserve Rs. 5,000
Interest on Capital and Capital Ratio
1. A and B the partners sharing profit & loss in the ratio of 3 : 2 having capital balances of Rs. 50,000 and Rs. 40,000 on 1st April, 2019. On 1st July, 2019, A introduced Rs. 10,000 as his additional capital whereas B introduced only Rs. 1,000. If the interest on capital is allowed to partners @ 10% p.a. Calculate interest on capital and Capital Ratio if the financial year closes on 31st March.
2. X and Y contribute Rs. 20,000 and Rs. 10,000 respectively. They decide to allow interest on capital @ 6% p.a. their respective share of profits is 2 : 3 and the business profit (before interest) for the year is Rs. 1,500. Show the distribution of profits (i) where there is no agreement except for interest on capital and (ii) where there is a clear agreement that the interest on capitals will be allowed even if it involves the firm in loss.
3. A and B started business on 1st April, 2019 with capitals of Rs. 15,00,000 and Rs. 9,00,000 respectively. On 1st October, 2019, they decided that their capitals should be Rs. 12,00,000 each. The necessary adjustments in capital were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on capital on 31st March, 2020.
4. Ram and Mohan are partners in a business. Their capitals at the end of the year were Rs. 24,000 and Rs. 18,000 respectively. During the year 2018 – 19, Ram’s drawings and Mohan’s drawings were Rs. 4,000 and Rs. 6,000 respectively. Profit (before charging interest on capital) during the year was Rs. 16,000. Calculate interest on capital @ 5% p.a. for the year ended 31st March, 2019.
5. From the following Balance Sheet of X and Y, calculate interest on capital @ 6% p.a. payable to Y for the year ended 31st March, 2019.
Liabilities
Rs.
Assets
Rs.
X’s Capital A/c
Y’s Capital A/c
Profit & Loss Appropriation A/c 2018-19
50,000
40,000
20,000
Sundry Assets
1,10,000

1,10,000

1,10,000
During the year, Y’s drawings were Rs. 15,000 and profit during 2018-19 was Rs. 30,000.
6. From the following Balance Sheet of Long and Short, calculate the interest on capital @ 8% p.a. for the year ended 31st March, 2018.
Balance Sheet as at 31st March, 2018
Liabilities
Rs.
Assets
Rs.
Long’s Capital A/c
Short’s Capital A/c
Profit & Loss Appropriation A/c 2017 – 18
1,60,000
1,40,000
1,00,000
Fixed Assets
Drawings – Long
Other Assets
3,00,000
40,000
60,000

4,00,000

4,00,000
During the year, Long’s drawings were Rs. 40,000 and Short’s drawings were Rs. 50,000. Profit for the year was Rs. 1,50,000.
Calculation of Interest on Drawings
1. B drew Rs. 15,000. The Deed provides for interest on capitals and drawings @ 6%. Calculate interest on drawings for the year ended 31st December, 2018.
1. B drew Rs. 15,000. The Deed provides for interest on capitals and drawings @ 6% p.a. Calculate interest on drawings for the year ended 31st December, 2018.
3. A, B and C are partners in a firm:
A withdrew Rs. 1000 in the beginning of each month of the year.
B withdrew Rs. 1000 at the end of each month of the year.
B withdrew Rs. 1000 in the middle of each month of the year.
B withdrew Rs. 1000 in the middle of each month for 6 months only.
A withdrew Rs. 1000 in the beginning of each month for 6 months only.
B withdrew Rs. 1000 at the end of each month for 6 months only.
Calculate interest on drawing @ 6% p.a. for each case.
4. Mohan is a partner in a firm. He withdrew the following amounts during the year 2018 – 19:
1st May                                                  4,000
1st August                                            10,000
30th September                                     4,000
31st January                                         12,000
1st March                                               4,000
Interest on drawing is to be charged @ 7 ½ % p.a. Calculate the amount of interest to be charged on Mohan’s drawings for the year 2018 – 19.
Partner’s Commission
1. A, B and C are partners sharing profits and losses in the ratio 2 : 2 : 1 respectively. A is entitled to a commission of 10% on the net profit before charging such commission. The net profit before charging commission is Rs. 1,10,000. Find out the commission payable to A.
2. X, Y and Z are partners sharing profit and losses equally. As per Partnership Deed, Z is entitled to a commission of 10% on the net profit after charging such commission. The net profit before charging commission is Rs. 2,20,000. Find out commission payable to Z.
3. Arun and Barun are partners in a firm. Arun is entitled to a commission of 10% on net profit after charging interest on capitals and such commission. Net profit of the firm is Rs. 27,000. Interest on Arun’s capital and Barun’s capital are Rs. 3,000 and Rs. 2,000 respectively. Calculate Arun’s commission.
Preparation of Profit and Loss Appropriation Account and Partners’ Capital and Current Account
1. A and B are partners with capitals of Rs. 30,000 and Rs. 10,000 respectively on 1st January 2018. The trading profit (before taking into account the provisions of the deed) for the year ended 31st December 2018 was Rs. 12,000. Interest on capitals is to be allowed at 6% p.a. B is entitled to a salary or Rs. 3,000 per annum. The drawing of the partners were Rs. 3,000 and Rs. 2,000; the interest for A being Rs. 100 and for B Rs. 50. Assuming that A and B are equal partners, prepare the profit & loss appropriation account and the partner’s capital accounts as on 31st December, 2018.
2. Ripa, Rini and Rima are three partners in a firm. According to Partnership Deed, the partners are entitled to draw Rs. 700 per month. On 1st day of every month Ripa, Rini and Rima draw Rs. 700, Rs. 600 and Rs. 500 respectively. Interest on capitals and interest on drawings are fixed @ 8% p.a. and 10% p.a. respectively. Profit during the year 2019 – 20 was Rs. 75,500 out of which Rs. 20,000 is transferred to the General Reserve Rini and Rima are entitled to receive a salary of Rs. 3,000 and Rs. 4,500 p.a. respectively and Ripa is entitled to receive commission @ 10% on the net distributable profits after charging such commission. On 1st April, 2019, the balances of their Capital Accounts were Rs. 50,000, Rs. 40,000 and Rs. 35,000 respectively. You are required to show the Profit & Loss Appropriation A/c for the year ended 31st March, 2020 and the Capital A/c of the partners in the books of the firm.
3. Amal, Bimal and Kamal are three partners. On 1st April, 2017, their Capitals stood as: Amal Rs. 40,000, Bimal Rs. 30,000 and Kamal Rs. 25,000. It was decided that:
a)      They would receive interest on capital @ 5% p.a.
b)      Amal would get a salary of Rs. 250 per month.
c)      Bimal would receive commission @ 4% on the net profit after deduction of the commission from it and
d)      After deducting all of these 10% of the profits should be transferred to the General Reserve.
Before the above items were taken into account, the profits for the year ended 31st March, 2018, were Rs. 33,360. Prepare Profit & Loss Appropriation A/c and the Capital A/c of the Partners.
4. Ajit and Bijit are partners in a firm. They share profits and losses as Ajit ¾ and Bijit 1/4.  The Profit and Loss Account of the firm for the year ended 31st March, 2019 showed a net profit of Rs. 60,000. You are required to prepare the Profit and Loss Appropriation Account and the partner’s Capital Accounts by taking into consideration the under mentioned information:
a)      Partner’s Capital: Ajit Rs. 50,000 and Bijit Rs. 40,000, Interest on capital is to be calculated @ 5% p.a.
b)      Partner’s Drawings: Ajit Rs. 10,000 and Bijit Rs. 7,500, Interest on drawings is to charged @ 10% p.a. at an average of six months.
c)      Partner’s Salaries – Ajit Rs. 6,000 and Bijit Rs. 4,500.
d)      Ajit gave loan of Rs. 20,000 to the firm and interest on loan is to be paid @ 6% p.a.
e)      Transfer 10% of distributable profit before distribution to the Reserve.
5. The following is the abridged Balance Sheet of M/s A & B Enterprise as on 1.1.2019:
Liabilities
Rs.
Assets
Rs.
Capital Accounts – A
                                   B
Sundry Creditors
Current Account – A
60,000
30,000
30,000
10,000
Sundry Assets
Current Account – B
1,28,500
1,500

1,30,000

1,30,000
During the year 2019, the partnership earned a profit of Rs. 54,000 before considering the following points:
a)      A and B are to get a salary of Rs. 500 p.m. and Rs. 400 p.m. respectively;
b)      Partners are entitled to receive 5% interest on their capitals;
c)      B is entitled to a commission of 2% on total sales of the business (total sales during the year were Rs. 82,000);
d)      Partners drawings during the year were : A – Rs. 600 p.m. and B – Rs. 400 p.m.
e)      Interest @ 5% p.a. is to be charged on drawings.
f)       Partners share profits and losses equally.
From the above particulars, prepare Profit and Loss Appropriation Account and Partner’s Current Accounts of the Enterprise.
6. Amit and Vijay started a partnership business on 1st April, 2018. Their capital contribution were Rs. 2,00,000 and Rs. 1,50,000 respectively. The Partnership Deed provided inter alia that:
a)      Interest on capital and on drawings @ 10% p.a.
b)      Amit to get a salary of Rs. 2,000 per month and Vijay Rs. 3,000 per month.
c)      Profits are to be shared in the ratio 3 : 2.
d)      Amit withdraw Rs. 5,000 at the end of every quarter.
e)      Vijay withdraw Rs. 1,000 at the end of every month.
Profit for the year ended 31st March, 2019 before making above appropriation was Rs. 2,16,000. Prepare Profit & Loss Appropriation Account and Partner’s capital account.
7. D, E and F were partners in a firm sharing profits in the ratio of 5 : 7 : 8. Their fixed capitals were D Rs. 5,00,000, E Rs. 7,00,000 and F Rs. 8,00,000. Their Partnership Deed provided for the following:
a)      Interest on capital @ 10% p.a.
b)      Salary of Rs. 10,000 per month of F.
c)      Interest on drawing @ 12% p.a.
d)      D withdrew Rs. 40,000 on 31st January, 2019. E withdrew Rs. 50,000 on 31st March, 2019 and F withdrew Rs. 30,000 on 31st December 2019.
e)      During the year ended 31st December, 2019 the firm earned a profit of Rs. 3,50,000.
f)       Prepare the Profit & Loss Appropriation A/c for the year ended 31st December, 2019.
8. A, B and C are in partnership with respective fixed capitals of Rs. 40,000, Rs. 30,000 and Rs. 20,000. B and C are entitled to annual salaries of Rs. 2,000 and Rs. 1,500 respectively payable before division of profits. Interest on capital is allowed at 5% p.a., but interest is not charged on drawing. Of the first Rs. 12,000 divisible as profits in any year. A is entitled to 50%, B to 30% and C to 20%. An annual profit in excess of Rs. 12,000 is divisible equally. The profit for the year ended 31st December 2019 was Rs. 20,100 after debiting partners salaries but before charging interest on capital. The partners drawings for the year were: A Rs. 8,000, B Rs. 7,500 and C Rs. 4,000. The balances on the partner currents accounts on 1st January, 2019, were A Rs. 3,000 (Cr.); B Rs. 500 (Cr.); C Rs. 1,000 (Dr.)
Prepare the profit and loss appropriation account and the partners’ current Accounts for the year 2019.
9. P, Q and R are in partnership. As on 1.4.2018, their respective capitals were Rs. 40,000, Rs. 30,000. Q is entitled to a salary of Rs. 6,000 and Rs. 4,000 p.a. payable before division of profit. Interest is allowed on capital at 5% p.a. and not charged on drawings. Of the net divisible profits, P is entitled to 50% of the 1st Rs. 10,000 Q to 30% and Rs. to 20%, over that amount profits are shared equality. The profit for the year ended 31.12.2003, after debiting partner’s salaries, but before charging interest on capital was Rs. 21,000 and the partners had drawn Rs. 10,000 each on account of salaries, interest and profit. Prepare the Profit & Loss Appropriation Account showing the distribution of profit and the Capital Accounts of the partners.
10. Rana, Saikat and Ramu are partners with Capitals of Rs. 1,00,000, Rs. 60,000 and Rs. 40,000 respectively. Their partnership deed provides that :
a)      Interest on partner’s capital should be provided @ 5% p.a.
b)      Interest on partner’s drawing should be provided @ 10% p.a. (Drawings: Rama Rs. 10,000; Saikat Rs. 6,000 and Ramu Rs. 4,000)
c)      The partners are entitled to a partnership salary of Rs. 5,000 each p.a.
d)      Rana is entitled to a commission @ 10% on the profit before charging the above provisions.
e)      Ramu is entitled to a commission @ 10% on the net profit (after charging the above provisions) after charging his commission.
f)       25% of the net profit (after charging all the above provisions) should be transferred to Reserve Fund.
g)      Partners will share profits or losses in the ratio of their capitals. The profit for the year ended 31.03.2019, amounted to Rs. 69,000.
You are required to prepare the Profit & Loss Appropriation Account and the partner’s Capital Accounts.
11. A and B are partners sharing profits and losses in the ratio of 3:1. On 1st April, 2019, their capitals were A Rs. 50,000 and B Rs. 30,000. During the year ended 31st March, 2020 they earned a net profit of Rs. 50,000. They terms of partnership are:
a)      Interest on capital is to be charged @ 6% p.a.
b)      A will get a commission @ 2% on turnover.
c)      B will get a salary of Rs. 500 per month.
d)      B will get commission of 5% on profits after deduction of all expenses including such commission. Partner’s drawings for the year were: A Rs. 8,000 and B Rs. 6,000. Turnover for the year was Rs. 3,00,000. After considering the above facts, you are required to prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.
12. A, B and C were partners in a firm having capitals of Rs. 50,000, Rs. 50,000 and Rs. 1,00,000 respectively. Their current Account balances were A: Rs. 10,000, B Rs. 5,000 and C Rs. 2,000 (Dr.). According to the Partnership Deed the partners were entitled to an interest on Capital @ 10% p.a. C being the working partner was also entitled to a salary of Rs. 12,000 p.a. The profits were to be divided as:
a)      The first Rs. 20,000 in proportion to their capitals.
b)      Next Rs. 30,000 in the ratio of 5 : 3 : 2.
c)      Remaining profits to be shared equally.
The firm made a profit of Rs. 1,72, 000 before charging any of the above items. Prepare Profit & Loss Appropriation A/c and pass necessary Journal entry for the appropriation of profits.
13. A and B are partners sharing profits in the ratio of 3:2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 2019 – 20, the profits of the year prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,500. A provision of 5% of the profit is to be made in respect of Manager’s Commission. Prepare an account showing the allocation of profits and the Partner’s Capital Accounts.
14. Show how the following will be recorded in the Capital Accounts of the Partners Sohan and Mohan when their capitals are fluctuating:
Particulars
Sohan (Rs.)
Mohan (Rs.)
Capital on 1st April, 2019
Drawing during 2019 – 20
Interest on Capital
Interest on Drawings
Share of Profit for 2019 – 20
Partner’s Salary
Commission
4,00,000
50,000
5%
1,250
60,000
36,000
5,000
3,00,000
30,000
5%
750
50,000
---
3,000

Guarantee of Profit /Income
1. A and B are partners sharing profits in the ratio of 3 : 2. C was admitted for 1/6th share of profit with a minimum guaranteed amount of Rs. 10,000. At the close of the first financial year the firm earned a profit of Rs. 54,000. Find out the share of profit which A, B and C will get.
2. A, B and C are partners sharing profits in the ratio of 5 : 4 : 1. C is given a guarantee that his minimum share of profits in any given year would be Rs. 5,000. Deficiency, if any, would be borne by A and B equally. The profits for the year 2018 – 19 amounted to Rs. 40,000. Pass the necessary journal entries in the books of the firm.
3. A, B and C entered into partnership on 1st April, 2009to share profits and losses in the ratio of 5 : 3 : 2. A guaranteed that C’s share of profits, after charging interest on capital @ 5% p.a. would not be less than Rs. 15,000 in any year. The capitals were provided as follows: A = Rs. 1,60,000, B = Rs. 1,00,000, and C = Rs. 80,000. The profits for the year ended 31st March, 2019 amounted to Rs. 79,500 before providing for interest on capital. Show Profit and Loss Appropriation Account.
4. A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They earned a profit of Rs. 30,000 during 2017 – 18. Distributed the profit among A, B and C if:
a)      C’s share of profit is guaranteed to be Rs. 6,000 minimum.
b)      Minimum profit payable to C amounting to Rs. 6,000 is guaranteed by A.
c)      Guaranteed minimum profit of Rs. 6,000 payable to C is guaranteed by B.
d)      Any deficiency after making payment of guaranteed Rs. 6,000 will be borne by A and B in the ratio of 3:1. Prepare profit and loss appropriation account.
5. Ankur, Bhavna and Disha are partners in a firm. On 1st April 2017, the balance in their capital accounts stood at Rs. 14,00,000, Rs. 6,00,000 and Rs. 4,00,000 respectively. They shared profits in the proportion of 7 : 3 : 2 respectively. Partners are entitled to interest on capital @ 6% p.a. and salary to Bhavna @ Rs. 50,000 p.a. and a commission of Rs. 3,000 per month to Disha as per the provisions of the Partnership Deed.
Bhavna’s share of profit (excluding interest on capital) is guaranteed at not less than 1,70,000 p.a. Disha’s  share of profit (including interest on capital but excluding salary) is guaranteed at not less than Rs. 1,50,000 p.a. Any deficiency arising on that account shall be met by Ankur. The profits of the firm for the year ended 31st March, 2018 amounted to Rs. 9,50,000. Prepare Profit and Loss Appropriation A/c for the year ended 31st March, 2018.
6. The partners of the firm distributed the profits for the year ended 31st March, 2019, Rs. 90,000 in the ratio of 3 : 2 : 1 without providing for the following adjustments:
a)      A and B were entitled to salary of Rs. 1,500 each p.a.
b)      B was entitled to a Commission of Rs. 4,500.
c)      B and C had guaranteed a minimum profit of Rs. 35,000 p.a. to A.
d)      Profits were to be shared in the ratio of 3 : 3 : 2.
Pass necessary Journal entry for the above adjustments in the books of the firm.
7. Three Chartered Accounts A, B and C form a partnership, profits being divisible in the ratio of 3 : 2 : 1 subject to the following:
a)      C’s share of profit guaranteed to be not less than Rs. 15,000 p.a.
b)      B given a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average gross fee of the proceeding five years when he was carrying on profession alone, which on an average works out a Rs. 25,000.
c)      The profits for the first year of the partnership are Rs. 75,000. The gross fee earned by B for the firm is Rs. 16,000.
You are required to show Profit & Loss Appropriation Account after giving effect to the above.
8. A, B and C are partners in a firm. A and B sharing profits in the ratio of 5 : 3 and C receiving a salary of Rs. 150 per month, plus a commission of 5% on the profits after charging such salary and commission or 1/5th of the profits of the firm, whichever is larger. Any excess of the latter over the former is, under the partnership agreement, to be borne personally by A. The profits for the year ended 31st March, 2019 amounted to Rs. 10,710 after charging C’s salary.  Prepare Profit and Loss Appropriation A/c showing the division of the profits of the year.
9. Arup and Birup are partners in a partnership firm sharing profit and losses in the ratio of 3:2. On 1st January, 2018 their capitals were Rs. 30,000 and Rs. 25,000 respectively. The partnership deed provided that:
(i) Partners shall be entitled to interest on capital 6% p.a.
(ii) Interest on drawings shall be charged at 6% p.a. During the year ended 31st December, 2018 the firm made a profit of Rs. 15, 500 before adjustment of interest on capital and drawings. The partners withdrew during the year Rs. 4,000 each at the end of every quarter commencing for 31st March, 2018.
(iii) Minimum guaranteed profit of Arup is Rs. 7,500.
You are to prepare the Profit & Loss Appropriation Account of the firm for the year ended 31st December, 2018.
10. Comprehensive profit and loss appropriation account: Ravi and Mohan were partner in a firm sharing profits in the ratio of 7:5. Their respective fixed capitals were Ravi Rs. 10, 00,000 and Mohan Rs. 7, 00,000. Ravi also provided a loan of Rs. 1, 00,000 to the firm. The partnership deed provided for the following:-
(i)     Interest on capital @ 12% p.a.
(ii)   Ravi’s salary Rs. 6000 per month and Mohan’s salary Rs. 60000 per year.
(iii) Drawings made by the partners: Ravi – Rs. 5000 at the end of each month. Mohan – Rs. 5000 in the beginning of each quarter.
(iv)  Commission to Ravi @ 10% on net profit after charging interest on capital and salary but before charging such commission.
(v)    Commission to Mohan @ 10% on net profit after charging interest on capital and salary and such commission.
(vi)  Interest charged on drawings @ 10% p.a.
(vii)            Ravi guaranteed Mohan that his share of profit will not be less Rs. 1, 00,000 in any year.
The profit for the year ended 31-03-2018 was Rs. 5,04,000. Pass an adjustment Entry, Prepare profit and loss appropriation account and partner’s capital account.
Appointment of Manager as partner
1. A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They decided to admit C, their Manager, as a partner with effect from 1st April, 2019, giving 1/4th share of profits. C, while a Manager, was in receipt of salary of Rs. 27,000 p.a. and a commission of 10% of the net profits after charging such salary and commission. In terms of the Partnership Deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be the Manager, would have to be personally borne by A out of his share of profits. Profits for the year ended 31st March, 2020 amounted to Rs. 2,25,000. You are required to show Profit & Loss Appropriation A/c for the year ended 31st March, 2020.
2. A and B are partners sharing profits and losses in the ratio of 3 : 2. They employed C as their Manager to whom they paid a salary of Rs. 750 per month. C had deposited Rs. 20,000 on which interest was payable @ 9% p.a. At the end of 2018 (after division of the year’s profits), it was decided that C should be treated as a partner with effect from 1st January, 2018 with 1/6th share of profits, his deposit being considered as capital carrying interest @ 6% p.a. like capitals of other partners. The firm’s profits and losses after showing interest on capitals were – 2006 Profit Rs. 59,000; 2007 Profit Rs. 62,600; 2008 Loss Rs. 4,000 and 2009 Profit Rs. 78,000. Record necessary journal entries to give effect to the above.
Past Adjustments
1. Ram and Mohan are equal partners. Their capitals are Rs. 4,000 and Rs. 8,000 respectively. After the accounts for the year are prepared it is discovered that interest @ 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 adjusting entry in the beginning of the next year. Give necessary adjustment entry.
2. Ram, Mohan and Sohan sharing profits and losses equally have capitals of Rs. 1,20,000, Rs. 90,000 and Rs. 60,000. For the year 2009, interest was credited to them @ 6% instead of 5%. Give adjusting journal entry.
3. Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at Rs. 3,00,000, Rs. 1,00,000, Rs. 2,00,000. For the year 2009, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was Rs. 2,50,000. Show your working notes clearly and pass necessary adjustment entry.
4. Reya, Mona and Nisha shared profits in the ratio of 3:2:1. The profits for the last three years were Rs. 1,40,000, Rs. 84,000 and Rs. 1,06,000 respectively. These profits were by mistake shared equally for all the three years. It is now decided to correct the error. Give necessary Journal entry for the same.
5. Profits earned by a partnership firm for the year ended 31st March, 2019 were distributed equally between the partners – Pankaj and Anu – without allowing interest on capital (Rs. 3,000 due to Pankaj and Rs. 1,000 due to Anu).  Pass the necessary adjustment entry.
6. X, Y, and Z are partners sharing profits and losses in the ratio of 3:2:1. After the final accounts have been prepared it was discovered that interest on drawings @ 5 % had not been taken into consideration. The drawings of the partner were X Rs. 15000, Y Rs. 12,600, Z Rs. 12,000. Give the necessary adjusting Journal entry.
7. Ravi and Mohan were partner in a firm sharing profits in the ratio of 7:5. Their respective fixed capitals were Ravi Rs. 10,00,000 and Mohan Rs. 7,00,000. The partnership deed provided for the following:
(i) Interest on capital @ 12% p.a.
(ii) Ravi’s salary Rs. 6000 per month and Mohan’s salary Rs. 60000 per year.
The profit for the year ended 31-03-2007 was Rs. 5,04,000 which was distributed equally without providing for the above. Pass an adjustment Entry.
8. The Capital Accounts of A and B stood at Rs. 4,00,000 and Rs. 3,00,000 respectively after necessary adjustments in respect of the drawings and the net profits for the year ended 31st March, 2018. It was subsequently ascertained that 5% p.a. Interest on capital and drawing was not taken into account in arriving at the net profit. The drawings of the partners had been: A – Rs. 12,000 drawn at the end of each quarter and B – Rs. 18,000 drawn at the end of each half year. The profits for the year as adjusted amounted to Rs. 2,00,000. The partners share profits in the ratio of 3:2. You are required to pass journal entries and show adjusted Capital A/c of the partners.
9. Mohan, Vijay and Anil are partners, the balances of 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 31st March, 2019, Rs. 24,000 had already been credited to partners in the proportion in which they shared profits. Their drawings were Rs. 5,000 (Mohan), Rs. 4,000 (Vijay) and Rs. 3,000 (Anil) during the year. Subsequently, the following omission were noticed and it was decided to bring them into account:
a)      Interest on capital @ 10% p.a.
b)      Interest on drawings: Mohan Rs. 250, Vijay Rs. 200 and Anil Rs. 150.
c)      Make necessary corrections through a journal entry and show your workings clearly.
10. A, B and C were partners in a firm. On 1st April, 2003 their capitals stood at Rs. 50,000, Rs. 25,000 and Rs. 25,000 respectively. As per the provisions of the Partnership Deed:
a)      C was entitled for a salary of Rs. 1,500 per month.
b)      Partners were entitled to interest on capital @ 5% p.a.
c)      Profits were to be shared in the ratio of capitals.
d)      The net profit for the year 2019 – 14 of Rs. 45,000 was divided equally without providing for the above terms. Pass an adjustment entry to rectify the above error.
11. After the accounts of a partnership have been drawn up, and the books closed, it is discovered that interest on capitals for the year 2019 – 11 and 2017 – 12 has been credited to partners though there is no such provision in the Partnership Deed. The amounts involved are:
Interest Credited
Partners
2019 – 11 (Rs.)
2017 – 12 (Rs.)
A
B
C
350
200
110
360
210
110
You are required to put through adjusting entries as on 1st April, 2018, if the profits were shared as follows:  2019 – 11 = 1 : 1 : 1; 2017 – 12 = 3 : 4 : 3. It may be assumed that capitals are fixed.
12. A, B and C are partners in a firm. Net profit of the firm for the year ended 31st March, 2019 is Rs. 30,000, which has been duly distributed amongst the partners, in their agreed ratio of 3 : 1 : 1 respectively. It is discovered on 10th April, 2019 that the under mentioned transactions were not passed through the books of account of the firm for the year ended 31st March, 2019.
a)      Interest on Capital @ 6% p.a., the capital of A, B and C being Rs. 50,000, Rs. 40,000 and Rs. 30,000 respectively.
b)      Interest on drawings: A Rs. 350; B Rs. 250; C Rs. 150.
c)      Partnership Salaries: A Rs. 5,000; B Rs. 7,500.
d)      Commission due to A (for some special transactions) Rs. 3,000.
You are required to pass a journal entry, which will not affect Profit & Loss Account of the firm and rectify the position of partners inter se.

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