Read DK Goel Solutions Class 12 Accountancy Chapter 1 Accounting for Partnership Firms Fundamentals 2026
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Class 12 Accounts Chapter 1 Accounting for Partnership Firms Fundamentals DK Goel Solutions
DK Goel Solutions for Chapter 1 Accounting for Partnership Firms Fundamentals Class 12 Accounts have been provided below based on the latest DK Goel Class 12 book. The answers have been prepared based on the latest 2026
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Chapter 1 Accounting for Partnership Firms Fundamentals DK Goel Class 12 Solutions
Chapter 1: Accounting for Partnership Firms - Fundamentals
Complete Step-by-Step Solutions | Q1 to Q98
💡 Quick Concept Summary
Numerical Questions and Solutions
X and Y are partners in a firm. They do not have any partnership deed. What should be done in the following cases:
- X has invested Rs. 10,00,000 and Y only Rs. 5,00,000 as capital. X wants interest on capital @ 8% p.a.
- X spend twice the time that Y devotes to the business. He wants a salary of Rs. 10,000 per month for the extra time spent by him.
- X wants to introduce his son Rajesh into the business for 25% share to be given out of his share of profit. Y object it.
- X has advanced a loan of Rs. 2,00,000 to the firm. He claim interest @ 9% p.a.
- Y withdraws Rs. 10,000 per month from the firm for his personal use. X claim that interest on drawings @ 12% p.a. be charged from Y.
(a) In the absence of partnership deed, No Interest on Capital will be allowed.
(b) In the absence of partnership deed, No salary provided to the partners. Hence X is not entitled to any salary.
(c) In the absence of partnership deed, X's son cannot be admitted as a partner if there is an objection from Y partner.
(d) In the absence of partnership deed, X is entitled to claim interest on loan @ 6% p.a. only.
(e) In the absence of partnership deed, Interest cannot be charged on drawings.
X and Y are partners sharing profit in the ratio of 2:1. The under mentioned trial balance was extracted from their books on 31st March, 2024:
| Particular | Dr. Balance | Cr. Balance |
|---|---|---|
| X's Capital | 3,20,000 | |
| Y's Capital | 2,40,000 | |
| X's Drawings | 40,000 | |
| Y's Drawings | 32,000 | |
| Stock (1st April, 2026) | 45,200 | |
| Purchases and Sales | 8,68,000 | 12,45,000 |
| Debtors and Creditors | 1,52,000 | 48,000 |
| Buildings | 6,00,000 | |
| Cash in hand | 5,900 | |
| Bank Overdraft | 27,500 | |
| Salaries to Staff | 74,700 | |
| Rent | 26,400 | |
| Advertising Expenditure | 5,000 | |
| Travelling Expenses | 31,300 | |
| Total | 18,80,500 | 18,80,500 |
You are required to prepare the Profit and Loss Account and Profit and Loss Appropriation Account for the year ended 31st March, 2024 and a Balance Sheet as on that date. The following adjustments are to be made:
- The value of stock on March 31, 2024 was Rs. 64,000.
- Change depreciation on Building at 10%.
- Provide for outstanding rent Rs. 2,400.
- Partners are entitled to interest on capital @ 5% and X is entitled to a salary of Rs. 48,000 p.a.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Opening Stock | 45,200 | By Sales | 12,45,000 |
| To Purchases | 8,68,000 | By Closing Stock | 64,000 |
| To Gross Profit c/d | 3,95,800 | ||
| Total | 13,09,000 | Total | 13,09,000 |
| To Salaries to staff | 74,400 | By Gross Profit b/d | 3,95,800 |
| To Rent 26,400 Add: Outstanding 2,400 | 28,800 | ||
| To Advertising Expenditure | 5,000 | ||
| To Travelling Expenses | 31,300 | ||
| To Depreciation on Building | 60,000 | ||
| To Net Profit transferred to P & L Appro. A/c | 1,96,000 | ||
| Total | 3,95,800 | Total | 3,95,800 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To X's Salaries | 48,000 | By Profit and Loss A/c (Net Profit) | 1,96,000 |
| To Interest on Capital | |||
| X 16,000 | |||
| Y 12,000 | 28,000 | ||
| To Profit transferred to: | |||
| X's Capital A/c 80,000 | |||
| Y's Capital A/c 40,000 | 1,20,000 | ||
| Total | 1,96,000 | Total | 1,96,000 |
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| Bank Overdraft | 27,500 | Cash in Hand | 5,900 |
| Outstanding Rent | 2,400 | Debtors | 1,52,000 |
| Creditors | 48,000 | Closing Stock | 64,000 |
| X's Capital 3,20,000 Less: Drawings 40,000 2,80,000 Add: Interest on Capital 16,000 Add: Salary 48,000 Add: Net Profit 80,000 | 4,24,000 | Building 6,00,000 Less: Depreciation 60,000 | 5,40,000 |
| Y's Capital 2,40,000 Less: Drawings 32,000 2,08,000 Add: Interest on capital 12,000 Add: Net Profit 40,000 | 2,60,000 | ||
| Total | 7,61,900 | Total | 7,61,900 |
Girish and Satish are partners in a firm. Their Capitals on April 1, 2023 were Rs. 5,60,000 and Rs. 4,75,000 respectively. On August 1, 2023 they decided that their capitals should be Rs. 5,00,000 each. The necessary adjustment in the capital were made by introducing or withdrawing cash. Interest on Capital is allowed at 6% p.a. You are required to compute interest on capital for the year ending March 31, 2024.
Calculation of Interest on Capital For Girish:-
Capital for 4 months = Rs. 5,60,000
Rate of interest = 6%
Interest on Capital = Rs. 5,60,000 × 6% × 4/12
Interest on Capital = Rs. 11,200
Capital for 8 months = Rs. 5,00,000
Rate of interest = 6%
Interest on Capital = Rs. 5,00,000 × 6% × 8/12
Interest on Capital = Rs. 20,000
Total Interest on Capital paid to Girish = Rs. 11,200 + Rs. 20,000
Total Interest on Capital paid to Girish = Rs. 31,200
Calculation of Interest on Capital For Satish:-
Capital for 4 months = Rs. 4,75,000
Rate of interest = 6%
Interest on Capital = Rs. 4,75,000 × 6% × 4/12
Interest on Capital = Rs. 9,500
Capital for 8 months = Rs. 5,00,000
Rate of interest = 6%
Interest on Capital = Rs. 5,00,000 × 6% × 8/12
Interest on Capital = Rs. 20,000
Total Interest on Capital paid to Satish = Rs. 9,500 + Rs. 20,000
Total Interest on Capital paid to Satish = Rs. 29,500
On 1st April, 2025 A and B commenced business with Capital of Rs. 6,00,000 and Rs. 2,00,000 respectively. On 31st March, 2026 the trading profit (before taking into account the provisions of deed) was Rs. 2,40,000. Interest on capital is to be allowed at 6% p.a. B was entitled to a salary of Rs. 60,000 p.a.
The drawings of the partners A and B were Rs. 60,000 and Rs. 40,000 respectively. The interest on Drawings for A being Rs. 2,000 and B Rs. 1,000. Assuming that A and B are equal partners, prepare the Profit and Loss Appropriation a/c and Partner's Capital Accounts as at 31st March, 2026.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit & Loss A/c (Profit) | 2,40,000 | |
| A = 6,00,000 × 6% 36,000 | By Interest on Drawings: (Given) | ||
| B = 6,00,000 × 6% 12,000 | 48,000 | A 2,000 | |
| To B's Salary | 60,000 | B 1,000 | 3,000 |
| To Profit transferred to Capital a/c | |||
| A 67,500 | |||
| B 67,500 | 1,35,000 | ||
| Total | 2,43,000 | Total | 2,43,000 |
| Date | Particulars | A | B | Date | Particulars | A | B |
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | ||||||
| 31 Mar. | To Drawings A/c | 60,000 | 40,000 | 01 April | By Bank A/c | 6,00,000 | 2,00,000 |
| 31 Mar. | To Interest on Drawings | 2,000 | 1,000 | 2024 | |||
| 31 Mar. | To Balance c/d | 6,41,500 | 2,98,500 | 31 Mar. | By Interest on Capital | 36,000 | 12,000 |
| 31 Mar. | By Salary A/c | - | 60,000 | ||||
| 31 Mar. | By Profit and Loss App. A/c | 67,500 | 67,500 | ||||
| Total | 7,03,500 | 3,39,500 | Total | 7,03,500 | 3,39,500 |
Profit will be distributed in equal ratio = 1 : 1
A's Profit = Rs. 1,35,000 × 1/2 = Rs. 67,500
B's Profit = Rs. 1,35,000 × 1/2 = Rs. 67,500
Anubha and Kajal entered into partnership sharing profit and losses in the ratio of 2:1. Their capitals were Rs. 90,000 and Rs. 60,000. The profits 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 is 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 partner's capital accounts, assuming that the capital accounts are fluctuating.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Salary | By Profit & Loss a/c (Profit) | 45,000 | |
| Anubha 8,400 | By Interest on Drawings: | ||
| Kajal 6,000 | 14,400 | Anubha 213 | |
| To Interest on Capital | Kajal 163 | 376 | |
| Anubha 4,500 | |||
| Kajal 3,000 | 7,500 | ||
| To Profit transferred to capital a/c | |||
| Anubha 15,651 | |||
| Kajal 7,825 | 23,476 | ||
| Total | 45,376 | Total | 45,376 |
| Date | Particulars | Anubha | Kajal | Date | Particulars | Anubha | Kajal |
|---|---|---|---|---|---|---|---|
| To Drawings | 8,500 | 6,500 | By Bank | 90,000 | 60,000 | ||
| To Interest on Drawings | 213 | 163 | By Salary | 8,400 | 6,000 | ||
| To Balance c/d | 1,09,838 | 70,162 | By Interest on Capital | 4,500 | 3,000 | ||
| By P & L App. A/c | 15,651 | 7,825 | |||||
| Total | 1,18,551 | 76,825 | Total | 1,18,551 | 76,825 |
1. Salary of Anubha = Rs. 700 × 12 = 8,400
Salary of Kajal = Rs. 500 × 12 = 6,000
2. Profit distribution between partners:-
Anubha's Profit = Rs. 23,476 × 2/3 = Rs. 15,651
Kajal's Profit = Rs. 23,476 × 1/3 = Rs. 7,825
3. Calculation of Interest on Capital:-
Anubha = Rs. 90,000 × 5% = Rs. 4,500
Kajal = Rs. 60,000 × 5% = Rs. 3,000
4. Calculation of Interest on Drawings:-
Anubha = Rs. 8,500 × 5/100 × 6/12 = Rs. 213
Kajal = Rs. 6,500 × 5/100 × 6/12 = Rs. 163
X and Y are partners with capitals of Rs. 1,00,000 and Rs. 80,000 respectively on 1st April, 2025 and their profit sharing ratio is 2:1. Interest on capital is agreed @ 12% p.a. Y is to be allowed an annual salary of Rs. 6,000. The profit for the year ended 31st March, 2026 amounted to Rs. 50,000. Manager is entitled to a commission of 10% of the profits.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Manager's Commission | 5,000 | By Gross Profit | 50,000 |
| To Net Profit transferred to Profit and Loss Appropriation A/c | 45,000 | ||
| Total | 50,000 | Total | 50,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Y's Salary | 6,000 | By Profit and Loss A/c | 45,000 |
| To Interest on Capital | |||
| X 12,000 | |||
| Y 9,600 | 21,600 | ||
| To Profit transferred to capital a/c | |||
| X 11,600 | |||
| Y 5,800 | 17,400 | ||
| Total | 45,000 | Total | 45,000 |
| Date | Particulars | X | Y | Date | Particulars | X | Y |
|---|---|---|---|---|---|---|---|
| 2017 | 2026 | ||||||
| 31 Mar. | To Balance c/d | 1,23,600 | 1,01,400 | 01 April | By Balance b/d | 1,00,000 | 80,000 |
| 2017 | |||||||
| 31 Mar. | By Interest on Capital | 12,000 | 9,600 | ||||
| 31 Mar. | By Salary | - | 6,000 | ||||
| 31 Mar. | By Profit and Loss App. A/c | 11,600 | 5,800 | ||||
| Total | 1,23,600 | 1,01,400 | Total | 1,23,600 | 1,01,400 |
1. Calculation of Manager's Commission = Rs. 50,000 × 10% = Rs. 5,000
2. Calculation of Interest on Capital:-
X = Rs. 1,00,000 × 12% = Rs. 12,000
Y = Rs. 80,000 × 12% = Rs. 9,600
3. Profit distribution between partners:-
X's Profit = Rs. 17,400 × 2/3 = Rs. 11,600
Y's Profit = Rs. 17,400 × 1/3 = Rs. 5,800
Asha and Lata are partners sharing profits in the ratio of 1:2. Asha is entitled to a salary of Rs. 2,00,000 p.a. and a commission of 8% of net profit before charging any commission. Lata is entitled to a commission of 8% of net profit after charging her commission. Net Profit for the year ended 31st March, 2024 amounted to Rs. 5,40,000. Prepare Profit and Loss Appropriation Account.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Asha's Salary | 2,00,000 | By Profit and Loss A/c (Profit) | 5,40,000 |
| To Commission | |||
| Asha 43,200 | |||
| Lata 40,000 | 83,200 | ||
| To Profit transferred to capital a/c | |||
| Asha 85,600 | |||
| Lata 1,71,200 | 2,56,800 | ||
| Total | 5,40,000 | Total | 5,40,000 |
1. Calculation of Commission:-
Asha's Commission = Rs. 5,40,000 × 8/100 = Rs. 43,200
Lata's Commission = Rs. 5,40,000 × 8/108 = Rs. 40,000
2. Profit distribution between partners:-
Asha's Profit = Rs. 2,56,600 × 1/3 = Rs. 85,600
Lata's Profit = Rs. 2,56,600 × 2/3 = Rs. 1,71,200
A and B are partners in a firm sharing profits or losses in the ratio of 2:3 with capitals of Rs. 4,00,000 and Rs. 8,00,000 respectively on 1st April, 2023. Each partner is entitled to 10% p.a. interest on his capital. B is entitled a commission of 10% on net profit before charging any commission. A is entitled a commission of 8% of net profit after charging all commissions. Net profit for the year ended 31st March, 2024 was Rs. 4,80,000. Prepare Profit and Loss Appropriation Account.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Profit and Loss A/c (Profit) | 4,80,000 | |
| A 40,000 | |||
| B 80,000 | 1,20,000 | ||
| To Commission A/c | |||
| A 32,000 | |||
| B 48,000 | 80,000 | ||
| To Profit Trf. to Capital A/c | |||
| A (2,80,000 × 2/5) 1,12,000 | |||
| B (2,80,000 × 3/5) 1,68,000 | 2,80,000 | ||
| Total | 4,80,000 | Total | 4,80,000 |
1. Calculation of Commission:-
Before Charing Such Commission
B's Commission = Rs. 4,80,000 × 10/100 = Rs. 48,000
After Charing Such Commission
A's Commission = Rs. 4,32,000 × 8/108 = Rs. 32,000
Y and Z are partners with capital of Rs. 2,50,000 and Rs. 1,50,000 respectively on 1st April, 2023. Each partner is entitled to 9% p.a. interest on his capital. Z is entitled to a salary of Rs. 60,000 p.a. together with a commission of 6% of Net Profit after charging his commission. Net profit for the year ended 31st March, 2024 amount to Rs. 2,12,000. Prepare Partner's Capital Accounts: (i) when capitals are fixed, (ii) when capital are fluctuating.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on capital | By Profit and Loss A/c (Profit) | 2,12,000 | |
| Y 22,500 | |||
| Z 13,500 | 36,000 | ||
| To Z's Salary | 60,000 | ||
| To Z's Commission | 12,000 | ||
| To Profit transferred to capital a/c | |||
| Y 52,000 | |||
| Z 52,000 | 1,04,000 | ||
| Total | 2,12,000 | Total | 2,12,000 |
When Capital are Fixed:-
| Date | Particulars | Y | Z | Date | Particulars | Y | Z |
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | ||||||
| 31 Mar. | To Balance c/d | 2,50,000 | 1,50,000 | 01 April | By Balance b/d | 2,50,000 | 1,50,000 |
| Total | 2,50,000 | 1,50,000 | Total | 2,50,000 | 1,50,000 |
| Date | Particulars | Y | Z | Date | Particulars | Y | Z |
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | ||||||
| 31 Mar. | To Balance c/d | 74,500 | 1,37,500 | 31 Mar. | By Interest on Capital | 22,500 | 13,500 |
| 31 Mar. | By Salary | - | 60,000 | ||||
| 31 Mar. | By Commission | - | 12,000 | ||||
| 31 Mar. | By Profit and Loss App. A/c | 52,000 | 52,000 | ||||
| Total | 74,500 | 1,37,500 | Total | 74,500 | 1,37,500 |
When Capitals are Fluctuating:-
| Date | Particulars | Y | Z | Date | Particulars | Y | Z |
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | ||||||
| 31 Mar. | To Balance c/d | 3,24,500 | 2,87,500 | 01 April | By Balance b/d | 2,50,000 | 1,50,000 |
| 2024 | |||||||
| 31 Mar. | By Interest on Capital | 22,500 | 13,500 | ||||
| 31 Mar. | By Salary | - | 60,000 | ||||
| 31 Mar. | By Commission | - | 12,000 | ||||
| 31 Mar. | By Profit and Loss App. A/c | 52,000 | 52,000 | ||||
| Total | 3,24,500 | 2,87,500 | Total | 3,24,500 | 2,87,500 |
1. Calculation of Commission:- Z's Commission = Rs. 2,12,000 × 6/106 = Rs. 12,000
2. Profit distribution between partners:- Y's Profit = Rs. 1,04,000 × 1/2 = Rs. 52,000
Z's Profit = Rs. 1,04,000 × 1/2 = Rs. 52,000
A, B and C were partners in a firm having capitals of Rs. 2,00,000; Rs. 2,00,000 and Rs. 80,000 respectively on 1st April, 2025. Their Current Account balances were A: Rs. 20,000; B: Rs. 10,000 and C: Rs. 5,000 (Dr.). According to the partnership deed the partners were entitled to interest on capital @ 10% p.a. B being the working partner was also entitled to a salary of Rs. 6,000 per quarter. The profit were to be divided as follows:
- The first Rs. 60,000 in proportion to their capitals.
- Next Rs. 1,00,000 in the ratio of 4:3:1.
- Remaining profit to be shared equally.
The firm made a profit of Rs. 2,80,000 for the year ended 31st March, 2026 before charging any of the above items. Prepare the Profit & Loss appropriation account and pass necessary journal entry for appropriation of profit.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on capital | By Profit and Loss A/c (Profit) | 2,80,000 | |
| A 20,000 | |||
| B 20,000 | |||
| C 8,000 | 48,000 | ||
| To B's Salary (Rs. 6,000 × 4) | 24,000 | ||
| To Profit transferred to current a/c | |||
| A 91,000 | |||
| B 78,500 | |||
| C 38,500 | 2,08,000 | ||
| Total | 2,80,000 | Total | 2,80,000 |
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| 2026 31 Mar. | Profit and Loss Appropriation A/c Dr. To A's Current A/c To B's Current A/c To C's Current A/c (Being Profit transferred to current account) | 2,08,000 | 91,000 78,500 38,500 |
1. Calculation of Interest on Capital:- A = Rs. 2,00,000 × 10% = Rs. 20,000 | B = Rs. 2,00,000 × 10% = Rs. 20,000 | C = Rs. 80,000 × 10% = Rs. 8,000
2. Calculation of Profit and Loss:- Capital Ratio = 2,00,000 : 2,00,000 : 80,000 = 5 : 5 : 2
Profit = 2,80,000 - 48,000 - Rs. 24,000 = Profit = 2,08,000
| Particulars | Amount A | Amount B | Amount C |
|---|---|---|---|
| (a) The first Rs. 60,000 in proportion to their capitals. | 25,000 | 25,000 | 10,000 |
| (b) Next Rs. 1,00,000 in the ratio of 4:3:1. | 50,000 | 37,500 | 12,500 |
| (c) Remaining profit to be shared equally. | 16,000 | 16,000 | 16,000 |
| Total | 91,000 | 78,500 | 38,500 |
Aru and Esha are partners sharing profit equally. Esha had given loan of Rs. 4,00,000 to the firm on 1st October 2023 and it was agreed that interest will be paid @ 9% p.a. Interest on Esha's Loan upto February 2024 was paid by cheque on 2nd March 2024 and balance was yet to be paid. Pass Journal entries for interest on loan for the year ended 31st March, 2024.
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| 2024 02 Mar. | Interest on Loan by Esha A/c Dr. To Bank A/c (Being Interest on loan paid) | 15,000 | 15,000 | |
| 31 Mar. | Interest on Loan by Esha A/c Dr. To Loan by Esha A/c (Being Interest on Loan by Esha due for 1 month) | 3,000 | 3,000 | |
| 31 Mar. | Profit and Loss A/c Dr. To Interest on Loan by Esha A/c (Being interest on loan by Esha transferred to P & L A/c) | 18,000 | 18,000 |
Lata and Mamta are partners with capitals of Rs. 3,00,000 and Rs. 2,00,000 respectively sharing profit as Lata 70% and Mamta 30%. During the year ended 31st March 2024 they earned a profit of Rs. 2,26,440 before allowing interest on partner's loan. The terms of partnership are as follows:
- Interest on Capital is to allowed @ 7% p.a.
- Lata to get a salary of Rs. 2,500 per month.
- Interest on Mamta's Loan account of Rs. 80,000 for the whole year.
- Interest on Drawings of partners at 8% per annum. Drawings being Lata Rs. 36,000 and Mamta Rs. 48,000.
- 1/10th of the distributable profit should be transferred to General Reserve.
Show the distribution of profits.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Mamta's Loan | 4,800 | By Profit before interest | 2,26,440 |
| To Profit transferred to Profit & Loss Appropriation A/c | 2,21,640 | ||
| Total | 2,26,440 | Total | 2,26,440 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital: | By Profit & Loss A/c - Net Profit | 2,21,640 | |
| Lata 21,000 | By Interest on Drawings: | ||
| Mamta 14,000 | 35,000 | Lata 1,440 | |
| To Salary (Lata) | 30,000 | Mamta 1,920 | 3,360 |
| To General Reserve A/c | 16,000 | ||
| To Profit transferred to: | |||
| Lata's Capital A/c 1,00,800 | |||
| Mamta's Capital A/c 43,200 | 1,44,000 | ||
| Total | 2,25,000 | Total | 2,25,000 |
(1) Interest on Mamta's Loan has been calculated at 6% p.a.
(2) Interest on Drawings has been calculated for an average period of 6 months.
(3) Distributable Profit = Total of Credit side - Debit Side
Total Credit Side = Rs. 2,25,000
Total of Debit side (Rs. 35,000 + Rs. 30,000) = Rs. 65,000
Rs. 2,25,000 - Rs. 65,000 = Rs. 1,60,000
General Reserve is 10% of Rs. 1,60,000 = Rs. 16,000
A, B and C are partners sharing the profit and losses in the ratio of 2:3:5. On 1st July, 2023, A and B granted loans of Rs. 2,00,000 and Rs. 1,00,000 respectively to the firm. Show the distribution of profit/losses for the year ended 31st March, 2024, in the following cases:
Case (a) If the profits before interest for the year amounted to Rs. 7,500.
Case (b) If the loss before interest for the year amounted to Rs. 7,500.
Case (a)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Loan: | By Profit before interest | 7,500 | |
| A 9,000 | By Net Loss transferred to: | ||
| B 4,500 | 13,500 | A's Capital A/c 1,200 | |
| B's Capital A/c 1,800 | |||
| C's Capital A/c 3,000 | 6,000 | ||
| Total | 13,500 | Total | 13,500 |
Case (b)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Loss before interest | 7,500 | By Net Loss transferred to: | |
| To Interest on Loan: | A's Capital A/c 4,200 | ||
| A 9,000 | B's Capital A/c 6,300 | ||
| B 4,500 | 13,500 | C's Capital A/c 10,500 | 21,000 |
| Total | 21,000 | Total | 21,000 |
(i) Interest on A's Loan = Rs. 2,00,000 × 6/100 × 9/12 = Rs. 9,000
(ii) Interest on B's Loan = Rs. 1,00,000 × 6/100 × 9/12 = Rs. 4,000
Raj, Mehak and Divya were partners in a firm sharing profits and losses in the ratio of 2:2:1. Their respective capitals were: Rs. 6,00,000, Rs. 4,00,000 and Rs. 2,00,000. The partnership deed provided for the following:
- Interest on Capital @ 8% per annum.
- Interest on drawings @ 6% per annum.
- Interest on partner's loan to the firm @ 5% per annum.
During the year, Raj had withdrawn Rs. 12,000 on 1st October, 2021, while Mehak withdrew Rs. 60,000 on 1st December, 2021. On 1st January, 2022, Divya had given a loan of Rs. 1,20,000 to the firm. Pass the necessary Journal entries in the books of the firm for the following transactions for the year ended 31st March, 2022:
- Allowing interest on Raj's capital.
- Charging interest on Mehak's drawings.
- Providing interest on Loan given to the firm by Divya.
Also pass transfer entries in the Profit and Loss Account/ Profit and Loss Appropriation Account as the case may be.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Profit and Loss A/c Dr. To Interest on Loan from Divya A/c (Being interest on Divya's Loan to the firm for 3 months at 5% per annum on Rs. 1,20,000) | 1,500 | 1,500 | ||
| Interest on capital A/c Dr. To Raja's Capital A/c (Being interest on Raj's Capital at 8% per annum on Rs. 6,00,000) | 48,000 | 48,000 | ||
| Profit and Loss Appropriation A/c Dr. To Interest on Capital A/c (Being Interest on Raj's Capital transfer to P & L Appropriation A/c) | 48,000 | 48,000 | ||
| Mehak's Capital A/c Dr. To Interest on Drawings A/c (Being interest on Mehak's drawings at 6% per annum on Rs. 60,000 for 3 months) | 1,200 | 1,200 | ||
| Interest on Drawings A/c Dr. To Profit and Loss Appropriation A/c (Being transfer of interest on Mehak's drawings to Profit and Loss Appropriation A/c) | 1,200 | 1,200 | ||
| Interest on Loan by Divya A/c Dr. To Loan by Divya A/c (Being Interest on Loan provided @ 5% p.a. for 3 months) | 1,500 | 1,500 |
A, B and C are partners in a firm sharing profits and losses equally. On 1st April, 2023 their fixed capitals were Rs. 8,00,000, Rs. 6,00,000 and Rs. 6,00,000 respectively. On 1st October 2023, A advanced Rs. 1,00,000 to the firm whereas C took a loan of Rs. 1,50,000 from the firm on the same date. It was agreed among the partners that C will pay interest @ 10% p.a. Profit for the year ended 31st March, 2024 amounted to Rs. 4,20,000 before allowing or charging interest on loans. Pass journal entries for interest on loans and prepare Current Accounts of the partners.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Interest on A's loan A/c Dr. To A's Loan A/c (Being interest on loan paid to A) | 3,000 | 3,000 | ||
| Profit and Loss A/c Dr. To interest on A's loan A/c (Being interest on A's Loan trf. to P&L A/c) | 3,000 | 3,000 | ||
| C's Current A/c Dr. To Interest on Loan A/c (Being interest on loan taken by C) | 7,500 | 7,500 | ||
| Interest on Loan to C's A/c Dr. To Profit and Loss A/c (Being interest on loan trf to p and l account) | 7,500 | 7,500 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on A's Loan A/c | 3,000 | By Profit before int. on loan A/c | 4,20,000 |
| To Profit & Loss App. A/c | 4,24,500 | By Interest on C's Loan A/c | 7,500 |
| Total | 4,27,500 | Total | 4,27,500 |
Hemant and Sameer are partners in a firm. On 1st December 2023, Hemant gave a loan to the firm of Rs. 5,00,000. On the same date, the firm gave a loan of Rs. 2,00,000 to Sameer. They do not have an agreement as to interest. Firm earned a profit of Rs. 3,70,000 (before any interest) for the year ended 31st March 2024. Pass journal entries for interest on loans and distribution of profit for the year ended 31st March, 2024.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Interest on Hement's loan A/c Dr. To Hement's Loan A/c (Being interest on loan paid to Hement) | 10,000 | 10,000 | ||
| Profit and Loss A/c Dr. To interest on Hement's loan A/c (Being interest on Hement's Loan trf. to P&L A/c) | 10,000 | 10,000 | ||
| Profit and Loss A/c Dr. To Profit and Loss Appropriation A/c (Being profit transferred to Profit and loss Appropriation A/c) | 3,60,000 | 3,60,000 | ||
| Profit and Loss Appropriation A/c Dr. To Hemant's Capital A/c To Sameer's Capital A/c (Being profit distributed between partners) | 3,60,000 | 1,80,000 1,80,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Hemant's Loan A/c | 10,000 | By Profit before Interest A/c | 3,70,000 |
| To Profit & Loss App. A/c | 3,60,000 | ||
| Total | 3,70,000 | Total | 3,70,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Hemant's Capital A/c | 1,80,000 | By Profit and Loss A/c | 3,60,000 |
| To Sameer's Capital A/c | 1,80,000 | ||
| Total | 3,70,000 | Total | 3,70,000 |
Kia and Siya are partners in a firm sharing profits equally. Siya has given her property on rent to the firm on a monthly rent of Rs. 25,000. The firm paid her rent from April 2023 to January 2024 by cheque on 10th February 2024. Rent for the month of February and March was yet to be paid. Pass the journal entries for the above transactions for the year ended 31st March, 2024.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Rent A/c Dr. To Bank A/c (Being Rent paid) | 2,50,000 | 2,50,000 | ||
| Rent A/c Dr. To Rent Payable A/c (Being Rent payable for two months feb. And March) | 50,000 | 50,000 | ||
| Rent A/c Dr. To Profit and Loss A/c (Being profit transferred to Profit and loss Appropriation A/c) | 3,00,000 | 3,00,000 |
Rent Paid to Siya for 10 Months = Rs. 25,000 × 10 = Rs. 2,50,000
Radha and Rukmani are partners in a firm with fixed capitals of 2,00,000 and Rs. 3,00,000 respectively. They share profit in the ratio of 1:2. Both partners are entitled to interest on capitals @ 8% p.a. In addition, Rukmani is entitled to a salary of Rs. 20,000 per month. Business is being carried from the property owned by Radha on a yearly rent of Rs. 1,20,000. Net Profit for the year ended 31st March 2024 before providing for rent was Rs. 5,50,000. You are required to draw Profit & Loss Appropriation Account for the year ended 31st March, 2024.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Rukmani's Salary | 2,40,000 | By Profit and Loss A/c (Net Profit) (Rs. 5,50,000 - Rs. 1,20,000) | 4,30,000 |
| To Interest on Capital | |||
| Radha 16,000 | |||
| Rukmani 24,000 | 40,000 | ||
| To Profit transferred to: | |||
| Radha 50,000 | |||
| Rukmani 1,00,000 | 1,50,000 | ||
| Total | 4,30,000 | Total | 4,30,000 |
1. Calculation of Net Profit = 5,50,000 - Rs. 1,20,000 = Rs. 4,30,000
2. Calculation of Interest on Capital:- Radha = Rs. 2,00,000 × 8% = Rs. 16,000
Rukmani = Rs. 3,00,000 × 8% = Rs. 24,000
3. Calculation of Profit and Loss:-
Profit of transferred to Capital account = Rs. 4,30,000 - (Rs. 2,40,000 + Rs. 40,000)
Profit of transferred to Capital account = Rs. 1,50,000
Radha's Profit = Rs. 1,50,000 × 1/3 = Rs. 50,000
Rukmani's Profit = Rs. 1,50,000 × 2/3 = Rs. 1,00,000
Divyanshi and Bhawna entered into a partnership firm on 1st July, 2025, with capitals of Rs. 6,50,000 and Rs. 2,70,000 respectively sharing profits in the ratio of 2: 1. The terms of Partnership Deed were as follows:
- Interest on capital to be allowed @ 6% p.a.
- 4% of the Net Profit to be provided as commission to Bhawna before charging such commission.
- Bhawna is entitled to a rent of 75,000 p.m. for allowing the firm to carry on the business in her premises.
- Interest on loan advanced by a partner to the firm @ 10% p.a. Divyanshi advanced a loan of Rs. 3,00,000 to the firm on 1st January, 2026.
The firm earned a net profit of Rs. 2,40,000 after considering all charges against profits. Pass Journal Entries for the year ended 31st March, 2026.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Rent A/c Dr. To Rent Payable A/c (Being rent payable to Bhawana from 1st July to 31 March 2026) | 45,000 | 45,000 | ||
| Interest on loan A/c Dr. To Divyanshi's Loan A/c (Being Interest on loan by Divyanshi @ 10% p.a) | 7,500 | 7,500 | ||
| Profit and Loss A/c Dr. To Rent A/c To Interest on Loan A/c (Being interest on loan and rent transferred) | 52,500 | 45,000 7,500 | ||
| Profit and Loss A/c Dr. To Profit and Loss Appropriation A/c (Being profit transferred to appropriation a/c) | 2,40,000 | 2,40,000 | ||
| Interest on Capital A/c Dr. To Divyanshi's Capital A/c To Bhawana's Capital A/c (Being interest on capital paid) | 41,400 | 29,250 12,150 | ||
| Commission to Bhawana's A/c Dr. To Bhawan's Capital A/c (Being Commission Paid to Bhawana) | 9,600 | 9,600 | ||
| Profit and Loss Appropriation A/c Dr. To Interest on Capital A/c To Commission to Bhawana's A/c (Being profit transferred to appropriation A/c) | 51,000 | 41,400 9,600 | ||
| Profit and Loss Appropriation A/c Dr. To Divyanshi's Capital A/c To Bhawana's Capital A/c (Being profit transferred to partners capital A/c) | 1,89,000 | 1,26,000 63,000 |
A and B are partners sharing profit and loss in the ratio of their capitals which were Rs. 6,00,000 and Rs. 4,00,000 respectively on 1st April 2023. The partnership deed provides that:
- Both partners will get monthly salary of Rs. 20,000 each;
- Interest on capital will be allowed @ 8% p.a.;
- A will get a quarterly rent of Rs. 24,000 for the use of his property by the firm.
On 1st July, 2023 A and B granted loans of Rs. 1,00,000 and Rs. 50,000 respectively to the firm. During the year ended 31st March 2024, the firm incurred a loss of Rs. 17,250 before any adjustment is made as per partnership deed.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit and Loss A/c (Net Loss) | 17,250 | By Net Loss transferred:- | |
| To Rent A/c | 96,000 | A 72,000 | |
| To Interest on Loan: | B 48,000 | 1,20,000 | |
| A 4,500 | |||
| B 2,250 | 6,750 | ||
| Total | 1,20,000 | Total | 1,20,000 |
Calculation of Interest in Loan:-
A = 1,00,000 × 6/100 × 9/12 = Rs. 4,500
B = 50,000 × 6/100 × 9/12 = Rs. 2,250
A and B are partners in a firm sharing profit in the ratio of 1:2. Their capitals on 1st April 2023 were Rs. 4,00,000 and Rs. 6,00,000 respectively. As per partnership deed, A is to get a monthly salary of Rs. 15,000 and interest on capitals is to be provided @ 10% p.a. and charged on drawings @ 12% p.a. During the year A withdrew Rs. 30,000 and B withdrew Rs. 50,000. The Firm incurred a loss of Rs. 60,000 during the year ended 31st March, 2024 before above adjustments. You are required to prepare an account showing the distribution of profit/loss.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit and Loss A/c (Net Loss) | 60,000 | By Interest on Drawings: | |
| A 1,800 | |||
| B 3,000 | 4,800 | ||
| By Loss transferred to: | |||
| A 18,400 | |||
| B 36,800 | 55,200 | ||
| Total | 60,000 | Total | 60,000 |
Calculation of Interest in Drawings:-
A = 30,000 × 12/100 × 6/12 = Rs. 1,800
B = 50,000 × 12/100 × 6/12 = Rs. 3,000
Questions Q21 to Q40 - IOC when profit insufficient, IOD calculations, Reverse calculations, IOC as charge vs appropriation
Parul and Rajul were partners in a firm, sharing profits and losses in the ratio of 5: 3. The balance in their fixed capital accounts on 1st April, 2023 were: Parul Rs. 6,00,000 and Rajul Rs. 8,00,000. The partnership deed provided for allowing interest on capital at 12% per annum. The net profit of the firm for the year ended 31st March, 2024 was Rs. 1,26,000. Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2024. Show your working clearly.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | To Profit and Loss A/c (Net Profit) | 1,26,000 | |
| Parul's Capital 54,000 | |||
| Rajul's Capital 72,000 | 1,26,000 | ||
| Total | 1,26,000 | Total | 1,26,000 |
Calculation of Interest on capital:-
A = 6,00,000 × 12/100 = Rs. 72,000
B = 8,00,000 × 12/100 = Rs. 96,000
Total = 72,000 + 96,000 = 1,68,000
It seems that total amount of appropriation is more than profit available. Hence, profit will be distributed in the appropriation ratio (Expenses Ratio) which is 3:4.
A = 1,26,000 × 3/7 = Rs. 54,000
B = 1,26,000 × 4/7 = Rs. 72,000
Mr. Ashok Gupta is a partner in a firm. He withdrew the following amounts during the year ended 31st March, 2024:-
| Date | Rs. |
|---|---|
| 30 April | 8,000 |
| 30 June | 6,000 |
| 30 September | 5,000 |
| 31 December | 12,000 |
| 31 January | 10,000 |
Calculate interest on drawings @ 9% p.a. for the year ended on 31st March, 2024.
(i) SIMPLE METHOD
| Date | Amount | Period (Months upto March 31) | Interest @ 9% |
|---|---|---|---|
| 30 April | 8,000 | 11 | 660 |
| 30 June | 6,000 | 9 | 405 |
| 30 September | 5,000 | 6 | 225 |
| 31 December | 12,000 | 3 | 270 |
| 31 January | 10,000 | 2 | 150 |
| Total | 41,000 | 1,710 |
(ii) Product Method:-
| Date | Amount | Period (Months upto March 31) | Products |
|---|---|---|---|
| 30 April | 8,000 | 11 | 88,000 |
| 30 June | 6,000 | 9 | 54,000 |
| 30 September | 5,000 | 6 | 30,000 |
| 31 December | 12,000 | 3 | 36,000 |
| 31 January | 10,000 | 2 | 20,000 |
| Total | 41,000 | 2,28,000 |
Interest = Total of Products × 9/100 × 1/12
Interest = 2,28,000 × 9/100 × 1/12 = Rs. 1,710
A is a partner in a firm. During the year ended 31st March, 2024, A's drawings were:
| Date | Rs. |
|---|---|
| 1 June | 1,000 |
| 1 August | 750 |
| 1 October | 1,250 |
| 1 December | 500 |
| 1 February | 500 |
Interest on drawings is charged @ 10% per annum. Calculate interest on drawings of A for year ended 31st March, 2024.
(i) SIMPLE METHOD
| Date | Amount | Period (Months upto March 31) | Interest @ 10% |
|---|---|---|---|
| 1 June | 1,000 | 10 | 83 |
| 1 August | 750 | 8 | 50 |
| 1 October | 1,250 | 6 | 63 |
| 1 December | 500 | 4 | 17 |
| 1 February | 500 | 2 | 8 |
| Total | 4,000 | 221 |
(ii) PRODUCT METHOD
| Date | Amount | Period (Months upto March 31) | Products |
|---|---|---|---|
| 1st June | 1,000 | 10 | 10,000 |
| 1st August | 750 | 8 | 6,000 |
| 1st October | 1,250 | 6 | 7,500 |
| 1st December | 500 | 4 | 2,000 |
| 1st February | 500 | 2 | 1,000 |
| Total | 4,000 | 26,500 |
Interest = Total of Products × 10/100 × 1/12
Interest = 26,500 × 10/100 × 1/12 = Rs. 221
As per partnership deed, interest on drawings is to be charged @ 7% p.a. Sohan, a partner of the firm withdrew the following amounts during the year ended 31st March, 2025.
| Date | Amount (Rs.) |
|---|---|
| 6th August 2024 | 12,000 |
| 22nd Nov. 2024 | 10,000 |
| 14th January 2025 | 18,000 |
| 10th March 2025 | 27,000 |
Calculate the amount of interest on Sohan's drawings and pass necessary Journal Entries for the same.
| Date | Amount of Drawings | Period in Days | Products |
|---|---|---|---|
| 6th August, 2024 | 12,000 | 238 | 28,56,000 |
| 22nd Nov. 2024 | 10,000 | 130 | 13,00,000 |
| 14th Jan. 2025 | 18,000 | 77 | 13,86,000 |
| 10th March 2025 | 27,000 | 22 | 5,94,000 |
| Total | 67,000 | 61,36,000 |
Interest on Drawings = Total Drawings × Rate/100 × 1/Days in a year
Interest on Drawings = Rs. 61,36,000 × 7/100 × 1/365
Interest on Drawings = Rs. 1,176.76
Rounded off Rs. 1,177
Gopal is a partner in a firm. He withdrew Rs. 1,000 p.m. regularly on the first day of every month during the year ended 31st March, 2024 for personal expenses. If interest on drawings is charged @ 15% p.a. calculate the interest on the drawings of Gopal.
Gopal withdrew Rs. 1,000 p.m. regularly on the first day of every month during the year ended 31st March, 2024 for personal expenses. His interest on drawings will be calculated as follows:
Interest on Drawings = Rs. 12,000 × 15/100 × 6.5/12
Interest on Drawings = Rs. 975
X, Y and Z are partners in a firm. You are informed that (i) X draws Rs. 4,000 from the firm at the beginning of every month, (ii) Y draws Rs. 4,000 from the firm at the end of every month, and (iii) Z draws Rs. 4,000 from the firm in the middle of every month. Interest on drawings is to be charged @ 9% p.a. Calculate interest on partner's drawings.
Interest on Drawings = Rs. 48,000 × 9/100 × 6.5/12
Interest on Drawings = Rs. 2,340
Interest on Drawings = Rs. 48,000 × 9/100 × 5.5/12
Interest on Drawings = Rs. 1,980
Interest on Drawings = Rs. 48,000 × 9/100 × 6/12
Interest on Drawings = Rs. 2,160
Calculate the interest on drawings of Mr. Aditya @ 8% p.a. for the year ended 31st March, 2024, in each of the following alternative cases:
Case (i) If he withdrew Rs. 5,000 in the beginning of each quarter.
Case (ii) If he withdrew Rs. 6,000 at the end of the each quarter.
Case (iii) If he withdrew Rs. 10,000 during the middle of each quarter.
Case (i)
Total Drawings for the year = Rs. 5,000 × 4 = Rs. 20,000
Period = 12 months + 3 months = 15 months
Average Period = 15 months/2 = 7.5 months
Interest on Drawings = Rs. 20,000 × 8/100 × 7.5/12
Interest on Drawings = Rs. 1,000
Case (ii)
Total Drawings for the year = Rs. 6,000 × 4 = Rs. 24,000
Period = 12 months
Average Period = 9 months/2 = 4.5 months
Interest on Drawings = Rs. 24,000 × 8/100 × 4.5/12
Interest on Drawings = Rs. 720
Case (iii)
Total Drawings for the year = Rs. 10,000 × 4 = Rs. 40,000
Period = 10.5 months + 1.5 months = 12 months
Average Period = 12 months/2 = 6 months
Interest on Drawings = Rs. 40,000 × 8/100 × 6/12
Interest on Drawings = Rs. 1,600
Calculate the interest on drawings of Sh. Ganesh @ 9% p.a. for the year ended 31st March, 2024 in each of the following alternative cases:
Case (i) If he withdrew Rs. 4,000 p.m. in the beginning of every month;
Case (ii) If he withdrew Rs. 5,000 p.m. at the end of every month;
Case (iii) If he withdrew Rs. 6,000 p.m.;
Case (iv) If he withdrew Rs. 72,000 during the year;
Case (v) If he withdrew as follows: 30th April, 2023 Rs. 10,000; 1st July, 2023 Rs. 15,000; 1st Oct, 2023 Rs. 18,000; 30th Nov., 2023 Rs. 12,000; 31st March, 2024 Rs. 20,000
Case (vi) If he withdrew Rs. 12,000 in the beginning of each quarter;
Case (vii) If he withdrew Rs. 18,000 at the end of each quarter;
Case (viii) If he withdrew Rs. 18,000 during the middle of each quarter.
Case (i)
Period = 12 months + 1 months = 13 months Average Period = 13 months/2 = 6.5 months
Interest on Drawings = Rs. 48,000 × 9/100 × 6.5/12 = Rs. 2,340
Case (ii)
Period = 11 months Average Period = 11 months/2 = 5.5 months
Interest on Drawings = Rs. 60,000 × 9/100 × 5.5/12 = Rs. 2,475
Case (iii)
Assuming that the drawings were made in the middle of every month:-
Period = 11.5 months + 0.5 months = 12 months Average Period = 12 months/2 = 6 months
Interest on Drawings = Rs. 72,000 × 9/100 × 6/12 = Rs. 3,240
Case (iv)
Calculated for an average period of 6 months:
Interest on Drawings = Rs. 72,000 × 9/100 × 6/12 = Rs. 3,240
Case (v)
| Date | Amount of Drawings | Period (Months upto 31st March, 2007) | Products |
|---|---|---|---|
| 30th April, 2023 | 10,000 | 11 | 1,10,000 |
| 1st July, 2023 | 15,000 | 9 | 1,35,000 |
| 1st Oct., 2023 | 18,000 | 6 | 1,08,000 |
| 30th Nov., 2023 | 12,000 | 4 | 48,000 |
| 31st March, 2024 | 20,000 | 0 | - |
| Total | 75,000 | 4,01,000 |
Interest on Drawings = Rs. 4,01,000 × 9/100 × 1/12 = Rs. 3,008
Case (vi)
Period = 12 months + 3 months = 15 months Average Period = 15 months/2 = 7.5 months
Total Drawings for the year = 12,000 × 4 = Rs. 48,000
Interest on Drawings = Rs. 48,000 × 9/100 × 7.5/12 = Rs. 2,700
Case (vii)
Period = 9 months Average Period = 9 months/2 = 4.5 months
Total Drawings for the year = 18,000 × 4 = Rs. 72,000
Interest on Drawings = Rs. 72,000 × 9/100 × 4.5/12 = Rs. 2,430
Case (viii)
Period = 10.5 months + 1.5 months = 12 months Average Period = 12 months/2 = 6 months
Total Drawings for the year = 18,000 × 4 = Rs. 72,000
Interest on Drawings = Rs. 72,000 × 9/100 × 6/12 = Rs. 3,240
Gupta is a partner in a firm. He drew regularly Rs. 800 at the beginning of every month for the six months ending 31st March, 2024. Calculate interest on drawings at 15% p.a.
Gupta drew Rs. 800 at the beginning of every month for the six months ending 30th September, 2024. Hence, his drawings for the period of six months would be:
Period = 6 months + 1 months = 7 months
Average Period = 7 months/2 = 3.5 months
Total Drawings for the year = 800 × 4 = Rs. 4,800
Interest on Drawings = Rs. 4,800 × 15/100 × 3.5/12
Interest on Drawings = Rs. 210
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 6 months + 1 months/2
Average Period = 7 months/2
Average Period = 3.5 months
Gupta is a partner in a firm. He drew regularly Rs. 800 at the end of every month for the six months ending 31st March, 2024. Calculate interest on drawings at 15% p.a.
Gupta withdraws Rs. 800 at the end of every month for the six months ending 30th September, 2024.
Total drawings = 6 x Rs. 800 = Rs. 4,800
(Time left after first drawing + Time left after last drawing)/2 = (5 + 0)/2 = 2.5 months.
Rs. 4,800 x 15/100 x 2.5/12 = Rs. 150
A, B and C are partners in a firm. For six months ending 31st March, 2024: A drew regularly Rs. 15,000 in the beginning of every month. B drew regularly Rs. 20,000 at the end of every month and C drew regularly Rs. 25,000 in the middle of every month. Calculate interest on drawings @ 10% p.a. for six months ending 31st March, 2024.
Total Drawings of A = Rs. 15,000 x 6 = Rs. 90,000
Total Drawings of B = Rs. 20,000 x 6 = Rs. 1,20,000
Total Drawings of C = Rs. 25,000 x 6 = Rs. 1,50,000
| A | B | C | |
|---|---|---|---|
| Average Period | 6 + 1/2 = 3.5 months | (5 + 0)/2 = 2.5 months | (5.5 + 0.5)/2 = 3 months |
| Interest on Drawings | Rs. 90,000 x 10/100 x 3.5/12 = Rs. 2,625 | Rs. 1,20,000 x 10/100 x 2.5/12 = Rs. 2,500 | Rs. 1,50,000 x 10/100 x 3/12 = Rs. 3,750 |
Gargi, withdrew Rs. 15,000 p.m. for six months ended 30th September, 2024. Calculate interest on drawings @ 8% p.a. in the following cases for the year ended 31st March, 2025.
- When she withdrew the amount in the beginning of every month.
- When she withdrew the amount in the middle of every month.
- When she withdrew the amount in the end of every month.
Gargi withdrew Rs. 15,000 for Six months ended 30th Sept. 2024.
Total Drawings in 6 months = Rs. 15,000 × 6 = Rs. 90,000
(i) Calculation of Interest on Drawings in the beginning of every month:-
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 12 months + 7 months/2
Average Period = 19 months/2
Average Period = 9.5 months
Interest on Drawings = Rs. 90,000 × 8/100 × 9.5/12
Interest on Drawings = Rs. 5,700
(ii) Calculation of Interest on Drawings in the middle of every month:-
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 11.5 months + 6.5 months/2
Average Period = 18 months/2
Average Period = 9 months
Interest on Drawings = Rs. 90,000 × 8/100 × 9/12
Interest on Drawings = Rs. 5,400
(ii) Calculation of Interest on Drawings in the end of every month:-
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 11 months + 6 months/2
Average Period = 17 months/2
Average Period = 8.5 months
Interest on Drawings = Rs. 90,000 × 8/100 × 8.5/12
Interest on Drawings = Rs. 5,100
Calculate interest on A's drawings:
(i) If he has withdrawn Rs. 60,000 on 1st October, 2024 and rate of interest on drawings is 8% p.a.
(ii) If he has withdrawn Rs. 6,000 on 1st October, 2024 and rate of interest on drawings is 8%. Books are closed on 31st March, 2025.
Case (i)
Interest on Drawings = Rs. 60,000 × 8/100 × 6/12
Interest on Drawings = Rs. 2,400
Case (ii)
Interest on Drawings = Rs. 60,000 × 8/100
Interest on Drawings = Rs. 4,800
Calculate the amount of Era's monthly drawings for the year ended 31st March, 2026 in the following cases when interest is charged on drawings @ 10% p.a.
(i) When she withdrew a fixed amount in the beginning of each month and interest on drawings is Rs. 5,200.
(ii) When she withdrew a fixed amount at the end of each month and interest on drawings is Rs. 6,600.
(i) Calculation of Interest on Drawings in the beginning of every month:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 5,200 = x × 10/100 × 6.5/12
Rs. 5,200 = 65x/1,200
x = 5,200 × 1,200/65
x = Rs. 96,000
Total Drawings = Rs. 96,000
Monthly Drawings = Rs. 96,000/12
Monthly Drawings = Rs. 8,000
(ii) Calculation of Interest on Drawings in the end of every month:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 6,600 = x × 10/100 × 5.5/12
Rs. 6,600 = 55x/1,200
x = 6,600 × 1,200/55
x = Rs. 1,44,000
Total Drawings = Rs. 1,44,000
Monthly Drawings = Rs. 1,44,000/12
Monthly Drawings = Rs. 12,000
Sneha is a partner in a firm. Calculate the amount of Sneha's quarterly drawings for the year ended 31st March, 2026, in the following cases when interest is charged @ 10% p.a.
(i) When she withdrew a fixed amount in the beginning of each quarter and interest on drawings is Rs. 3,750.
(ii) When she withdrew a fixed amount at the end of each quarter and interest on drawings is Rs. 3,000.
(i) Calculation of Interest on Drawings in the beginning of each quarter:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 3,750 = x × 10/100 × 7.5/12
Rs. 3,750 = 75x/1,200
x = 3,750 × 1,200/75
x = Rs. 60,000
Total Drawings = Rs. 60,000
Quarterly Drawings = Rs. 60,000/4
Quarterly Drawings = Rs. 15,000
(ii) Calculation of Interest on Drawings in the end of each quarter:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 3,000 = x × 10/100 × 4.5/12
Rs. 3,000 = 45x/1,200
x = 3,000 × 1,200/45
x = Rs. 80,000
Total Drawings = Rs. 80,000
Quarterly Drawings = Rs. 80,000/4
Quarterly Drawings = Rs. 20,000
(i) Anamika and Monika are partners in a firm. Anamika withdrew Rs. 25,000 at the end of each month and interest on drawings was calculated Rs. 8,250 at the end of the year. What is the rate of interest on drawings?
(ii) Shruti and Gayatri are partners in a firm. Shruti withdrew Rs. 60,000 at the end of each quarter and interest on drawings was calculated Rs. 6,300 at the end of the year. What is the rate of interest on drawings?
(i)
Interest on Drawings = Rs. 8,250
Total Amount of Drawings = Rs. 25,000 × 12 = Rs. 3,00,000
Average Period = At the end of each months
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 11 months + 0 months/2
Average Period = 11 months/2
Average Period = 5.5 months
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 8,250 = Rs. 3,00,000 × x/100 × 5.5/12
Rs. 8,250 = 1375x
x = 8,250/1,375
x = 6
Rate of Interest = 6%
(i)
Interest on Drawings = Rs. 6,300
Total Amount of Drawings = Rs. 60,000 × 4 = Rs. 3,00,000
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 9 months + 0 months/2
Average Period = 9 months/2
Average Period = 4.5 months
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 6,300 = Rs. 2,40,000 × x/100 × 4.5/12
Rs. 6,300 = 900x
x = 6,300/900
x = 7%
Rate of Interest = 7%
Partner A withdrew Rs. 70,000 in the middle of each half year. Calculate the rate of interest on drawings if the amount of interest charged at the end of the year was Rs. 8,400.
Interest on Drawings = Rs. 8,400
Total Amount of Drawings = Rs. 70,000 × 2 = Rs. 1,40,000
Average Period = in the middle of each half year
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 9 months + 3 months/2
Average Period = 12 months/2
Average Period = 6 months
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 8,400 = Rs. 1,40,000 × x/100 × 6/12
Rs. 8,400 = 700x
x = 8,400/700
x = 12
Rate of Interest = 12%
Ascertain the amount of each drawing made by B, during the year ending 31st March, 2026, if he withdrew a fixed amount at the beginning of every alternate month starting from 1st April, 2025. The interest on drawings was Rs. 4,725 charged @ 9% p.a.
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 12 months + 2 months/2
Average Period = 14 months/2
Average Period = 7 months
Calculation of Interest on Drawings in the beginning of every month:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Rs. 4,725 = x × 9/100 × 7/12
Rs. 4,725 = 63x/1,200
x = 4,725 × 1,200/63
x = Rs. 90,000
Total Drawings = Rs. 90,000
Monthly Drawings = Rs. 90,000/6
Monthly Drawings = Rs. 15,000
X and Y are partners sharing the profits and losses in the ratio 2:1 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Show the distribution of profits in each of the following alternative cases:
- If the partnership deed is silent as to the Interest on Capital and the profits for the year are Rs. 9,000.
- If the partnership deed provides for Interest on Capital @ 6% p.a. and the losses for the year are Rs. 6,000.
- If the partnership deed provides for Interest on Capital @ 6% p.a. and the profits for the year are Rs. 9,000.
- If the partnership deed provides for Interest on Capital @ 6% p.a. and the profits for the year are Rs. 3,000.
- If the partnership deed provides for Interest on Capital @ 6% p.a. even if it involves the firm in loss and the profits for the year are Rs. 3,000.
Case (i)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit transferred to Capital a/c | By Profit and Loss A/c (Profit) | 9,000 | |
| X 6,000 | |||
| Y 3,000 | 9,000 | ||
| Total | 9,000 | Total | 9,000 |
Case (ii)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Net Loss a/c | 6,000 | By Loss transfer to capital A/c | |
| X 4,000 | |||
| Y 2,000 | 6,000 | ||
| Total | 6,000 | Total | 6,000 |
In case of loss we cannot pay Interest on capital.
Profit and Loss Appropriation (Distribution of Loss):-
X's Share = 6,000 × 2/3 = 4,000
Y's Share = 6,000 × 1/3 = 2,000
Case (iii)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Net Profit A/c | 9,000 | |
| X 3,000 | |||
| Y 1,800 | 4,800 | ||
| To Profit transferred to: | |||
| X 2,800 | |||
| Y 1,400 | 4,200 | ||
| Total | 9,000 | Total | 9,000 |
Calculation of Interest on Capital:-
X's Interest on Capital = 50,000 × 6% = 3,000
Y's Interest on Capital = 30,000 × 6% = 1,800
Profit and Loss Appropriation (Distribution of Profit):-
X's Share = 4,200 × 2/3 = 2,800
Y's Share = 4,200 × 1/3 = 1,400
Case (iv)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Net Profit A/c | 3,000 | |
| X 1,875 | |||
| Y 1,125 | 3,000 | ||
| Total | 3,000 | Total | 3,000 |
The profit is Rs. 3,000 whereas Interest on capital is Rs. 4,800. So the expenses divided into their expenses ratio which is 3,000 : 1,800 or 5 : 3
Calculation of Interest on Capital:-
X's Interest on Capital = 3,000 × 5/8 = 1,875
Y's Interest on Capital = 3,000 × 3/8 = 1,125
Case (v)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 3,000 | |
| X 3,000 | By Loss transferred to Capital A/c | ||
| Y 1,800 | 4,800 | X 1,200 | |
| Y 600 | 1,800 | ||
| Total | 4,800 | Total | 4,800 |
A and B contribute Rs. 4,00,000 and Rs. 3,00,000 respectively as their capitals. They decide to allow interest on capital @ 8% p.a. Their respective share of profit is 3:2 and the profit for the year is Rs. 42,000 before allowing for interest on capitals. Show the distribution of profits (i) Where there is no agreement except for interest on capitals and (ii) Where there is a clear agreement that the interest on capitals will be allowed even if it involves the firm in loses.
Case (i)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 42,000 | |
| A 24,000 | |||
| B 18,000 | 42,000 | ||
| Total | 42,000 | Total | 42,000 |
Calculation of Interest on Capital:-
A's Interest on Capital = 4,00,000 × 8% = 32,000
B's Interest on Capital = 3,00,000 × 8% = 24,000
The profit is Rs. 42,000 whereas Interest on capital is Rs. 56,000. So the expenses divided into their expenses ratio which is 32,000 : 24,000 or 4 : 3
A's Interest on Capital = Rs. 42,000 × 4/7 = Rs. 24,000
B's Interest on Capital = Rs. 42,000 × 3/7 = Rs. 18,000
Case (ii)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 42,000 | |
| A 32,000 | By Loss transferred to Capital A/c | ||
| B 24,000 | 56,000 | A 8,400 | 8,400 |
| Total | 56,000 | Total | 56,000 |
P and Q were partners in a firm sharing profits in 3:1 ratio. Their respective fixed capitals were Rs. 10,00,000 and Rs. 6,00,000. The partnership deed provided interest on capital @ 12% p.a. The Partnership deed further provided that interest on capital will be allowed fully even if it will result into a loss to the firm. The net profit of the firm for the year ended 31st March, 2023 was Rs. 1,50,000. Pass necessary journal entries in the books of the firm allowing interest on capital and division of profit/loss among the partners.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 1,50,000 | |
| P 1,20,000 | By Loss transferred to Capital A/c | ||
| Q 72,000 | 1,92,000 | A 31,500 | 31,500 |
| Total | 1,92,000 | Total | 1,92,000 |
Calculation of Interest on Capital:-
P's Interest on Capital = 10,00,000 × 12% = 1,20,000
Q's Interest on Capital = 6,00,000 × 12% = 72,000
Profit and Loss Appropriation (Distribution of Loss):-
P's Share = 42,000 × 3/4 = 31,500
Q's Share = 42,000 × 1/4 = 10,500
On 1-4-2025 Brij and Nandan entered into partnership to construct toilets in government girls school in the remote areas of Uttarakhand. They contributed capitals of Rs. 10,00,000 and Rs. 15,00,000 respectively. Their profit ratio was 2:3 and interest allowed on capital as provided in the Partnership Deed was 12% per annum. During the year ended 31.03.2026, the firm earned a profit of Rs. 2,00,000. Prepare Profit and Loss Appropriation Account of Brij and Nandan for the year ended 31. 03.2026.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 2,00,000 | |
| Brij 80,000 | |||
| Nandan 1,20,000 | 2,00,000 | ||
| Total | 2,00,000 | Total | 2,00,000 |
Calculation of Interest on Capital:-
A's Interest on Capital = 10,00,000 × 12% = 1,20,000
B's Interest on Capital = 15,00,000 × 12% = 1,80,000
The profit is Rs. 2,00,000 whereas Interest on capital is Rs. 3,00,000. So the expenses divided into their expenses ratio which is 1,20,000 : 1,80,000 or 2 : 3
A's Interest on Capital = Rs. 2,00,000 × 2/5 = Rs. 80,000
B's Interest on Capital = Rs. 2,00,000 × 3/5 = Rs. 1,20,000
Kavita and Leela are partners with capitals of Rs. 6,00,000 and Rs. 4,00,000 and sharing profits & losses in the ratio of 2:1. Their partnership deed provides that interest on capitals shall be provided @ 8% p.a. and it is to be treated as a charge against profits. Prepare relevant account to allocate the profit in the following alternative cases:
- If profit for the year is Rs. 1,10,000
- If profit for the year is Rs. 35,000
- If loss for the year is Rs. 10,000
Case (i)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 1,10,000 | |
| Kavita 48,000 | |||
| Leela 32,000 | 80,000 | ||
| To Profit transferred to profit & loss App. a/c | 30,000 | ||
| Total | 1,10,000 | Total | 1,10,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit transferred capital a/c | By Net Profit A/c | 30,000 | |
| Kavita 20,000 | |||
| Leela 10,000 | 30,000 | ||
| Total | 30,000 | Total | 30,000 |
Kavita's Share = 30,000 × 2/3 = 20,000
Leela's Share = 30,000 × 1/3 = 10,000
Case (ii)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital a/c | By Net Profit A/c | 35,000 | |
| Kavita 48,000 | By Loss transferred to P&L Appr. a/c | ||
| Leela 32,000 | 80,000 | Kavita 30,000 | |
| Leela 15,000 | 45,000 | ||
| Total | 80,000 | Total | 80,000 |
Case (iii)
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Loss before interest | 10,000 | By Loss transferred to capital a/c | |
| To Interest on Capital | Kavita 60,000 | ||
| Kavita 48,000 | Leela 30,000 | 90,000 | |
| Leela 32,000 | 80,000 | ||
| Total | 90,000 | Total | 90,000 |
Lalan and Balan were partners in a firm sharing in the ratio of 3:2. Their fixed capitals on 1st April, 2023 were: Lalan Rs. 1,00,000 and Balan Rs. 2,00,000. They agreed to allow interest on capital @ 12% per annum and to change on drawings @ 15% per annum. The firm earned a profit, before all above adjustments of Rs. 30,000 for the year ended 31st March, 2024. The drawings of Lalan and Balan during the year were Rs. 3,000 and Rs. 5,000 respectively. Showing you calculations clearly, prepare Profit and Loss Appropriation Account of Lalan and Balan. The interest on capital will be allowed even if the firm incurs a loss.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit before Interest | 30,000 | |
| Lalan 12,000 | By Loss transferred to P&L appro. a/c | 6,000 | |
| Balan 24,000 | 36,000 | ||
| Total | 36,000 | Total | 36,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit and Loss a/c | 6,000 | By Interest on Drawings a/c | |
| Lalan 225 | |||
| Balan 375 | 600 | ||
| By Loss transferred to P&L Appr. a/c | |||
| Lalan 3,240 | |||
| Balan 2,160 | 5,400 | ||
| Total | 6,000 | Total | 6,000 |
Calculation of Drawings:
Lalan's Interest on Drawings = Rs. 3,000 × 15/100 × 6/12 = Rs. 225
Balan's Interest on Drawings = Rs. 5,000 × 15/100 × 6/12 = Rs. 375
Questions Q41 to Q57 - Adjusting Entries for Omissions: IOC, IOD, Salary, Commission, Wrong Rates, Ratio Changes
After the accounts of the partnership have been drawn up and the books closed off, it is discovered that interest on capitals @ 8% p.a. as provided in the partnership agreement has been omitted to be recorded. Their capital accounts at the beginning of the year stood as follows: A Rs. 8,00,000; B Rs. 4,00,000; C Rs. 3,00,000. Their profit sharing ratio was 2 : 1 : 1. Instead of altering the Balance Sheet it is decided to pass necessary adjusting entry at the beginning of the next year. You are required to give the necessary journal entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| C's Capital A/c Dr. To A's Capital A/c To B's Capital A/c (Being interest on capital omitted in previous year's account) | 6,000 | 4,000 2,000 |
Calculation of Interest on Capital:-
A's Interest on Capital = Rs. 8,00,000 × 8% = Rs. 64,000
B's Interest on Capital = Rs. 4,00,000 × 8% = Rs. 32,000
C's Interest on Capital = Rs. 3,00,000 × 8% = Rs. 24,000
Interest on capital is a expense for the firm but this is omitted to recorded on the debit side of Profit and loss appropriation a/c of the previous year. Hence, this is loss of Rs. 1,20,000 will be shared by the partners in their profit sharing ratio 2:1:1.
A = Rs. 1,20,000 × 2/4 = Rs. 60,000
B = Rs. 1,20,000 × 1/4 = Rs. 30,000
C = Rs. 1,20,000 × 1/4 = Rs. 30,000
| Particulars | A | B | C |
|---|---|---|---|
| Interest on Capital | 64,000 | 32,000 | 24,000 |
| Loss Share of partners | 60,000 | 30,000 | 30,000 |
| Difference | 4,000 (Cr.) | 2,000 (Cr.) | 6,000 (Dr.) |
A, B, C and D are partners sharing profits in 2:2:1:1. They distributed the profit for the year ending 31st March, 2023, Rs. 9,00,000 without providing for the following:
- Salary to A @ 15,000 per month.
- Salary to B and D @ Rs. 30,000 per quarter to each partner.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| B's Capital A/c Dr. C's Capital A/c Dr. To A's Capital A/c To D's Capital A/c (Being interest on capital omitted in previous year's account) | 20,000 70,000 | 40,000 50,000 |
Calculation of Profit:-
A = Rs. 9,00,000 × 2/6 = Rs. 3,00,000
B = Rs. 9,00,000 × 2/6 = Rs. 3,00,000
C = Rs. 9,00,000 × 1/6 = Rs. 1,50,000
D = Rs. 9,00,000 × 1/6 = Rs. 1,50,000
A's Salary = Rs. 15,000 × 12 = 1,80,000
B's Salary = Rs. 30,000 × 4 = 1,20,000
D's Salary = Rs. 30,000 × 4 = 1,20,000
Remaining Profit = Rs. 9,00,000 - Rs. 1,80,000 - Rs. 1,20,000 - Rs. 1,20,000
Remaining Profit = Rs. 4,80,000
Calculation of Profit after the adjustment of Salary:-
A = Rs. 4,80,000 × 2/6 = Rs. 1,60,000
B = Rs. 4,80,000 × 2/6 = Rs. 1,60,000
C = Rs. 4,80,000 × 1/6 = Rs. 80,000
D = Rs. 4,80,000 × 1/6 = Rs. 80,000
| Particulars | A | B | C | D |
|---|---|---|---|---|
| Salary | 1,80,000 | 1,20,000 | - | 1,20,000 |
| Profit after adjustments | 1,60,000 | 1,60,000 | 80,000 | 80,000 |
| Total Revenue received by partners | 3,40,000 | 2,80,000 | 80,000 | 2,00,000 |
| Profit giving before adjustment | 3,00,000 | 3,00,000 | 1,50,000 | 1,50,000 |
| Adjustment | 40,000 Cr. | 20,000 Dr. | 70,000 Dr. | 50,000 Cr. |
A, B and C are partners sharing profits and losses in the ratio of 1:2:3. They have omitted interest on capital @ 8% p.a. for two years ended 31st March, 2023. Their fixed capitals were Rs. 4,00,000, Rs. 6,00,000 and Rs. 8,00,000 respectively. Pass the necessary adjusting entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| C's Capital A/c Dr. To A's Capital A/c (Being two years interest on capital omitted to record) | 16,000 | 16,000 |
Calculation of Interest on Capital:-
A = Rs. 4,00,000 × 8% × 2 = Rs. 64,000
B = Rs. 6,00,000 × 8% × 2 = Rs. 96,000
C = Rs. 8,00,000 × 8% × 2 = Rs. 1,28,000
Total Expenses = Rs. 64,000 + Rs. 96,000 + Rs. 1,28,000 = Rs. 2,88,000
Interest on capital is the expense for the firm. Hence we should divide it in the given ratio.
A = Rs. 2,88,000 × 1/6 = Rs. 48,000
B = Rs. 2,88,000 × 2/6 = Rs. 96,000
C = Rs. 2,88,000 × 3/6 = Rs. 1,44,000
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital | 64,000 | 96,000 | 1,28,000 | 2,88,000 |
| Divide Rs. 2,88,000 in the profit ratio | 48,000 | 96,000 | 1,44,000 | 2,88,000 |
| Difference | 16,000 (Cr.) | - (Nil) | 16,000 (Dr.) | - |
Asha, Suman and Verka were partners in a firm, their Capitals were Rs. 9,00,000, Rs. 7,00,000 and Rs. 4,00,000 respectively as on 1st April 2022. Net Profit for the year ended 31st March, 2023 was Rs. 1,20,000 which was distributed without providing for interest on capital @ 8% p.a. as per partnership deed. Pass necessary adjustment entry.
Asha = Rs. 9,00,000 × 8/100 = Rs. 72,000
Suman = Rs. 7,00,000 × 8/100 = Rs. 56,000
Verka = Rs. 4,00,000 × 8/100 = Rs. 32,000
Total amount of Interest on capital = 72,000 + 56,000 + 32,000 = 1,60,000, which is greater than appropriation. So, Profit will be distributed in the ratio of 72,000 : 56,000 : 32,000 or 9:7:4.
Total Available Profit = 1,20,000
| Particulars | Asha | Suman | Verka | Total |
|---|---|---|---|---|
| Interest on Capital (distributed in 9:7:4) | 54,000 | 42,000 | 24,000 | 1,20,000 |
| Divide Rs. 1,20,000 in the profit ratio (equally) | 40,000 | 40,000 | 40,000 | 1,20,000 |
| Net Effect | 14,000 Cr. | 2,000 Cr. | 16,000 Dr. | - |
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Verka's Capital A/c Dr. To Asha's Capital A/c To Suman's Capital A/c (Being adjustment entry passed) | 16,000 | 14,000 2,000 |
A, B and C are partners sharing profits and losses in 2:2:3:3 respectively. After the accounts of the year had been closed, it was found that interest on drawings @ 6% per annum has not been taken into consideration. The drawings of the partners were: A Rs. 20,000; B Rs. 24,000; C Rs. 32,000 and D Rs. 44,000. Give the necessary adjusting entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| D's Capital A/c Dr. To A's Capital A/c To C's Capital A/c (Being two years interest on drawings omitted to record) | 240 | 120 120 |
A = Rs. 20,000 × 6% × 6/12 = Rs. 600
B = Rs. 24,000 × 6% × 6/12 = Rs. 720
C = Rs. 32,000 × 6% × 6/12 = Rs. 960
D = Rs. 44,000 × 6% × 6/12 = Rs. 1,320
| Particulars | A | B | C | D | Total |
|---|---|---|---|---|---|
| Interest on Drawings | 600 | 720 | 960 | 1,320 | 3,600 |
| Divide Rs. 3,600 in the profit ratio (2:2:3:3) | 720 | 720 | 1,080 | 1,080 | 3,600 |
| Difference | 120 Cr. | - | 120 Cr. | 240 Dr. | - |
A and B were partners sharing profits in 2:1 ratio. During the year ended 31st March, 2026, A's drawings were Rs. 50,000 per month drawn in the beginning of every month and B's drawings were Rs. 25,000 per month drawn at the end of every month. After the preparation of final accounts. It was discovered that interest on A's drawings @ 12% p.a. was not taken into consideration. Given the necessary adjusting entry on 1st April, 2026.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Capital A/c Dr. To B's Capital A/c (Being adjustment entry passed of omission of interest on A's drawings) | 13,000 | 13,000 |
A's Drawings = Rs. 50,000 × 12 = Rs. 6,00,000
Interest on Drawings:-
Rs. 6,00,000 × 12/100 × 6.5/12 = Rs. 39,000
| Particulars | A | B | Total |
|---|---|---|---|
| IOD on A's drawings (Cr. to firm - income) | 39,000 | - | 39,000 |
| Share of Rs. 39,000 income in 2:1 | 26,000 | 13,000 | 39,000 |
| Net Effect | 13,000 Dr. | 13,000 Cr. | - |
Anil, Sunil and Sanjay have omitted interest on capitals for two years ended on 31st March, 2026. Their fixed capitals in two years were Anil Rs. 8,00,000, Sunil Rs. 7,00,000 and Sanjay Rs. 3,00,000. Rate of interest on capitals is 10% p.a. Their profit sharing ratios were in first year 4:3:2 and in second year 3:2:1. Give necessary adjusting entry at the beginning of next year.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Anil's Capital A/c Dr. Sanjay's Capital A/c Dr. To Sunil's Capital A/c (Being adjustment entry passed of omission of interest on A's drawings) | 10,000 10,000 | 20,000 |
| Particulars | Anil | Sunil | Sanjay | Total |
|---|---|---|---|---|
| Interest on Capital @ 10% p.a. | ||||
| For I year 31st March 2025 | 80,000 | 70,000 | 30,000 | 1,80,000 |
| For II year 31st March 2026 | 80,000 | 70,000 | 30,000 | 1,80,000 |
| Total Amount Paid (Cr.) | 1,60,000 | 1,40,000 | 60,000 | 3,60,000 |
| For the year ended 31st March 2025 in the ratio of 4:3:2 | 80,000 | 60,000 | 40,000 | 1,80,000 |
| For the year ended 31st March 2026 in the ratio of 2:2:1 | 90,000 | 60,000 | 30,000 | 1,80,000 |
| Total Loss (Dr.) | 1,70,000 | 1,20,000 | 70,000 | 3,60,000 |
| Net Effect | 10,000 Dr. | 20,000 Cr. | 10,000 Dr. | - |
On 1st April, 2022 the capitals of A and B were Rs. 4,00,000 and Rs. 2,00,000 respectively. They divided profits in their capital ratio. Profit for the year ended 31st March, 2023 were Rs. 3,00,000 which have been duly distributed among the partners, but the following transactions were not passed through the books:-
- Interest on Capitals @ 12% p.a.,
- Interest on Drawings A Rs. 12,000; B Rs. 10,000.
- Commission due to B Rs. 20,000 on special transaction.
- A is to be paid a salary of Rs. 50,000.
You are required to pass a journal entry on 10th April, 2023 which will not affect the Profit and Loss A/c of the firm and at the same time will rectify the errors.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| B's Capital A/c Dr. To A's Capital A/c (Being adjustment for the omission) | 6,000 | 6,000 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest on Capital | 48,000 | 24,000 | 72,000 |
| Commission due to B | - | 20,000 | 20,000 |
| Salary to A | 50,000 | - | 50,000 |
| Total Amount Paid (Cr.) | 98,000 | 44,000 | 1,42,000 |
| Less: Interest on Drawings | 12,000 | 10,000 | 22,000 |
| Net | 86,000 | 34,000 | 1,20,000 |
| Division of firm's loss of Rs. 1,20,000 in the ratio 2:1 | 80,000 | 40,000 | 1,20,000 |
| Total Loss | 6,000 (Cr.) | 6,000 (Dr.) | - |
Kumar and Raja were partners in a firm sharing profits in the ratio of 7:3. Their fixed capitals were: Kumar Rs. 9,00,000 and Raja Rs. 4,00,000. The partnership deed provided for the following but the profit for the year was distributed without providing for:
- Interest on capital @ 9% per annum.
- Kumar's salary Rs. 50,000 per year and Raja's salary Rs. 3,000 per month.
The profit for year ended 31.03.2023 was Rs. 2,78,000. Pass the adjustment entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Kumar's Current A/c Dr. To Raja's Current A/c (Being adjustment for the omission) | 11,100 | 11,100 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest on Capital | 81,000 | 36,000 | 1,71,000 |
| Salary | 50,000 | 36,000 | 86,000 |
| Total Amount Paid (Cr.) | 1,31,000 | 72,000 | 2,03,000 |
| Division of firm's loss of Rs. 2,03,000 in the ratio 7:3 | 1,42,100 | 60,000 | 2,03,000 |
| Net Effect | 11,100 (Dr.) | 11,100 (Cr.) | - |
A, B and C are partners sharing profits in the ratio of 2:2:1. Their fixed capitals were Rs. 4,00,000, Rs. 2,50,000 and Rs. 1,00,000 respectively. Net profit for the year ending 31st March, 2024 amounted to Rs. 2,20,000 which was distributed without providing for the following:
- Salary to B Rs. 5,000 p.m. and to C Rs. 10,000 per quarter.
- Interest on capital @ 6% p.a.
- Commission to Manager @ 10% after charging such commission.
Pass necessary rectifying entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Current A/c Dr. To B's Current A/c To C's Current A/c To Manager's Commission outstanding A/c (Being adjustment for the omission of salary, interest on capitals and manager's commission) | 42,000 | 9,000 13,000 20,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital | 24,000 | 15,000 | 6,000 | 45,000 |
| Salary to Partners | - | 60,000 | 40,000 | 1,00,000 |
| Total Amount Paid (Cr.) | 24,000 | 75,000 | 46,000 | 1,45,000 |
| Division of firm's loss of Rs. 1,45,000 in the ratio 2:2:1 | 58,000 | 58,000 | 29,000 | 1,45,000 |
| Net | 34,000 (Dr.) | 17,000 (Cr.) | 17,000 (Cr.) | - |
| Adjustment for Manager's Commission: Rs. 2,20,000 × 10/110 in ratio 2:2:1 | 8,000 | 8,000 | 4,000 | 20,000 |
| Net Effect | 42,000 (Dr.) | 9,000 (Cr.) | 13,000 (Cr.) | 20,000 (Cr.) |
Suresh and Ramesh were partners in a firm sharing profits in the ratio of 3:2. Their fixed capital were: Suresh Rs. 9,00,000 and Ramesh Rs. 6,00,000. The partnership deed provided for the following:
- Interest on capital @ 5% per annum.
- Rs. 60,000 per annum salary to Suresh and salary Rs. 2,000 per month to Ramesh.
The profit earned by the firm for the year ended 31-3-2023 was Rs. 2,34,000. The profits were divided equally without providing for the above. Pass adjustment entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Ramesh's Current A/c Dr. To Suresh's Current A/c (Being adjustment for interest on capital, salary and wrong distribution of profit) | 33,000 | 33,000 |
| Particulars | Suresh | Ramesh | Total |
|---|---|---|---|
| Interest on Capital | 45,000 | 30,000 | 75,000 |
| Salary to Partners | 60,000 | 24,000 | 84,000 |
| Profit remaining after allowing expense (2,34,000 - 75,000 - 84,000 = Rs. 75,000). It will be divided in 3:2 | 45,000 | 30,000 | 75,000 |
| Net amount which should have been received (Cr.) | 1,50,000 | 84,000 | 2,34,000 |
| Less: Profit already distributed (equally) | 1,17,000 | 1,17,000 | 2,34,000 |
| Net Effect | 33,000 (Cr.) | 33,000 (Dr.) | - |
A, B and C are partners sharing profits and losses in the ratio of 1:2:3. They have omitted interest on capital @ 8% p.a. for two years ended 31st March, 2023. Their fixed capitals were Rs. 4,00,000, Rs. 6,00,000 and Rs. 8,00,000 respectively. Pass the necessary adjusting entry.
A, B and C are partners sharing profits and losses in the ratio of 2:3:5. The net profits for the year ended 31st March, 2024 were Rs. 3,60,000 distributed in the ratio of their capitals without providing for any of the above adjustments. The profits were to be shared in the ratio 2:3:5. Pass the necessary adjustment entry showing the working clearly.
Their capitals were A Rs. 1,00,000, B Rs. 2,00,000 and C Rs. 3,00,000 respectively on 1st April, 2023. According to the partnership deed they were entitled to an interest on capital @ 5% p.a. In addition A was also entitled to draw a salary of Rs. 5,000 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital; but before charging the salary payable to A.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| B's Current A/c Dr. C's Current A/c Dr. To A's Current A/c (Being adjustment for the omission of salary, interest on capitals) | 33,950 21,750 | 55,700 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on capital | 5,000 | 10,000 | 15,000 | 30,000 |
| Salary | 60,000 | - | - | 60,000 |
| Commission (Rs. 3,60,000 - Rs. 30,000 × 5%) | - | - | 16,500 | 16,500 |
| Remaining profit (Rs. 3,60,000 - Rs. 30,000 - Rs. 60,000 - Rs. 16,500) = Rs. 2,53,500 in the ratio 2:3:5 | 50,700 | 76,050 | 1,26,750 | 2,53,500 |
| Net amount (Cr.) | 1,15,700 | 86,050 | 1,58,250 | 3,60,000 |
| Less: Profit already distributed in 1:2:3 (Dr.) | 60,000 | 1,20,000 | 1,80,000 | 3,60,000 |
| Net Profit | 55,700 (Cr.) | 33,950 (Dr.) | 21,750 (Dr.) | - |
X, Y and Z are partners in a firm sharing profits and losses in the ratio 5:3:2. Their capitals (Fixed) are Rs. 2,00,000; Rs. 1,50,000; Rs. 1,25,000 respectively. For the year ended 31st March, 2024 interest on capital was credited to them @ 8% instead of 10%. Give adjusting journal entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| X's Current A/c Dr. To Y's Current A/c To Z's Current A/c (Being adjustment for the omission) | 750 | 150 600 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest credited @ 8% | 16,000 | 12,000 | 10,000 | 38,000 |
| Interest should be credited @ 10% | 20,000 | 15,000 | 12,500 | 47,500 |
| Short amount credited to partners | 4,000 | 3,000 | 2,500 | 9,500 |
| Total loss Rs. 9,500 loss should be divided in the ratio 5:3:2 | 4,750 | 2,850 | 1,900 | 9,500 |
| Net Effect | 750 (Dr.) | 150 (Cr.) | 600 (Cr.) | - |
Jay and Vijay were partners in a firm sharing profits and losses in the ratio of 7:3, Their respective fixed capitals were Rs. 9,00,000 and Rs. 7,00,000. The partnership deed provided for interest on capital @ 8% per annum. After preparing the accounts for the year ended 31st March, 2024, it was discovered that interest on capital was allowed @ 9% per annum. Showing your working clearly, pass the necessary journal entry to rectify the error.
Jay = Rs. 9,00,000 × 9/100 = Rs. 81,000
Vijay = Rs. 7,00,000 × 9/100 = Rs. 63,000
Jay = Rs. 9,00,000 × 8/100 = Rs. 72,000
Vijay = Rs. 7,00,000 × 8/100 = Rs. 56,000
| Particulars | Jay | Vijay | Total |
|---|---|---|---|
| Interest on Capital @ 9% | 81,000 | 42,000 | 1,44,000 |
| Interest on Capital @ 8% | 72,000 | 56,000 | 1,28,000 |
| Net Effect (Dr.) | 9,000 | 7,000 | 16,000 |
| Rs. 16,000 is divisible in 7:3 (Cr.) | 11,200 | 4,800 | 2,200 |
| Net | 2,200 Cr. | 2,200 Dr. | - |
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Vijay's Capital A/c Dr. To Jay's Capital A/c (Being adjustment entry passed) | 2,200 | 2,200 |
A, B and C were partners sharing profits in the ratio of 1:2:3. A withdrew Rs. 5,000 every month, B withdrew Rs. 60,000 during the year and C withdrew Rs. 15,000 during each quarter. It was discovered that for the year ending 31st March 2024, interest on drawings was charged @ 8% p.a. whereas there is no provision for interest on drawings in the partnership deed. Pass necessary rectifying entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| C's Capital A/c Dr. To A's Capital A/c (Being adjustment entry passed) | 1,200 | 1,200 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Drawings (Cr.) | 2,400 | 2,400 | 2,400 | 7,200 |
| Division of Rs. 7,200 in 1:2:3 (Dr.) | 1,200 | 2,400 | 3,600 | 7,200 |
| Net Effect | 1,200 (Cr.) | - (Nil) | 1,200 (Dr.) | - |
A = Rs. 60,000 × 8/100 × 6/12 = Rs. 2,400
B = Rs. 60,000 × 8/100 × 6/12 = Rs. 2,400
C = Rs. 60,000 × 8/100 × 6/12 = Rs. 2,400
After the accounts of a partnership have been drawn up and the books closed off, it is discovered that for the year ended 31st March, 2023 and 2024, interest has been credited to the partners upon their capitals at 5% per annum although, no provision for interest is made in the partnership agreement. The amount involved are:
| Interest Credited Year | A (Rs.) | B (Rs.) | C (Rs.) |
|---|---|---|---|
| 2023 | 4,200 | 2,400 | 1,320 |
| 2024 | 4,320 | 2,520 | 1,320 |
You are required to put through adjusting entry as on 1st April, 2024, if the profits were shared as follows in 2023, 2:2:1 and in 2024, 3:4:3.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Current A/c Dr. To B's Current A/c To C's Current A/c (Being adjustment of Interest on capital wrongly provided in the accounts for two years) | 2,904 | 1,512 1,392 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest allowed on capitals @ 5% For the year 2023 | 4,200 | 2,400 | 1,320 | 7,920 |
| For the year 2024 | 4,320 | 2,520 | 1,320 | 8,160 |
| Total amount recoverable | 8,520 | 4,920 | 2,640 | 16,080 |
| Division of firm's profit For the year 2023 (2:2:1) | 3,168 | 3,168 | 1,584 | 7,920 |
| For the year 2024 (3:4:3) | 2,448 | 3,264 | 2,448 | 8,160 |
| Total profit distributed | 5,616 | 6,432 | 4,032 | 16,080 |
| Net Effect (Dr./Cr.) | 2,904 (Dr.) | 1,512 (Cr.) | 1,392 (Cr.) | - |
Sachin, Kapil and Rashmi have been sharing profits in the ratio 3:2:1 respectively. Rashmi wants that she should share profits equally along with Sachin and Kapil and she further wants that change in profit sharing ratio should be applicable respectively for the last three years. Other partners have no objection to this. The profits for the last three year were Rs. 60,000, Rs. 47,000 and Rs. 55,000. Record the adjustment by means of a journal entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Sachin's Current A/c Dr. To Rashmi's Current A/c (Being adjustment on account of charging in profit sharing ratio for the last three year) | 27,000 | 27,000 |
| Particulars | Sachin | Kapil | Rashmi | Total |
|---|---|---|---|---|
| Total Profit for three years (Rs. 60,000 + Rs. 47,000 + Rs. 55,000 = Rs. 1,62,000) | 1,62,000 | |||
| Profit has already been divided in the ratio of 3:2:1 | 81,000 | 54,000 | 27,000 | 1,62,000 |
| Profit are shared equally | 54,000 | 54,000 | 54,000 | 1,62,000 |
| Net Effect | 27,000 (Dr.) | - (Nil) | 27,000 (Cr.) | - |
Mohan, Vijay and Anil are partners, their capitals 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, 2024 Rs. 24,000 has already been credited to the partners in the proportion in which they share profits. Their drawings were Rs. 5,000 (Mohan); Rs. 4,000 (Vijay) and Rs. 3,000 (Anil) for the year ending 31st March, 2024. Subsequently the following omissions were noticed and it was decided to bring them into Account.
- Interest on Capital at 10% p.a.
- Interest on Drawings Mohan Rs. 250, Vijay Rs. 200 and Anil Rs. 150.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Anil's Capital A/c Dr. To Mohan's Capital A/c (Being adjustment on account of charging in profit sharing ratio for the last three year) | 550 | 550 |
| Particulars | Mohan | Vijay | Anil |
|---|---|---|---|
| Capitals as on 31.03.2024 | 30,000 | 25,000 | 20,000 |
| Less: Share of Profit (already added) | 8,000 | 8,000 | 8,000 |
| 22,000 | 17,000 | 12,000 | |
| Add: Drawings | 5,000 | 4,000 | 3,000 |
| Capital as on 01-04-2024 | 27,000 | 21,000 | 15,000 |
| Particulars | Mohan | Vijay | Anil | Total |
|---|---|---|---|---|
| Interest on capital @ 10% | 2,700 | 2,100 | 1,500 | 6,300 |
| Less: Interest on drawings | 250 | 200 | 150 | 600 |
| Balance | 2,450 | 1,900 | 1,350 | 5,700 |
| Division of loss in equal ratio | 1,900 | 1,900 | 1,900 | 5,700 |
| Net Effect | 550 (Cr.) | - (Nil) | 550 (Dr.) | - |
Questions Q58 to Q77 - Opening Capitals from Balance Sheet, Guaranteed Profits, P&L Adjustment A/c, Full Appropriation Accounts
The Capital accounts of A, B and C showed credit balance of Rs. 5,00,000, Rs. 3,00,000 and Rs. 2,00,000 respectively, after taking into account drawings of Rs. 3,00,000. They shared profits in the ratio of 2:1:1. The drawings of the partners during the year 2023-24 were:
- A withdrew Rs. 10,000 at the beginning of each half year.
- B withdrew Rs. 10,000 at the end of each half year.
- C's Drawings were:
| Date | Amount |
|---|---|
| 1st May, 2023 | 6,000 |
| 1st October, 2023 | 5,000 |
| 31st December, 2023 | 4,000 |
| 31st March, 2024 | 5,000 |
Calculate interest on partner's capital @ 8% p.a. and interest on partner's drawings @ 10% p.a. for the year ended 31st March, 2024.
(i) Calculation of Interest on Drawings at the beginning of each half year:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Interest on Drawings = Rs. 20,000 × 10/100 × 9/12
Interest on Drawings = Rs. 1,500
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 12 months + 6 months/2
Average Period = 18 months/2
Average Period = 9 months
(ii) Calculation of Interest on Drawings at the end of each half year:-
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Interest on Drawings = Rs. 20,000 × 10/100 × 3/12
Interest on Drawings = Rs. 500
Average Period = Time left after first drawing + Time left after last drawing/2
Average Period = 6 months + 0 months/2
Average Period = 6 months/2
Average Period = 3 months
(iii) Calculation of C's Interest on Drawings:-
| Date | Amount | Period | Product |
|---|---|---|---|
| 1st May, 2023 | 6,000 | 11 | 66,000 |
| 1st October, 2023 | 5,000 | 6 | 30,000 |
| 31st December, 2023 | 4,000 | 3 | 12,000 |
| 31st March, 2024 | 5,000 | 0 | 0 |
| Total | 20,000 | 1,08,000 |
Interest on Drawings = Interest on Drawings × Rate/100 × Average Period/12
Interest on Drawings = Rs. 1,08,000 × 10/100 × 1/12
Interest on Drawings = Rs. 900
A and B are partners in firm sharing profits and losses in the ratio of 2:1 The following was the Balance Sheet of the firm as at 31.3.2026.
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| Capitals: A | 6,00,000 | Sundry Assets | 10,00,000 |
| B | 4,00,000 | ||
| Total | 10,00,000 | Total | 10,00,000 |
The profits Rs. 4,50,000 for the year ended 31.3.2026 were divided between the partners without allowing interest on capital @ 9% p.a. and without charging interest on drawings @ 12% p.a. During the year A withdrew Rs. 10,00,000 and B Rs. 50,000. Pass the necessary adjustment journal entry and show your working clearly.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Capital A/c Dr. To B's Capital A/c (Being interest on capital and interest on drawings not charged) | 6,000 | 6,000 |
| Particulars | A | B |
|---|---|---|
| Closing Capitals | 6,00,000 | 4,00,000 |
| Less: Share of Profit (already added) | 3,00,000 | 1,50,000 |
| 3,00,000 | 2,50,000 | |
| Add: Drawings | 1,00,000 | 50,000 |
| Opening Capital | 4,00,000 | 3,00,000 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest on capital | 36,000 | 27,000 | 63,000 |
| Less: Interest on drawings | 6,000 | 3,000 | 9,000 |
| Balance | 30,000 | 24,000 | 54,000 |
| Division of loss in (2:1) | 36,000 | 18,000 | 74,700 |
| Net Effect | 6,000 (Dr.) | 6,000 (Cr.) | - |
A and B are partners in a firm sharing profits and losses in the ratio of 2:3. The following was the Balance Sheet of the firm as at 31.3.2026.
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| Capitals: | 3,00,000 | Sundry Assets | 7,90,000 |
| Total | 7,90,000 | Total | 7,90,000 |
Profits Rs. 2,00,000 for the year ended 31.3.2026 were divided between the partners without allowing interest on capital @6% p.a., interest on drawings @10% p.a. and salary to B @ Rs. 5,000 per month. During the year A withdrew Rs. 40,000 and B withdrew Rs. 20,000. Showing your working notes clearly, pass the necessary rectifying entry.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Capital A/c Dr. To B's Capital A/c (Being interest on capital and interest on drawings not charged) | 13,400 | 13,400 |
| Particulars | A | B |
|---|---|---|
| Closing Capitals | 4,90,000 | 3,00,000 |
| Less: Share of Profit (already added) | 80,000 | 1,20,000 |
| 4,10,000 | 1,80,000 | |
| Add: Drawings | 40,000 | 20,000 |
| Opening Capital | 4,50,000 | 2,00,000 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest on capital @ 6% | 27,000 | 12,000 | 39,000 |
| Add: B's Salary | - | 60,000 | 60,000 |
| Balance | 27,000 | 72,000 | 99,000 |
| Less: Interest on drawings | 2,000 | 1,000 | 3,000 |
| Balance | 25,000 | 71,000 | 96,000 |
| Division of loss in (2:3) | 38,400 | 57,600 | 96,000 |
| Net Effect | 13,400 (Dr.) | 13,400 (Cr.) | - |
A and B are partners sharing profits and losses in the ratio of 3:1. Following is the Balance Sheet of the firm as at 31st March, 2026.
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| A's Capitals | 90,000 | Drawings: A | 12,000 |
| B's Capitals | 30,000 | B | 6,000 |
| Total Drawings | 18,000 | ||
| Sunday Assets | 1,02,000 | ||
| Total | 1,20,000 | Total | 1,20,000 |
Profit for the year ended 31st March, 2026 Rs. 24,000 was divided between the partners in their profit sharing ratio, but interest on capital at 5% p.a. and on drawings at 6% p.a. was inadvertently ignored. Give the necessary adjustment entry for the adjustment of interest. Interest on drawings may be calculated on an average basis for 6 months.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| B's Capital A/c Dr. To A's Capital A/c (Being interest on capital and interest on drawings not charged) | 45 | 45 |
| Particulars | A | B |
|---|---|---|
| Closing Capitals | 90,000 | 30,000 |
| Less: Share of Profit (already added) | 18,000 | 6,000 |
| Opening Capital | 72,000 | 24,000 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest on capital @ 5% | 3,600 | 1,200 | 4,800 |
| Less: Interest on drawings | 360 | 180 | 540 |
| Balance | 3,240 | 1,020 | 4,260 |
| Division of loss in (3:1) | 3,195 | 1,065 | 4,260 |
| Net Effect | 45 (Cr.) | 45 (Dr.) | - |
From the following Balance Sheet of A and B, calculate interest on capital at 5% p.a. for the year ending 31st March, 2026:
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| A's Capitals | 1,00,000 | Fixed Assets | 1,40,000 |
| B's Capitals | 80,000 | Current Assets | 60,000 |
| P & L Appro. A/c | 40,000 | Drawings - B | 20,000 |
| Total | 2,20,000 | Total | 2,20,000 |
Profit during the year ended 31st March, 2026 was Rs. 70,000. A and B share profits in the ratio of 2:1. Drawings during the year ended 31st March, 2026 were A Rs. 16,000 and B Rs. 20,000.
| Particulars | A | B |
|---|---|---|
| Closing Capitals | 1,00,000 | 80,000 |
| Less: Share of Profit (already added) (Rs. 70,000 - Rs. 40,000 = Rs. 30,000) ratio 2:1 | 20,000 | 10,000 |
| 80,000 | 70,000 | |
| Add: Drawings | 16,000 | - |
| Opening Capital | 96,000 | 70,000 |
A's Interest on Capital = Rs. 96,000 × 5% = Rs. 4,800
B's Interest on Capital = Rs. 70,000 × 5% = Rs. 3,500
Cheese and Slice are equal partners. Their capitals as on April 01, 2022 were Rs. 50,000 and Rs. 1,00,000 respectively. After the accounts for the financial year ending March 31, 2023 have been prepared, it is observed that interest on capital 6% per annum and salary to Cheese @ Rs. 5,000 per annum, as provided in the partnership deed has not been credited to the partner's capital accounts before distribution of profits. You are required to give necessary rectifying entries using P & L adjustment account.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Profit & Loss Adjustment A/c Dr. To Cheese's Capital A/c To Slice's Capital A/c (Being interest on capital omitted to pay now paid) | 9,000 | 3,000 6,000 | ||
| Profit & Loss Adjustment A/c Dr. To Cheese's Capital A/c (Being salary omitted to pay now paid) | 5,000 | 5,000 | ||
| Cheese's Capital A/c Dr. Slice's Capital A/c Dr. To Profit and Loss Adjustment A/c (Being loss trf. To partners capital Account) | 7,000 7,000 | 14,000 |
Piya and Shreya are partners in a firm. Their Capital Accounts as on 1st April, 2023 were Rs. 5,00,000 and Rs. 3,00,000 respectively. As per provisions of the Deed:
- Piya was entitled to a remuneration of Rs. 60,000 per year and Shreya a remuneration of Rs. 6,000 per month
- Interest on Capitals was to be provided @ 6% p.a.
- Profit will be divided equally among the partners.
Ignoring the above terms, net profits of Rs. 4,00,000 for the year ended 31st March, 2024 was distributed between the partners in the ratio of their capitals. Pass the journal entries to rectify the above errors.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Priya's Capital A/c Dr. Shreya's Capital A/c Dr. To Profit and Loss Adjustment A/c (Being profit revised through P&L Adjustment) | 2,50,000 1,50,000 | 4,00,000 | ||
| Profit and Loss Adjustment A/c Dr. To Piya's Capital A/c To Shreya's Capital A/c (Being remuneration to partners credited to partners capital A/c) | 1,32,000 | 60,000 72,000 | ||
| Profit and Loss Adjustment A/c Dr. To Piya's Capital A/c To Shreya's Capital A/c (Being interest on capital paid to partners) | 48,000 | 30,000 18,000 | ||
| Profit and Loss Adjustment A/c Dr. To Piya's Capital A/c To Shreya's Capital A/c (Being profit distributed to partners) | 2,20,000 | 1,10,000 1,10,000 |
A, B and C are partners in a firm. Their profit sharing ratio is 3:2:1. However, C is guaranteed a minimum amount of Rs. 10,000 as share of profits every year. Any deficiency arising on that account shall be met by A. The profits for the two years ending 31st March, 2025 and 2026 were Rs. 30,000 and Rs. 90,000 respectively. Prepare Profit and Loss Appropriation Account for the two years.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit transferred to capital a/c | By Profit & Loss A/c | 30,000 | |
| A 10,000 | |||
| B 10,000 | |||
| C 10,000 | 30,000 | ||
| Total | 30,000 | Total | 30,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit transferred to capital a/c | By Profit & Loss A/c | 90,000 | |
| A 45,000 | |||
| B 30,000 | |||
| C 15,000 | 90,000 | ||
| Total | 90,000 | Total | 90,000 |
Calculation of Share of Profit in 2025:-
A's Share of Profit = Rs. 30,000 × 3/6 = Rs. 15,000
B's Share of Profit = Rs. 30,000 × 2/6 = Rs. 10,000
C's Share of Profit = Rs. 30,000 × 1/6 = Rs. 5,000
C's share Rs. 5,000 < guaranteed Rs. 10,000. Deficiency = Rs. 5,000 borne by A.
A gets 15,000 - 5,000 = Rs. 10,000. C gets Rs. 10,000.
Calculation of Share of Profit in 2026:-
A's Share of Profit = Rs. 90,000 × 3/6 = Rs. 45,000
B's Share of Profit = Rs. 90,000 × 2/6 = Rs. 30,000
C's Share of Profit = Rs. 90,000 × 1/6 = Rs. 15,000
C's share Rs. 15,000 > guaranteed Rs. 10,000. No deficiency. Distribute normally.
X, Y and Z are partners with capitals of Rs. 4,00,000; Rs. 3,00,000 and Rs. 2,00,000 respectively. They charge 8% p.a. interest on their capitals and divide the profits in the ratio of 3:2:1. X has guaranteed that Z's share shall not amount to less than Rs. 50,000 in any one year. Their Drawings during the year were Rs. 50,000; Rs. 40,000 and Rs. 35,000 respectively. Net profits for the year before providing interest on capitals was Rs. 2,52,000. Prepare P & L Appropriation A/c and Capital Accounts.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Profit & Loss A/c | 2,52,000 | |
| X 32,000 | |||
| Y 24,000 | |||
| Z 16,000 | 72,000 | ||
| To Profit transferred to capital a/c | |||
| X 70,000 | |||
| Y 60,000 | |||
| Z 50,000 | 1,80,000 | ||
| Total | 2,52,000 | Total | 2,52,000 |
Calculation of Interest on capital:-
X's Interest on capital = Rs. 4,00,000 × 8% = Rs. 32,000
Y's Interest on capital = Rs. 3,00,000 × 8% = Rs. 24,000
Z's Interest on capital = Rs. 2,00,000 × 8% = Rs. 16,000
Calculation of Share of Profit in 2025:-
X's Share of Profit = Rs. 1,80,000 × 3/6 = Rs. 90,000 - Rs. 20,000 = Rs. 70,000
Y's Share of Profit = Rs. 1,80,000 × 2/6 = Rs. 60,000
Z's Share of Profit = Rs. 1,80,000 × 1/6 = Rs. 30,000 + Rs. 20,000 = Rs. 50,000
Vidhi, Manas and Ansh were partners sharing profits and losses in the ratio of 2:3:5. Ansh was given a guarantee that his share of profits in any given year would not be less than Rs. 1,20,000. Deficiency, if any, would be borne by Vidhi and Manas equally. Profit for the year ended 31st March, 2024 amounted Rs. 2,00,000. Pass necessary journal entries in the books of the firm for division of profits.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Profit & Loss A/c Dr. To Profit & Loss Appropriation A/c (Being net profit transfer to P&L Appropriation A/c) | 2,00,000 | 2,00,000 | ||
| Profit & Loss Adjustment A/c Dr. To Vidhi's Capital A/c To Manas's Capital A/c To Ansh's Capital A/c (Being profit distributed to partners) | 2,00,000 | 40,000 60,000 1,00,000 | ||
| Vidhi's Capital A/c Dr. Manas's Capital A/c Dr. To Ansh's Capital A/c (Being deficiency of Ansh paid by Vidhi and Manas) | 10,000 10,000 | 20,000 |
A, B and C were partners sharing profits and losses in the ratio of 3:2:1. Their capitals on 1st April, 2017 were: A Rs. 5,00,000; B Rs. 3,00,000 and C Rs. 2,00,000. A had personally guaranteed that in any year C's share of profit after allowing interest on capital to all partners @ 8% p.a. and charging interest on drawings @ 10% p.a. will be less than Rs. 1,00,000. The net profit for the year ended 31st March, 2024, before allowing of charging any interest amounted to Rs. 4,32,000. A has withdrawn Rs. 5,000 at the end of every month. B has withdrawn Rs. 15,000 at the end of every quarter. C has withdrawn Rs. 60,000 during the year. Prepare Profit and Loss Appropriation Account for the year 2023-24.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on capital: | By Profit & Loss A/c | 4,32,000 | |
| A 40,000 | By Interest on Drawings: | ||
| B 24,000 | A's Capital a/c 2,750 | ||
| C 16,000 | 80,000 | B's Capital a/c 2,250 | |
| To Profit transferred to | C's Capital a/c 3,000 | 8,000 | |
| A's Capital a/c 1,40,000 | |||
| B's Capital a/c 1,20,000 | |||
| C's Capital a/c 1,00,000 | 3,60,000 | ||
| Total | 4,40,000 | Total | 4,40,000 |
Calculation of Interest on Drawings:-
A's Interest on Drawings = Rs. 60,000 × 5.5/12 × 10/100 = Rs. 2,750
B's Interest on Drawings = Rs. 60,000 × 4.5/12 × 10/100 = Rs. 2,250
C's Interest on Drawings = Rs. 60,000 × 6/12 × 10/100 = Rs. 3,000
Calculation of Profit:-
Net Profit = 4,32,000 + 8,000 - Rs. 80,000 = Rs. 3,60,000
A's Share of Profit = Rs. 3,60,000 × 3/6 = Rs. 1,80,000 - Rs. 40,000 = Rs. 1,20,000
B's Share of Profit = Rs. 3,60,000 × 2/6 = Rs. 1,20,000
C's Share of Profit = Rs. 3,60,000 × 1/6 = Rs. 60,000 + Rs. 40,000 = Rs. 1,00,000
C's deficiency = Rs. 1,00,000 - Rs. 60,000 = Rs. 40,000. Deficiency will be contributed by A.
The partners of a firm distributed the profits for the year ended 31st March 2024, Rs. 1,50,000 in the ratio of 2:2:1 without providing for the following adjustments:
- A and B were entitled to a salary of Rs. 1,500 per quarter.
- C was entitled to a commission of Rs. 18,000.
- A and C had guaranteed a minimum profit of Rs. 50,000 p.a. to B.
- Profits were to be shared in the ratio of 3:3:2.
Pass necessary journal entry for the above adjustment in the books of the firm.
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| A's Capital A/c Dr. B's Capital A/c Dr. To C's Capital A/c (Being adjustment entry passed) | 12,000 4,000 | 16,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Salary (Cr.) | 6,000 | 6,000 | - | 12,000 |
| Commission (Cr.) | - | - | 18,000 | 18,000 |
| Profit guaranteed to B (Cr.) | - | 50,000 | - | 50,000 |
| Remaining Profit (1,50,000 - 80,000 = 70,000) (Cr.) | 42,000 | - | 28,000 | 70,000 |
| Total (Cr.) | 48,000 | 56,000 | 46,000 | 1,50,000 |
| Less: Profit Distributed in 2:2:1 (Dr.) | 60,000 | 60,000 | 30,000 | 1,50,000 |
| Net effect | 12,000 (Dr.) | 4,000 (Dr.) | 16,000 (Cr.) | - |
Yamini, Divyanshi and Rohini are partners sharing profits in the ratio 3:2:1. Rohini is given guarantee that her share of profit in a year would be at least Rs. 1,20,000. Deficiency, if any would be borne by Yamini and Divyanshi in the ratio of 5:4. Other terms of partnership agreement are:
- Divyanshi and Rohini to get salary of Rs. 15,000 p.m. and Rs. 20,000 per quarter respectively.
- Yamini to get commission of 2% on sales.
Net Profit earned by the firm of Rs. 8,00,000 was distributed in the ratio of 2:1:1 without taking into consideration the above provisions. Sales for the year amounted to Rs. 45,00,000. You are required to pass a single adjustment entry to rectify the error (show working clearly).
| Date | Particulars | L.F. | Debit Amount | Credit Amount |
|---|---|---|---|---|
| Yamini's Capital A/c Dr. To Divyanshi's Capital A/c (Being adjustment entry passed) | 1,10,000 | 1,10,000 |
| Particulars | Yamini | Divyanshi | Rohini | Total |
|---|---|---|---|---|
| Salary (Cr.) | - | 1,80,000 | 80,000 | 2,60,000 |
| Commission (Cr.) | 90,000 | - | - | 90,000 |
| Correct distribution of Profit (4,50,000 in 3:2:1) (WN) (Cr.) | 2,00,000 | 1,30,000 | 1,20,000 | 4,50,000 |
| Total (Cr.) | 2,90,000 | 3,10,000 | 2,00,000 | |
| Wrong Distribution of Profit in 2:1:1 (Dr.) | 4,00,000 | 2,00,000 | 2,00,000 | 8,00,000 |
| Net effect | 1,10,000 Dr. | 1,10,000 Cr. | - | - |
Divisible Profit = Rs. 8,00,000 - Rs. 2,60,000 - Rs. 90,000 = Rs. 4,50,000
Yamini's Profit = Rs. 4,50,000 × 3/6 = Rs. 2,25,000 - 25,000 = 2,00,000
Divyanshi's Profit = Rs. 4,50,000 × 2/6 = Rs. 1,50,000 - 20,000 = 1,30,000
Rohini's Profit = Rs. 4,50,000 × 1/6 = Rs. 75,000 + 45,000 = 1,20,000
Guarantee of minimum profit to Rohini = Rs. 1,20,000
Deficiency = 1,20,000 - 75,000 = 45,000
Deficiency in Rohini's share contributed by Yamini and Divyanshi in 5:4.
Yamini = Rs. 45,000 × 5/9 = 25,000
Devyanshi = Rs. 45,000 × 4/9 = 20,000
X and Y were sharing profits in the ratio of 2:1. On 1st April, 2023 they admitted Z for 1/4th share in the profits. Z is guaranteed a minimum profit of Rs. 1,00,000 for the year. Any deficiency in Z's share is to be borne by X and Y in the ratio of 3:2. Losses for the year ending 31st March, 2024 amounted to Rs. 1,20,000. Record necessary entries.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 31 Mar. | X's Capital A/c Dr. Y's Capital A/c Dr. Z's Capital A/c Dr. To Profit & Loss A/c (Being loss is distributed among partners) | 60,000 30,000 30,000 | 1,20,000 | |
| 31 Mar. | X's Capital A/c Dr. Y's Capital A/c Dr. To Z's Capital A/c (Being grantee of Z's Profit will fulfilled by X and Y in 3:2) | 78,000 52,000 | 1,30,000 |
Z's Share of Loss = Rs. 1,20,000 × 1/4 = Rs. 30,000
Remaining Profit = Rs. 1,20,000 - Rs. 30,000 = Rs. 90,000
X's Share of Loss = Rs. 90,000 × 2/5 = Rs. 60,000 (after Z's 1/4 share, remaining 3/4 split 2:1 becomes 2/3:1/3 of remaining)
Y's Share of Loss = Rs. 90,000 × 3/5 = Rs. 30,000
Z's guaranteed minimum profit of Rs. 1,00,000. Total loss of Z = Rs. 1,00,000 + Rs. 30,000 = Rs. 1,30,000. Which is distributed by X and Y in the ratio of 3:2.
A, B and C are partners sharing profits in the ratio of 4:3:2. It was provided that B's share of profit will not be less than Rs. 1,50,000 per annum. The losses for the year ended 31st March, 2024 were Rs. 85,000, before allowing interest on Loan of Rs. 1,00,000 taken from A on 1st June, 2023. You are required to show necessary account for division of loss and pass necessary journal entries.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Loss before Interest | 85,000 | By Net Loss Transferred to | |
| To Interest on A's Loan | 5,000 | A's Capital A/c 40,000 | |
| B's Capital A/c 30,000 | |||
| C's Capital A/c 20,000 | 90,000 | ||
| Total | 90,000 | Total | 90,000 |
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2025 31 Mar. | Interest on A's Loan A/c Dr. To A's Loan A/c (Being interest paid on A's loan) | 5,000 | 5,000 | |
| Profit & Loss A/c Dr. To Interest on A's Loan A/c (Being Interest on loan charged to profit and loss A/c) | 5,000 | 5,000 | ||
| A's Capital A/c Dr. B's Capital A/c Dr. C's Capital A/c Dr. To Profit & Loss A/c (Being loss is divided among partners) | 40,000 30,000 20,000 | 90,000 | ||
| A's Capital A/c Dr. C's Capital A/c Dr. To B's Capital A/c (Being deficiency of B's profit covered by A and C in the ratio of 4:2) | 1,20,000 60,000 | 1,80,000 |
A's Share of Loss = Rs. 90,000 × 4/9 = Rs. 40,000
B's Share of Loss = Rs. 90,000 × 3/9 = Rs. 30,000
C's Share of Loss = Rs. 90,000 × 2/9 = Rs. 20,000
B's guaranteed minimum profit of Rs. 1,50,000. Total loss of Z = Rs. 1,50,000 + Rs. 30,000 = Rs. 1,80,000. Which is paid by A and C in the ratio of 4:2.
A's Share to B = Rs. 1,80,000 × 4/6 = Rs. 1,20,000
A's Share to B = Rs. 1,80,000 × 2/6 = Rs. 60,000
Aakash and Baadal entered into partnership on 1st October, 2023 with the capitals of Rs. 80,00,000 and Rs. 60,00,000 respectively. They decided to share profit and losses equally. Partners were entitled to interest on capital 10% p.a., as per the provisions of the partnership deed. Baadal is given a guarantee that his share of profit, after charging interest on capital, will not be less than Rs. 7,00,000 per annum. Any deficiency arising on that account shall be met by Aakash. The profit of the firm for the year ended 31st March, 2024 amounted to 13,00,000. Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2024.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit and Loss A/c (Profit) | 13,00,000 | |
| Aakash - 4,00,000 | |||
| Baadal - 3,00,000 | 7,00,000 | ||
| To Profit Transferred | |||
| Aakash - 3,00,000 - 50,000 = 2,50,000 | |||
| Baadal - 3,00,000 + 50,000 = 3,50,000 | 6,00,000 | ||
| Total | 13,00,000 | Total | 13,00,000 |
1. Baadal's Guarantee for a year Rs. 7,00,000
1st Oct. 2023 to 31st March, 2024
= 7,00,000 × 1/2 = Rs. 3,50,000
2. Deficiency = 3,50,000 - 3,00,000 = 50,000
D, E and F were partners in a firm sharing profits in the ratio of 5:7: 8. Their fixed capitals on 1st April, 2023 were D Rs. 5,00,000, E Rs. 7,00,000 and F Rs. 8,00,000. Their partnership Deed provided for the following:
- Interest on capital @10% p.a.
- Salary of 10,000 per month to F.
- Interest on drawing @12% p.a.
D withdrew Rs. 40,000 on 30th April, 2023; E withdrew Rs. 50,000 on 30th June 2023 and F withdrew Rs. 30,000 on 31st March, 2024. During the year ended 31st March, 2024 the firm earned a profit of Rs. 3,50,000. Prepare the Profit and Loss Appropriation Account for the year ended 31st March, 2024.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit & Loss a/c | 3,50,000 | |
| D 50,000 | By Interest on Drawings | ||
| E 70,000 | D 4,400 | ||
| F 80,000 | 2,00,000 | E 4,500 | 8,900 |
| To F's Salary A/c | 1,20,000 | ||
| To Profit transferred to | |||
| D's Capital A/c 9,725 | |||
| E's Capital A/c 13,615 | |||
| F's Capital A/c 15,560 | 38,900 | ||
| Total | 3,58,900 | Total | 3,58,900 |
D's Profit Share = Rs. 38,900 × 5/20 = Rs. 9,725
E's Profit Share = Rs. 38,900 × 7/20 = Rs. 13,615
F's Profit Share = Rs. 38,900 × 8/20 = Rs. 15,560
IOD: D = 40,000 × 12% × 11/12 = Rs. 4,400 (30 April, 11 months to Mar 31)
E = 50,000 × 12% × 9/12 = Rs. 4,500 (30 June, 9 months to Mar 31)
F = 30,000 × 12% × 0/12 = Rs. 0 (31 March, 0 months remaining)
Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio 3:1. The profit and loss account of the firm for the year ending March 31, 2024 shows a net profit of Rs. 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
- Partners capital on April 1, 2023 : Simmi 30,000; Sonu 60,000.
- Current accounts balances on April 1, 2023 : Simmi 30,000 (Cr.); Sonu 15,000 (Cr.).
- Partners drawings during the year amounted to: Simmi 20,000; Sonu 15,000.
- Interest on capital was allowed @ 5% p.a.
- Interest on drawing was to be charged @ 6% p.a. at an average of six months.
- Partner's salaries: Simmi Rs. 12,000 and Sonu Rs. 9,000. Also show the partner's current accounts.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Salary a/c | By Profit & Loss A/c | 1,50,000 | |
| Simmi 1,500 | By Interest on Drawings: | ||
| Sonu 3,000 | 4,500 | Simmi 600 | |
| To Interest on Capital | Sonu 450 | 1,050 | |
| Simmi 1,500 | |||
| Sonu 3,000 | 4,500 | ||
| To Profit transferred to: | |||
| Simmi's Current a/c 94,163 | |||
| Sonu's Current a/c 31,387 | 1,25,550 | ||
| Total | 1,51,050 | Total | 1,51,050 |
| Date | Particulars | Shankar | Manu | Date | Particulars | Shankar | Manu |
|---|---|---|---|---|---|---|---|
| 2026 | 2025 | ||||||
| Mar.31 | To Drawings | 20,000 | 15,000 | Apr. 1 | By Balance b/d | 30,000 | 15,000 |
| Mar.31 | To Int. on Drawings | 600 | 450 | 2026 | |||
| Mar.31 | To Bal. c/d | 1,17,063 | 42,937 | Mar. 31 | By Salary | 12,000 | 9,000 |
| Mar. 31 | By Int. on Capital | 1,500 | 3,000 | ||||
| Mar. 31 | By Profit & Loss App. A/c | 94,163 | 31,387 | ||||
| Total | 1,37,663 | 58,387 | Total | 1,37,663 | 58,387 |
Pappu and Munna are partners in a firm sharing profits in the ratio of 3:2. The partnership deed provided that Pappu was to be paid salary of Rs. 2,500 per month and Munna was to get a commission of Rs. 10,000 per year. Interest on capital was to be allowed @ 5% per annum and interest on drawings was to be charged @ 6% per annum. Interest on Pappu's drawings was Rs. 1,250 and on Munna's drawings Rs. 425. Capital of the partners were Rs. 2,00,000 and Rs. 1,50,000 respectively, and were fixed. The firm earned a profit of Rs. 90,575 for the year ended 31-3-2024. Prepare Profit and Loss Appropriation Account of the firm.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Pappu's Salary a/c (2,500 × 12) | 30,000 | By Profit & Loss A/c | 90,575 |
| To Munna's Commission a/c | 10,000 | By Interest on Drawings: | |
| To Interest on Capital | Pappu 1,250 | ||
| Pappu 10,000 | Munna 425 | 1,675 | |
| Munna 7,500 | 17,500 | ||
| To Profit transferred to: | |||
| Pappu's Current a/c 20,850 | |||
| Munna's Current a/c 13,900 | 34,750 | ||
| Total | 92,250 | Total | 92,250 |
A, B and C were partners in a firm having capitals of Rs. 1,00,000; Rs. 1,00,000 and Rs. 2,00,000 respectively. According to the partnership deed the partners were entitled to interest on capital @ 6% p.a. A being the working partner was also entitled to a salary of Rs. 5,000 per month. The profits were to be divided as follows:
- The first Rs. 40,000 in the ratio of 2:3:5.
- Next Rs. 80,000 in the proportion of their capitals.
- Remaining profits to be shared equally.
The firm made a profit of Rs. 2,70,000 for the year ended 31st March, 2024 before charging any of the above items. Prepare the Profit & Loss Appropriation Account and pass necessary journal entry for apportionment of profits.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Profit & Loss A/c (Net Profit) | 2,70,000 | |
| A 6,000 | |||
| B 6,000 | |||
| C 12,000 | 24,000 | ||
| To A's Salary A/c | 60,000 | ||
| To Profit transferred to | |||
| A's Capital A/c 50,000 | |||
| B's Capital A/c 54,000 | |||
| C's Capital A/c 82,000 | 1,86,000 | ||
| Total | 2,70,000 | Total | 2,70,000 |
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2023 31 Mar. | Profit & Loss Appropriation A/c Dr. To A's Current A/c To B's Current A/c To C's Current A/c (Being profit transferred to partners current account) | 1,86,000 | 50,000 54,000 82,000 |
Profit after interest on capital and Salary:- Rs. 2,70,000 - Rs. 24,000 - Rs. 60,000 = Rs. 1,86,000
| Particulars | A | B | C |
|---|---|---|---|
| First Rs. 40,000 in Capital ratio 2:3:5 | 8,000 | 12,000 | 20,000 |
| Next Rs. 80,000 in Capital ratio 1:1:2 | 20,000 | 20,000 | 40,000 |
| Remaining Rs. 66,000 1:1:1 | 22,000 | 22,000 | 22,000 |
| Total | 50,000 | 54,000 | 82,000 |
X, Y and Z are in the partnership and on 1st April, 2023, their respective capitals were Rs. 2,00,000; Rs. 1,20,000 and Rs. 1,00,000. Y is entitled to a salary of Rs. 25,000 and Z Rs. 20,000 per annum, payable before division of profits. Interest is allowed on capital at 5% per annum but is not charged on drawings. Of the net divisible profits on the first Rs. 1,00,000; X is entitled to 40 per cent; Y to 35 per cent and Z to 25 per cent, over that amount profits are shared equally. The profit for the year ended 31st March, 2024, after debiting partnership salaries, but before charging interest on capitals, was Rs. 1,81,000 and the partners had drawn Rs. 8,000 each. Prepare partner's capital account for the year.
| Particulars | X | Y | Z | Particulars | X | Y | Z |
|---|---|---|---|---|---|---|---|
| To Drawings A/c | 8,000 | 8,000 | 8,000 | By Bal. b/d | 2,00,000 | 1,20,000 | 1,00,000 |
| To Balance c/d | 2,62,000 | 1,98,000 | 1,62,000 | By Salary | - | 25,000 | 20,000 |
| By Interest on Cap. A/c | 10,000 | 6,000 | 5,000 | ||||
| By P & L Appr. A/c | 60,000 | 55,000 | 45,000 | ||||
| Total | 2,70,000 | 2,06,000 | 1,70,000 | Total | 2,70,000 | 2,06,000 | 1,70,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Profit & Loss A/c (Net Profit) | 1,81,000 | |
| X 10,000 | |||
| Y 6,000 | |||
| Z 5,000 | 21,000 | ||
| To Profit transferred to | |||
| X's Capital A/c 60,000 | |||
| Y's Capital A/c 55,000 | |||
| Z's Capital A/c 45,000 | 1,60,000 | ||
| Total | 1,81,000 | Total | 1,81,000 |
| Particulars | A | B | C |
|---|---|---|---|
| First Rs. 1,00,000 in Capital ratio 40%, 35% and 25% respectively | 40,000 | 35,000 | 25,000 |
| Remaining Rs. 66,000 1:1:1 (Wait - remaining = 1,60,000 - 1,00,000 = 60,000) | 20,000 | 20,000 | 20,000 |
| Total | 60,000 | 55,000 | 45,000 |
Questions Q78 to Q98 - Manager Commission, IOD All Cases, Reverse Calculations, Wrong Rates, Opening Capitals, Retrospective Ratio Change
Tulsi and Kabir are partners sharing profits in proportion of 3 : 2 with capitals of Rs. 8,00,000 and Rs. 6,00,000 respectively. Interest on capitals is agreed at 6% p.a. Tulsi is to be allowed a salary of Rs. 6,000 per month. For the year ended 31st March, 2024 the profits prior to calculation of interest on capital but after charging Tulsi's salary amounted to Rs. 2,28,000. Manager is to be allowed a commission of 10% of the profits. Prepare an account showing the allocation of Profits.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Manager's Commission (Rs. 3,00,000 × 10%) | 30,000 | By Net Profit (Rs. 2,28,000 + Rs. 72,000) | 3,00,000 |
| To Net Profit transferred to P & L App. a/c | 2,70,000 | ||
| Total | 3,00,000 | Total | 3,00,000 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital A/c | By Profit & Loss A/c (Net Profit) | 2,70,000 | |
| Tulsi 48,000 | |||
| Kabir 36,000 | 84,000 | ||
| To Tulsi's Salary A/c | 72,000 | ||
| To Profit transferred to | |||
| Tulsi's Capital A/c 68,400 | |||
| Kabir's Capital A/c 45,600 | 1,14,000 | ||
| Total | 2,70,000 | Total | 2,70,000 |
A and B are partners in a firm. A is to get a commission of 10% of net profit before charging any commission. B is to get a commission of 10% on net profit after charging all commissions. Net profit before charging any commission was Rs. 55,000. Find out the commission of A and B.
Before charging such commission
A's Commission = Rs. 55,000 × 10/100 = Rs. 5,500
After charging A's commission and his commission
Rs. 55,000 - Rs. 5,500 = Rs. 49,500
B's Commission = Rs. 49,500 × 10/110 = Rs. 4,500
Calculate the interest on Drawings of Tarun @ 8% p.a. for the year ended 31st March, 2023 in each of the following alternative cases :
Case (a) if his drawings during the year were Rs. 60,000;
Case (b) if he withdrew Rs. 5,000 p.m. in the beginning of every month;
Case (c) if he withdrew Rs. 5,000 p.m. at the end of every month;
Case (d) if he withdrew Rs. 5,000 p.m. during the year;
Case (e) if he withdrew the following amounts as under; 2025 June, 1: Rs. 10,000; August 31: Rs. 12,000; November 1: Rs. 16,000; December 31: Rs. 13,000; February 1, 2026; Rs. 9,000.
Case (a)
Drawings during the year were Rs. 60,000 = Rs. 60,000 × 8/100 × 6/12 = Rs. 2,400
Case (b)
If he withdrew Rs. 5,000 p.m. in the beginning of every month = Rs. 60,000 × 8/100 × 6.5/12 = Rs. 2,600
Case (c)
If he withdrew 5,000 p.m. at the end of every month = Rs. 60,000 × 8/100 × 5.5/12 = Rs. 2,200
Case (d)
If he withdrew 35,000 p.m. during the year = Rs. 60,000 × 8/100 × 6/12 = Rs. 2,400
Case (e) - Specific dates (Product Method)
| Date | Amount | Period (Months) | Product |
|---|---|---|---|
| 2025 01 June | 10,000 | 10 | 1,00,000 |
| 31 August | 12,000 | 7 | 84,000 |
| 01 November | 16,000 | 5 | 80,000 |
| 31 December | 13,000 | 3 | 39,000 |
| 2026 01 February | 9,000 | 2 | 18,000 |
| Total | 60,000 | 3,21,000 |
Interest on Drawings = Total of Products × rate of interest × 1/12
Interest on Drawings = 3,21,000 × 8/100 × 1/12
Interest on Drawings = Rs. 2,140
Calculate the interest on Drawings of Anuradha @ 9% p.a. for the year ended 31st March 2026, if she withdrew Rs. 10,000 in the beginning of each quarter.
Total Drawings = Drawing Amount × Number of quarter in a year
Total Drawings = Rs. 10,000 × 4
Total Drawings = Rs. 40,000
Average Period = 12 months + 3 months/2 = 15/2 = 7.5 months
Interest on Drawings = Rs. 40,000 × 9/100 × 7.5/12 = Rs. 2,250
Calculate the interest on Drawings of Bipasa @ 9% p.a. for the year ended 31st March 2026, if she withdrew Rs. 10,000 at the end of each quarter.
Total Drawings = Drawing Amount × Number of quarter in a year
Total Drawings = Rs. 10,000 × 4
Total Drawings = Rs. 40,000
Average Period = 9 months + 0 months/2 = 9/2 = 4.5 months
Interest on Drawings = Rs. 40,000 × 9/100 × 4.5/12 = Rs. 1,350
Calculate the interest on Drawings of Charulata @ 9% p.a. for the year ended 31st March, 2026, if she withdrew Rs. 10,000 each quarter.
Total Drawings = Drawing Amount × Number of quarter in a year
Total Drawings = Rs. 10,000 × 4
Total Drawings = Rs. 40,000
Average Period = 10.5 months + 1.5 months/2 = 12/2 = 6 months
Interest on Drawings = Rs. 40,000 × 9/100 × 7.5/12 = Rs. 1,800
Calculate the interest on Drawings of Divya @ 9% p.a. if she withdrew Rs. 4,000 p.m. on the first day of every month for six months ending 31st March, 2026.
Total Drawings = Drawing Amount × Number of month
Total Drawings = Rs. 4,000 × 6
Total Drawings = Rs. 24,000
Average Period = 6 months + 1 months/2 = 7/2 = 3.5 months
Interest on Drawings = Rs. 24,000 × 9/100 × 3.5/12 = Rs. 630
Calculate the interest on Drawings of Esha @ 9% p.a., if she withdrew Rs. 4,000 p.m. on the last day of every month for six months ending 31st March, 2026.
Total Drawings = Drawing Amount × Number of months
Total Drawings = Rs. 4,000 × 6
Total Drawings = Rs. 24,000
Average Period = 5 months + 0 months/2 = 5/2 = 2.5 months
Interest on Drawings = Rs. 24,000 × 9/100 × 2.5/12 = Rs. 450
Calculate the interest on Drawings of Garima @ 9% p.a., if she withdrew Rs. 4,000 p.m. for six months ending 31st March, 2026.
Total Drawings = Drawing Amount × Number of months
Total Drawings = Rs. 4,000 × 6
Total Drawings = Rs. 24,000
Average Period = 5.5 months + 0.5 months/2 = 6/2 = 3 months
Interest on Drawings = Rs. 24,000 × 9/100 × 3/12 = Rs. 540
Seema and Tina are partners in a firm. Interest on drawings is charged @ 10% p.a. You are required to calculate the amount of drawings of each partner in the following cases:
(i) Seema withdrew a fixed amount in the beginning of each month and interest on drawings is Rs. 3,900.
(ii) Tina withdrew a fixed amount in the beginning of each quarter and interest on drawings is Rs. 6,000.
Case 1. Calculation of Monthly Drawing of Seema:-
Average Period = time left after first drawing + time left after last drawing/2
Average Period = 12 + 1/2
Average Period = 13/2
Average Period = 6.5 Months
Interest on drawings = Total Drawings × Rate × Average Period/12
3,900 = Total Drawings × 10% × 6.5/12
3,900 = Total Drawings × 10/100 × 6.5/12
Total Drawings = 3,900 × 100 × 12/(10 × 6.5)
Total Drawings = Rs. 72,000
Monthly Drawings = 72,000/12
Monthly Drawings = Rs. 6,000
Case 2. Calculation of Monthly Drawing of Tina:-
Average Period = time left after first drawing + time left after last drawing/2
Average Period = 12 + 3/2
Average Period = 15/2
Average Period = 7.5 Months
Interest on drawings = Total Drawings × Rate × Average Period/12
6,000 = Total Drawings × 10% × 7.5/12
6,000 = Total Drawings × 10/100 × 7.5/12
Total Drawings = 6,000 × 100 × 12/(10 × 7.5)
Total Drawings = Rs. 96,000
Quarterly Drawings = 72,000/4
Quarterly Drawings = Rs. 24,000
Era, a partner withdrew Rs. 40,000 per month for her personal use from the firm in the beginning of each month. Interest on her drawings was calculated at Rs. 31,200 at the end of the year. Calculate the rate of interest on her drawings.
Calculation of Rate of Interest of drawings:-
Average Period = time left after first drawing + time left after last drawing/2
Average Period = 12 + 1/2
Average Period = 13/2
Average Period = 6.5 Months
Interest on drawings = Total Drawings × Rate × Average Period/12
31,200 = 4,80,000 × 12% × 6.5/12
31,200 = 4,80,000 × Rate/100 × 6.5/12
Rate = 31,200 × 100 × 12/(4,80,000 × 6.5)
Rate = 12% p.a.
Calculate the rate of interest on drawings in the following cases:
(i) Charu and Suruchi are partners in a firm. Suruchi withdrew Rs. 12,000 in the beginning of each quarter and interest on drawings was calculated at Rs. 2,700 at the end of the year.
(ii) Yamini and Sonia are partners in a firm. Sonia withdrew Rs. 12,000 at the end of each quarter and interest on drawings was calculated at Rs. 1,440 at the end of the year.
Case 1:- Calculation of Monthly Drawing of Suruchi:-
Average Period = time left after first drawing + time left after last drawing/2
Average Period = 12 + 3/2
Average Period = 15/2
Average Period = 7.5 Months
Interest on drawings = Total Drawings × Rate × Average Period/12
2,700 = 48,000 × Rate/12 × 7.5/12
2,700 = 48,000 × Rate/100 × 7.5/12
Rate of Interest = 2,700 × 100 × 12/(48,000 × 7.5)
Rate of Interest = 9% p.a.
Case 2:- Calculation of Monthly Drawing of Sonia:-
Average Period = time left after first drawing + time left after last drawing/2
Average Period = 9 + 0/2
Average Period = 9/2
Average Period = 4.5 Months
Interest on drawings = Total Drawings × Rate × Average Period/12
1,440 = 48,000 × Rate/12 × 4.5/12
1,440 = 48,000 × Rate/100 × 7.5/12
Rate of Interest = 1,440 × 100 × 12/(48,000 × 4.5)
Rate of Interest = 8% p.a.
X, Y and Z contribute Rs. 3,00,000, Rs. 2,00,000 and Rs. 1,00,000 respectively by way of capital on which they agree to allow interest at 12% p.a. They share profits and losses in the ratio of 5:3:2. Profit for the year ended 31st March, 2026 is Rs. 60,000 before allowing interest on capital. Prepare a Profit & Loss Appropriation Account if (i) partnership deed is silent as to the treatment of interest as a charge or appropriation, and (ii) partnership deed provides for interest even if it involves the firm in loss.
Case (i) If Partnership deed is silent as to the treatment of interest as a charge or appropriation
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit & Loss A/c | 60,000 | |
| X 30,000 | |||
| Y 20,000 | |||
| Z 10,000 | 60,000 | ||
| Total | 60,000 | Total | 60,000 |
X's Interest on Capital = Rs. 60,000 × 3/6 = Rs. 30,000
Y's Interest on Capital = Rs. 60,000 × 2/6 = Rs. 20,000
Z's Interest on Capital = Rs. 60,000 × 1/6 = Rs. 10,000
Case (ii) Partnership deed provides for interest even if it involves the firm in loss.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit & Loss A/c | 60,000 | |
| X 36,000 | By Loss transferred | ||
| Y 24,000 | X's Capital 6,000 | ||
| Z 12,000 | 72,000 | Y's Capital 3,600 | |
| Z's Capital 2,400 | 12,000 | ||
| Total | 72,000 | Total | 72,000 |
Arun and Arora were partners in a firm sharing profits in the ratio of 5: 3. Their fixed capitals on 1.4.2023 were: Arun Rs. 60,000 and Arora Rs. 80,000. They agreed allow interest on capital @ 12% per annum and to charge on drawings @15% per annum. The profit of the firm for the year ended 31.3.2024 before all above adjustments were Rs. 12,600. The drawings made by Arun were Rs. 2,000 and by Arora Rs. 4,000 during the year. Prepare Profit and Loss Appropriation Account of Arun and Arora. Show your calculations clearly. The interest on capital will be allowed even if the firm incurs a loss.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Interest on Capital | By Profit & Loss A/c | 12,600 | |
| Arun 7,200 | By Profit and Loss Appro. A/c | 4,200 | |
| Arora 9,600 | 16,800 | ||
| Total | 16,800 | Total | 16,800 |
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| To Profit and Loss A/c | 4,200 | By Interest on Drawings | |
| Arun 150 | |||
| Arora 300 | 450 | ||
| By Net Loss transferred to | |||
| Arun 2,344 | |||
| Arora 1,406 | 3,750 | ||
| Total | 4,200 | Total | 4,200 |
Arun = Rs. 2,000 × 15/100 × 6/12 = Rs. 150
Arora = Rs. 4,000 × 15/100 × 6/12 = Rs. 300
Raja, Roopa and Mala sharing profits and losses equally have fixed capitals of Rs. 12,00,000, Rs. 9,00,000 and Rs. 6,00,000 respectively. For the year ended 31st March, 2026, interest was credited to them @ 6% instead of 5% p.a. Give adjusting entry.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | Raja's Current A/c Dr. To Mala's Current A/c (Being excess interest on capital allowed to partners) | 3,000 | 3,000 |
| Particulars | Raja | Roopa | Mala | Total |
|---|---|---|---|---|
| Interest on Capital already Credited @ 6% | 72,000 | 54,000 | 36,000 | 1,62,000 |
| Interest should be credited @ 5% | 60,000 | 45,000 | 30,000 | 1,35,000 |
| Excess amount credited to partners | 12,000 | 9,000 | 6,000 | 27,000 |
| Excess amount will divided into partners equally | 9,000 | 9,000 | 9,000 | 27,000 |
| Net Effect | 3,000 (Dr.) | - (Nil) | 3,000 (Cr.) | - |
P and Q were partners in a firm sharing profits in 7:3 ratio. Their fixed capitals were P Rs. 5,00,000 and Q Rs. 8,00,000. For the year ended 31st March, 2024, on capital was credited @ 12% instead of 10%. Show the necessary adjusting entry for the rectification of the error. Also show the working notes clearly.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | Q's Current A/c Dr. To P's Current A/c (Being excess interest on capital allowed to partners) | 8,200 | 8,200 |
| Particulars | P | Q | Total |
|---|---|---|---|
| Interest on Capital already Credited @ 12% | 60,000 | 96,000 | 1,56,000 |
| Interest should be credited @ 10% | 50,000 | 80,000 | 1,30,000 |
| Excess amount credited to partners | 10,000 | 16,000 | 26,000 |
| Excess amount will divided into partners in 7:3 | 18,200 | 7,800 | 26,000 |
| Net Effect | 8,200 (Cr.) | 8,200 (Dr.) | - |
A, B and C are partners. Their fixed capitals as on 31st March, 2024 were A Rs. 2,00,000, B Rs. 3,00,000 and C Rs. 4,00,000. Profits for the year 2024 amounting to Rs. 1,80,000 were distributed. Give the necessary adjusting entry in each of the following alternative cases:
Case (a) Interest on capital was credited @ 8% p.a. though there was no such provision in the partnership deed.
Case (b) Interest on capital was not credited @ 8% p.a. though there was such provision in the partnership deed.
Case (c) Interest on capital was credited @ 8% p.a. instead of 10% p.a.
Case (d) Interest on capital was credited @ 10% p.a. instead of 8% p.a.
Case (a)
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | C's Current A/c Dr. To A's Current A/c (Being Interest on capital wrongly credited) | 8,000 | 8,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital already Credited @ 8% | 16,000 | 24,000 | 32,000 | 72,000 |
| Excess amount will divided into partners equally | 24,000 | 24,000 | 24,000 | 72,000 |
| 8,000 (Cr.) | - (Nil) | 8,000 (Dr.) |
Case (b)
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | A's Current A/c Dr. To C's Current A/c (Being Interest on capital wrongly credited) | 8,000 | 8,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital already Credited @ 8% | 16,000 | 24,000 | 32,000 | 72,000 |
| Excess amount will divided into partners equally | 24,000 | 24,000 | 24,000 | 72,000 |
| 8,000 (Dr.) | - (Nil) | 8,000 (Cr.) |
Case (c)
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | A's Current A/c Dr. To C's Current A/c (Being Interest on capital less charged) | 2,000 | 2,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital already Credited @ 8% | 16,000 | 24,000 | 32,000 | 72,000 |
| Interest should be credited @ 10% | 20,000 | 24,000 | 32,000 | 90,000 |
| Excess amount credited to partners | 4,000 | 6,000 | 8,000 | 18,000 |
| Excess amount will divided into partners equally | 6,000 | 6,000 | 6,000 | 18,000 |
| 2,000 (Dr.) | - (Nil) | 2,000 (Cr.) |
Case (d)
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | C's Current A/c Dr. To A's Current A/c (Being Interest on capital less charged) | 2,000 | 2,000 |
| Particulars | A | B | C | Total |
|---|---|---|---|---|
| Interest on Capital already Credited @ 10% | 20,000 | 30,000 | 40,000 | 90,000 |
| Interest should be credited @ 8% | 16,000 | 24,000 | 32,000 | 72,000 |
| Excess amount credited to partners | 4,000 | 6,000 | 8,000 | 18,000 |
| Excess amount will divided into partners equally | 6,000 | 6,000 | 6,000 | 18,000 |
| 2,000 (Cr.) | - (Nil) | 2,000 (Dr.) |
Neena and Sara were partners in a firm with fixed capitals of Rs. 5,00,000 and Rs. 4,00,000 respectively. It was discovered that interest on capital @6% pa. was credited to the partners for the two years ending 31st March. 2018 and 31st March, 2019 whereas there was no such provision in the partnership deed. Their profit sharing ratio during the last two years was:
2017-18 4:5
2017-18 5:1
Showing your workings clearly, pass the necessary adjustment entry to rectify the error.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | Sara's Capital A/c Dr. To Neena's Capital A/c (Being adjustment entry passed) | 9,000 | 9,000 |
| Particulars | A | B | Total |
|---|---|---|---|
| Interest wrongly credited in 2017-18 | 30,000 | 24,000 | 54,000 |
| Interest wrongly credited in 2017-18 | 30,000 | 24,000 | 54,000 |
| (Dr.) | 60,000 | 48,000 | 1,08,000 |
| Profit Divided in the Ratio of 4:5 | 24,000 | 30,000 | 54,000 |
| Profit Divided in the Ratio of 5:1 | 45,000 | 9,000 | 54,000 |
| (Cr.) | 69,000 | 39,000 | 1,08,000 |
| Net Effect | 9,000 (Cr.) | 9,000 (Dr.) | - |
E, F and G were partners in a firm sharing profits in the ratio of 3:2:1 After division of the profits for the year ended 31-3-2024 their capitals were E Rs. 2,95,000; F Rs. 3,30,000 and G Rs. 3,35,000. During the year they withdrew 40,000 each. The profit of the year was Rs. 1,80,000. The partnership deed provided that interest on capital will be allowed @ 12% p.a. While preparing the final accounts, interest on partner's capital was not allowed. You are required to calculate the capital of E, F and G as on 1-4-2023 and pass the necessary adjustment entry for providing interest on capital. Show your workings clearly.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2024 Mar. 31 | E's Capital A/c Dr. To F's Capital A/c To G's Capital A/c (Being adjustment entry passed) | 24,600 | 1,200 23,400 |
| Particulars | E | F | G |
|---|---|---|---|
| Closing Capitals (31-3-2024) | 2,95,000 | 3,30,000 | 3,35,000 |
| Less: Share of Profit in 3:2:1 | 90,000 | 60,000 | 30,000 |
| Add: Drawings | 40,000 | 40,000 | 40,000 |
| Opening Capital (1-4-2023) | 2,45,000 | 3,10,000 | 3,45,000 |
| Particulars | E | F | G | Total |
|---|---|---|---|---|
| Interest on Capital @ 12% (Cr.) | 29,400 | 37,200 | 41,400 | 1,08,000 |
| Profit Divided in the Ratio of 3:2:1 (Dr.) | 54,000 | 36,000 | 18,000 | 1,08,000 |
| Net Effect | 24,600 (Dr.) | 1,200 (Cr.) | 23,400 (Cr.) | - |
A and B are partners in a business. Their capitals at the end of the year were Rs. 6,40,000 and Rs. 4,60,000 respectively. During the year ending 31st March, 2024, A's drawings and B's drawings were Rs. 1,20,000 and Rs. 1,40,000 respectively. Profits (before charging interest on capital) during the year were Rs. 4,00,000. Calculate interest on capital @ 12% p.a. for the year ending 31st March, 2024.
| Particulars | A | B |
|---|---|---|
| Closing Capital on 31.03.2024 | 6,40,000 | 4,60,000 |
| Less: Share of Profit already credited | 2,00,000 | 2,00,000 |
| 4,40,000 | 2,60,000 | |
| Add: Drawings | 1,20,000 | 1,40,000 |
| Opening Capital | 5,60,000 | 4,00,000 |
A's Interest on Capital = Rs. 5,60,000 × 12/100 = Rs. 67,200
B's Interest on Capital = Rs. 4,00,000 × 12/100 = Rs. 48,000
Prem, Param and Priya were partners in a firm. Their fixed capitals Prem Rs. 2,00,000; Param Rs. 3,00,000 and Priya Rs. 5,00,000. They were sharing profits in the ratio of their capitals. It was decided that the new profit sharing ratio will be 2:1:2 and its effect will be introduced retrospectively for the last four years. The profits of the last four years were Rs. 2,00,000; Rs. 3,50,000; Rs. 4,75,000 and Rs. 5,25,000 respectively. Showing your calculation clearly, pass a necessary adjustment entry to give effect to the new agreement between Prem, Param and Priya.
| Date | Particulars | L.F. | Amount (Dr.) | Amount (Cr.) |
|---|---|---|---|---|
| 2026 Mar. 31 | Param's Current A/c Dr. Priya's Current A/c Dr. To Prem's Current A/c (Being change in the profit sharing ratio) | 1,55,000 1,55,000 | 3,10,000 |
Profit = 2,00,000 + Rs. 3,50,000 + Rs. 3,50,000 + Rs. 4,75,000 + Rs. 5,25,000 = Rs. 15,50,000
| Particulars | Prem | Param | Priya | Total |
|---|---|---|---|---|
| Profit already distributed in ratio 2:3:5 | 3,10,000 | 4,65,000 | 7,75,000 | 15,50,000 |
| Profit redistributed in ratio 2:1:2 | 6,20,000 | 3,10,000 | 6,20,000 | 15,50,000 |
| Net Effect | 3,10,000 (Cr.) | 1,55,000 (Dr.) | 1,55,000 (Dr.) | - |