GSEB Class 12 Statistics Solutions Chapter 2 Random Variable and Discrete Probability Distribution Ex 2.1

 

Question 1. Select appropriate option for each question :

(1) In which year partnership Act was implemented in India ?
(A) 1923
(B) 1932
(C) 1947
(D) 1956
Answer: (B) 1932
In simple words: This question asks for the implementation year of the Partnership Act in India, which is 1932.

🎯 Exam Tip: Knowing the foundational legal dates for business entities is crucial for historical context and legal framework questions.

 

Question 1.

(2) In which proportion profit-loss will be shared between the partners made in the
(A) Capital proportion
(B) Gaining ratio
(C) Sacrificing ratio
(D) if no provision is Equal proportion
Answer: (D) if no provision is Equal proportion
In simple words: If partners don't specify a profit-sharing ratio, profits and losses are divided equally among them.

🎯 Exam Tip: This is a fundamental principle of partnership accounting; remember the default sharing rule when no provision exists.

 

Question 1.

(3) Credit balance of trading account represents
(A) gross profit
(B) net profit
(C) gross loss
(D) net loss
Answer: (A) gross profit
In simple words: When the total credits in the trading account are more than the total debits, it shows a gross profit.

🎯 Exam Tip: Understanding the meaning of debit and credit balances in financial statements is essential for accurate interpretation.

 

Question 1.

(4) Goods returned debit means
(A) purchase
(B) purchase return
(C) sales
(D) sales return
Answer: (B) purchase return
In simple words: A debit to "goods returned" means the company returned items it had purchased.

🎯 Exam Tip: Distinguish between purchase returns (debit) and sales returns (credit) for correct accounting entries.

 

Question 1.

(5) Goods returned credit means
(A) purchase return
(B) sales return
(C) purchase
(D) sales
Answer: (B) sales return
In simple words: A credit to "goods returned" implies customers returned items they had bought from the company.

🎯 Exam Tip: Correctly identifying the nature of return transactions (purchase vs. sales) is vital for accurate ledger posting.

 

Question 1.

(6) Which balance is represented by bank overdraft ?
(A) Debit balance
(B) Credit balance
(C) Debit and Credit
(D) None of the above
Answer: (B) Credit balance
In simple words: A bank overdraft means you owe the bank money, so it's recorded as a credit balance.

🎯 Exam Tip: Bank overdraft is a short-term liability and is always presented as a credit balance in the books.

 

Question 1.

(7) Where will you disclose the credit balance of profit and loss account which is shown in the trial balance ?
(A) Trading A/c
(B) Profit and loss A/c
(C) Profit and loss appropriation A/c
(D) Capital/current A/c
Answer: (C) Profit and loss appropriation A/c
In simple words: The net profit from the P&L Account goes into the P&L Appropriation Account to show how profits are distributed.

🎯 Exam Tip: The Profit and Loss Appropriation Account is specifically used to show the distribution of profits among partners, not the calculation of net profit.

 

Question 1.

(8) Which transaction is shown at the debit side of the profit and loss appropriation account ?
(A) Interest on drawings
(B) Interest on debit balance of current A/c
(C) Net profit
(D) Amount to be transferred to general reserve
Answer: (D) Amount to be transferred to general reserve
In simple words: Transfers to reserves are expenses for the appropriation account, so they are debited.

🎯 Exam Tip: Remember that appropriations of profit, such as transfers to reserves or interest on capital, are debited to the P&L Appropriation Account.

 

Question 1.

(9) Generally, which balance is maintained by current account ?
(A) debit
(B) credit
(C) debit or credit
(D) None of the above
Answer: (C) debit or credit
In simple words: A current account can sometimes have a debit balance (if drawings exceed interest/salary) or a credit balance (if contributions exceed drawings).

🎯 Exam Tip: Unlike capital accounts (which usually show a credit balance), current accounts are dynamic and can fluctuate between debit and credit based on partner activities.

 

Question 1.

(10) The financial position of business is disclosed by
(A) Trial balance
(B) Trading A/c
(C) Balance sheet
(D) Profit and loss A/c
Answer: (C) Balance sheet
In simple words: The Balance Sheet is a snapshot that shows what a business owns and owes at a particular date.

🎯 Exam Tip: The Balance Sheet is a statement of financial position, while the Trading Account and Profit and Loss Account show financial performance over a period.

 

Question 2. Describe the objectives of the preparation of final accounts of a partnership firm.

Answer: The primary objectives for preparing a partnership firm's final accounts are as follows:
(1) **Determining Gross Profit or Loss**: The trading account's creation allows the partnership to accurately calculate its gross profit or gross loss from trading activities.
(2) **Determining Net Profit or Loss**: By preparing the profit and loss account, the firm can establish its net profit or net loss, thereby assessing its overall profitability for the period.
(3) **Determining Divisible Profit or Loss**: The profit and loss appropriation account is used to ascertain the profit or loss available for distribution among partners after considering all partner-related transactions and provisions.
(4) **Assessing Financial Position**: The balance sheet is instrumental in presenting the firm's financial status at a specific date, detailing its assets, receivables, payables, and capital structure.
(5) **For Taxation Purposes**: Final accounts are prepared to compute the firm's taxable income, which is necessary for fulfilling tax obligations.
In simple words: Final accounts help a partnership know its gross profit, net profit, how much profit can be shared among partners, its overall financial health, and calculate taxes.

🎯 Exam Tip: Clearly stating each objective with a brief explanation demonstrates a comprehensive understanding of the purpose of final accounts.

 

Question 3. Explain in brief, the method of the preparation of final accounts of a partnership firm.

Answer: The process of preparing final accounts for a partnership firm involves several key steps and statements:
Initially, all economic transactions are systematically recorded in the journal and subsidiary books. These entries are then posted to the respective ledger accounts, and the balance of each account is determined. These balances are subsequently compiled into a trial balance on a specific date. Based on this trial balance and any necessary adjustments, the final accounts are prepared to ascertain the business's profitability and financial position. The essential accounts and statements prepared include:
(1) **Trading Account**: This account records transactions related to the purchase and sale of goods, including returns, goods removed by other means, and direct purchase expenses. Its purpose is to calculate the gross profit or gross loss, which is then transferred to the Profit and Loss Account.
(2) **Profit and Loss Account**: In this account, all revenue expenses and incomes are recorded to ascertain the net profit or net loss of the firm. The debit side typically lists administrative, selling-distribution, and financial expenses, while the credit side records revenue incomes. The resulting net profit or net loss is then transferred to the Profit and Loss Appropriation Account.
(3) **Profit and Loss Appropriation Account**: This specialized account details how the net profit or loss is distributed among partners. On its debit side, items such as partners' interest on capital, interest on the credit balance of current accounts, salaries, bonuses, commissions, and transfers to general reserves are recorded. The credit side includes partners' interest on drawings and interest on the debit balance of current accounts. This account ultimately determines the net divisible profit or loss, which is transferred to the partners' capital or current accounts.
(4) **Partners' Capital Accounts**: These accounts are maintained to record all transactions between the partners and the firm.
    (i) Under the fluctuating capital account method, all partner-related transactions are recorded here, and the final balance is transferred to the balance sheet.
    (ii) Under the fixed capital account method, only the opening balance and transactions leading to permanent increases or decreases in capital are recorded in the capital account. Other partner transactions are recorded in the partners' current accounts, with their final balances also transferred to the balance sheet.
(5) **Balance Sheet**: Prepared at the end of the financial year, the balance sheet provides a comprehensive view of the business's financial position. It includes the partners' capital account balances, current account balances, reserves, and various current and non-current liabilities on the liabilities side. On the asset side, it shows fixed assets, intangible assets, investments, current assets, deferred revenue expenditure, and any debit balances of partners' current accounts. The totals of both sides must always be equal.
In simple words: Preparing final accounts starts with recording transactions, posting to ledgers, and creating a trial balance. Then, a Trading Account finds gross profit, a Profit and Loss Account finds net profit, a P&L Appropriation Account shows profit distribution, Partners' Capital Accounts track partner dealings, and finally, a Balance Sheet presents the firm's financial position.

🎯 Exam Tip: Be thorough in explaining each component of the final accounts and its specific purpose, especially distinguishing between fixed and fluctuating capital methods.

 

Question 4. State list of tangible and intangible assets.

Answer:
Tangible Assets: Include physical assets like Land, Building, Leasehold properties, Vehicles, Machines, Furniture and fittings, and Loose Tools.
Intangible Assets: Are non-physical assets such as Patent, Trademark, Copyright, and Goodwill.
In simple words: Tangible assets are physical things you can touch (like land or machines), while intangible assets are non-physical rights or advantages (like patents or goodwill).

🎯 Exam Tip: Clearly differentiate between tangible assets (physical existence) and intangible assets (lack physical existence but have value) with relevant examples.

 

Question 5. Where will you disclose the following items given in a trial balance during the preparation of a final account of a partnership firm : (1) Bad debts returned (2) Depreciation : factory's building (3) Wages and salary (4) Provident fund investments (5) Bills payable (6) Goods withdrawn as drawings (7) Goods return credit (8) Goods return debit (9) Loan given to firm by a partner (10) Interest on investments of provident fund.

Answer: The disclosure of the listed items from the trial balance in the final accounts of a partnership firm will be as follows:

**Name of Account**	**Recorded in Account or Statement**
(1) Bad debts returned	- On the credit side of the Profit and Loss Account.
(2) Depreciation: Factory's building	- On the debit side of the Trading Account.
(3) Wages and salary	- On the debit side of the Trading Account.
(4) Provident fund investments	- On the asset side of the Balance Sheet.
(5) Bills payable	- On the capital and liability side of the Balance Sheet.
(6) Goods withdrawn as drawings	- Deducted from purchases on the debit side of the Trading Account.
(7) Goods return	- Deducted from sales on the credit side of the Trading Account.
(8) Goods return	- Deducted from purchases on the debit side of the Trading Account.
(9) Loan given to firm by a partner	- On the capital and liability side of the Balance Sheet.
(10) Interest on investments of Provident fund	- On the capital and liability side of the Balance Sheet, added to the Provident Fund account.

In simple words: This table outlines the correct placement of various financial items from the trial balance into the appropriate final accounts or statements of a partnership firm.

🎯 Exam Tip: Remember that "goods return credit" typically implies sales return, and "goods return debit" implies purchase return for correct ledger entries.

 

Question 6. Where will you disclose the effects of the following adjustments during the preparation of final accounts of a partnership firm : (1) Closing stock of stationery (2) Unrecorded credit sales (3) Commission payable to partner on net profit (4) Goods withdrawn by partner for personal use. (5) Interest on debit balance of Partners' current account (6) Certain amount is written off from leasehold property (7) Receivable income (outstanding income) (8) Prepaid expenses (9) Discount reserve on debtors.

Answer: The effects of the following adjustments will be disclosed in the final accounts of a partnership firm as described below:

**Adjustments**	**Treatment**
(1) Closing stock of stationery	(i) Deducted from stationery expense on the debit side of the Profit and Loss Account. (ii) Shown on the asset side of the Balance Sheet as closing stock of stationery.
(2) Unrecorded Credit sales	(i) Added to sales account on the credit side of the Trading Account. (ii) Added to debtors on the asset side of the Balance Sheet.
(3) Commission payable to partner on net profit	(i) Debited to the Profit and Loss Appropriation Account. (ii) Credited to the Partner's Capital/Current Account.
(4) Goods withdrawn by partner for personal use	(i) Deducted from the purchase account on the debit side of the Trading Account. (ii) Debited to the partners' Capital/Current Account.
(5) Interest on debit balance of partner's current account	(i) Debited to the partners' Current Account. (ii) Credited to the Profit-Loss Appropriation Account.
(6) Certain amount is written off from leasehold property	(i) Debited to the Profit and Loss Account as leasehold asset written off. (ii) Deducted from the leasehold asset on the asset side of the Balance Sheet.
(7) Receivable income (Outstanding income)	(i) Added to the respective income on the credit side of the Profit and Loss Account. (ii) Shown on the asset side of the Balance Sheet.
(8) Prepaid expense	(i) Deducted from the respective expense on the debit side of the Trading Account or Profit and Loss Account. (ii) Shown on the asset side of the Balance Sheet.
(9) Discount reserve on debtors	(i) Debited to the Profit and Loss Account. (ii) Deducted from debtors on the asset side of the Balance Sheet.

In simple words: This table details how various common adjustments, like outstanding income, prepaid expenses, and discount reserves, are accounted for across the Profit and Loss Account and the Balance Sheet.

🎯 Exam Tip: Adjustments often relate to accrual and deferral concepts; ensure you understand whether an item is an asset/liability and income/expense.

 

Question 7. Write adjustment entries for the following adjustments : (1) Book value of stock is Rs. 40,000, but its market value is 20% less than the book value. (2) Salary outstanding Rs. 1,000. (3) Mahendra landed loan of Rs. 25,000 to the firm, but 10% for 6 months is outstanding on it. (4) Interest received in advance Rs. 500. (5) Provide depreciation at 8% for 8 months on a building of Rs. 5,00,000. (6) Closing stock of stationery at the end of the accounting period is Rs. 250. (7) Closing balance at the end of accounting period, of debtors of business is Rs. 50,000, out which written off Rs. 4,500 as bad debts. Provide 10% bad debts reserve on debtors. (8) One partner has withdrawn goods of Rs. 5,000 for personal use, this transaction is not recorded. (9) Goods of Rs. 3,000 destroyed by fire. Insurance company has admitted the claim of 80%.

Answer: The adjustment entries for the given information are as detailed below, with all currency symbols replaced by "Rs.":

**No.**	**Particulars**	**L.F.**	**Debit (Rs.)**	**Credit (Rs.)**
(1)	Closing Stock A/c     To Trading A/c (Being adjustment entry passed for closing stock) Calculation: Book Value = Rs. 40,000 Market Value = Rs. \( 40,000 - (40,000 \times \frac{20}{100}) \) = Rs. \( 40,000 - 8,000 \) = Rs. 32,000 (Stock is valued at market value or cost price, whichever is lower)	Dr.	32,000	32,000
(2)	Salary A/c     To Outstanding Salary A/c (Being adjustment entry passed for outstanding salary)	Dr.	1,000	1,000
(3)	Interest A/c     To Mahendra's Loan A/c (Being adjustment entry for interest due is passed) Calculation: Loan Amount = Rs. 25,000 Interest Rate = 10% p.a. Months Outstanding = 6 Interest = Rs. \( 25,000 \times \frac{10}{100} \times \frac{6}{12} \) = Rs. 1,250	Dr.	1,250	1,250
(4)	Interest A/c     To Interest received in advance A/c (Being adjustment entry for interest received in advance is passed)	Dr.	500	500
(5)	Depreciation A/c     To Building A/c (Being depreciation provided on building) Calculation: Building value = Rs. 5,00,000 Depreciation rate = 8% p.a. Months = 8 Depreciation = Rs. \( 5,00,000 \times \frac{8}{100} \times \frac{8}{12} \) = Rs. 26,666.67 (rounded to 26,667)	Dr.	26,667	26,667
(6)	Stationery Stock A/c     To Stationery expense A/c (Being adjustment entry passed for stationery stock)	Dr.	250	250
(7) (i)	Bad debts A/c     To Debtors A/c (Being written off bad debts)	Dr.	4,500	4,500
(ii)	Profit-Loss A/c     To Bad debts reserve A/c (Being provision for bad debts reserve is made) Calculation: Debtors = Rs. 50,000 Less: Bad Debts written off = Rs. 4,500 Net Debtors = Rs. 45,500 Bad Debts Reserve @ 10% = Rs. \( 45,500 \times \frac{10}{100} \) = Rs. 4,550	Dr.	4,550	4,550
(8)	Drawings A/c     To Purchase A/c (Being goods withdrawn by partner for his personal use)	Dr.	5,000	5,000
(9)	Insurance Co. A/c Loss due to fire A/c     To Purchase A/c (Being goods destroyed by fire and insurance company accepted 80% claim amount. Also passed adj. entry for loss amount.) Calculation: Goods destroyed = Rs. 3,000 Insurance claim @ 80% = Rs. \( 3,000 \times \frac{80}{100} \) = Rs. 2,400 Loss due to fire = Rs. \( 3,000 - 2,400 \) = Rs. 600	Dr. Dr.	2,400 600	3,000

In simple words: These journal entries record various adjustments, including closing stock valuation, outstanding salary, interest accruals, depreciation, bad debts provision, partner drawings in goods, and goods destroyed by fire, ensuring all financial impacts are recognized.

🎯 Exam Tip: Each adjustment entry must strictly adhere to the double-entry system, impacting two accounts with equal debit and credit amounts, and be clearly narrated.

 

Question 8. Brahma and Vishnu are partners of a firm sharing profit-loss in the proportion 3 : 2. From the trial balance dated 31-3-2017 and adjustments, prepare annual accounts of the firm :

Answer: The annual accounts of the partnership firm, Brahma and Vishnu, with a profit-loss sharing ratio of 3:2, are prepared as follows based on the trial balance dated March 31, 2017, and the provided adjustments:

Profit and Loss Account of partnership firm Brahma and Vishnu
for the year ending on 31-3-2017

Dr.		Cr.
Particulars	Amt. (Rs.)	Particulars	Amt. (Rs.)
**Administrative expenses :**		By Trading A/c	97,250
To Salary	7,500	(Gross Profit)
+ Unpaid salary	3,000	By Discount received	400
	10,500	By Commission	2,500
To Trading expenses	5,900	+ O/s Commission	500
**Selling distribution expenses :**			3,000
To Discount allowed	350
To Carriage outward	1,200
**Financial expenses :**
To Int. on loan of Brahma	2,250
**Other expenses and losses:**
Bad debts (T.B.)	1,200
Bad debts (A)	500
	1,700
**To depreciation :**
Machinery	3,000
Furniture and Fixtures	1,000
	4,000
To Written off leasehold building	6,000
To Profit & Loss App. A/c (net profit)	68,750
	1,00,650		1,00,650

Profit and Loss Appropriation Account for the partnership firm of Brahma and Vishnu
for the year ending on 31-3-2017

Dr.		Cr.
Particulars	Amt. (Rs.)	Particulars	Amt. (Rs.)
To Salary		By Profit and Loss A/c (net profit)	68,750
Brahma	5,000
Vishnu	4,000	9,000
To Partners capital A/c (Divisible profit)
Brahma	35,850
Vishnu	23,900	59,750
	68,750		68,750

Partners' Capital Accounts

Dr.				Cr.
Date	Particulars	Brahma (Rs.)	Vishnu (Rs.)	Date	Particulars	Brahma (Rs.)	Vishnu (Rs.)
31-3-17	To Drawings A/c	5,000	5,000	1-4-16	By Balance b/d	55,000	45,000
31-3-17	To Balance c/d	90,850	67,900	31-3-17	By Salary A/c	5,000	4,000
				31-3-17	By Profit and Loss Appro. A/c (Divisible Profit)	35,850	23,900
		95,850	72,900			95,850	72,900

Balance Sheet of partnership firm of Brahma and Vishnu as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
**Capital Accounts :**		**Non-current Assets :**
Brahma	90,850	Fixed Assets :
Vishnu	67,900	Machinery	50,000
	1,58,750	- depreciation	3,000
**Non-current Liabilities :**			47,000
Brahma's loan	50,000	Furniture and Fixtures	5,000
**Current Liabilities :**		- depreciation	1,000
Creditors	25,000		4,000
Bills Payable	5,000	Leasehold building	60,000
Interest on Brahma's loan	2,250	- Written off	6,000
Outstanding Salary	3,000		54,000
		**Current Assets :**
		Closing stock of goods	73,000
		Debtors	40,000
		- B.D. (A)	500
			39,500
		Bills receivable	20,000
		Cash balance	6,000
		Outstanding commission	500
	2,44,000		2,44,000

In simple words: This set of financial statements—Profit and Loss Account, Profit and Loss Appropriation Account, Partners' Capital Accounts, and Balance Sheet—shows the firm's profitability, how profits are shared, partners' equity, and its overall financial health after all adjustments.

🎯 Exam Tip: Ensure that all adjustments are accurately reflected in both the profit/loss statements and the balance sheet, following the double-entry principle, and that the balance sheet always tallies.

 

Question 9. Parthiv and Priya are the partners of a partnership firm. From the Trial balance dated 31-3-2017 and adjustments, prepare final accounts of a partnership firm.

Answer: The final accounts for the partnership firm of Parthiv and Priya, based on the trial balance dated March 31, 2017, and subsequent adjustments, are presented as follows:

Trading Account of partnership firm of Parthiv and Priya
for the year ending on 31-3-2017

Dr.		Cr.
Particulars	Amt. (Rs.)	Particulars	Amt. (Rs.)
To Net cost of purchase (Adjusted purchase)	1,06,000	By Sales	2,00,000
To Wages - Salary	10,000	+ Unrec. Sales	10,000
To Profit and Loss A/c (Gross profit)	94,000	- Total overcosted	2,000
			2,08,000
		By Goods distributed as sample	2,000
	2,10,000		2,10,000

Profit and Loss Account of partnership firm Parthiv and Priya
for the year ending on 31-3-2017

Dr.		Cr.
Particulars	Amt. (Rs.)	Particulars	Amt. (Rs.)
**Administrative expenses :**		By Trading A/c (Gross profit)	94,000
To Trading exp.	16,000
**Other expenses and losses :**
To Loss due to fittings	4,000
To Bad debts (A)	2,000
+ B.D.R. (A)	2,800
	4,800
To Loss due to claim	4,000
To Profit and Loss Appro. A/c (Net profit)	65,200
	94,000		94,000

Profit and Loss Appropriation Account of partnership firm of Parthiv and Priya
for the year ending on 31-3-2017

Dr.		Cr.
Particulars	Amt. (Rs.)	Particulars	Amt. (Rs.)
To Interest on capital :		By Profit and Loss A/c (Net profit)	65,200
Parthiv	1,920
Priya	1,280	3,200
By Interest on drawings :
Parthiv	264
Priya	192	456
To Partners capital A/c (Divisible profit)
Parthiv	31,228
Priya	31,228	62,456
	65,656		65,656

Partners' Capital Accounts

Dr.				Cr.
Date	Particulars	Parthiv (Rs.)	Priya (Rs.)	Date	Particulars	Parthiv (Rs.)	Priya (Rs.)
	To Drawings A/c	4,800		1-4-16	By Balance b/d	24,000	16,000
1-10-16	To Drawings A/c		3,200	31-3-17	By Interest on capital	1,920	1,280
31-3-17	To Interest on drawings A/c	264	192	31-3-17	By Profit and Loss Appro. A/c (Divisible profit)	31,228	31,228
31-3-17	To Balance c/d	52,084	45,116
		57,148	48,508			57,148	48,508

Balance Sheet of partnership firm of Parthiv and Priya as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
**Capital Accounts :**		**Non-current Assets :**
Parthiv	52,084	Fixed Assets :
Priya	45,116	Furniture and fittings	10,000
	97,200	- Loss	4,000
**Current Liabilities :**			6,000
Creditors	30,000	Office equipments	4,000
Bank overdraft	14,000	Building	50,000
Outstanding claim amount	4,000	**Current Assets :**
Outstanding wages	2,000	Debtors	48,000
		+ Unrec. sales	10,000
			58,000
		- Bad debts (A)	2,000
			56,000
		- B.D.R. (A)	2,800
			53,200
		Cash balance	2,000
		Closing stock	28,000
		Closing stock of packing materials	4,000
	1,47,200		1,47,200

**Note:**
(1) Interest on drawings for partners:
Interest on drawings - Parthiv = Rs. \( 400 \times 12 \times \frac{12}{100} \times \frac{5.5}{12} \) = Rs. 264
Interest on drawings - Priya = Rs. \( 3,200 \times \frac{12}{100} \times \frac{6}{12} \) = Rs. 192
(2) Here, the sales book total is overcosted by Rs. 2,000, and unrecorded outstanding wages are Rs. 2,000, which exemplifies a compensating error. Therefore, only one effect of these two balances is passed. Accordingly, the total overcasted amount is subtracted from the sales A/c on the credit side of the trading A/c, and the unrecorded outstanding wages of Rs. 2,000 will be recorded on the capital-liability side of the Balance Sheet.
In simple words: These accounts—Trading, Profit & Loss, P&L Appropriation, Partners' Capital, and Balance Sheet—show the financial performance and position of Parthiv and Priya's firm, incorporating all given adjustments.

🎯 Exam Tip: Accuracy in applying all adjustments to the correct accounts and ensuring the final balance sheet balances is critical for full marks.

Question 10. Luv and Kush are partners of a partnership firm. They distribute 60% profit in the ratio of 3: 2 and remaining in the proportion of 2 : 1. From the trial balance of the firm dated 31-3-17 and adjustments prepare profit and loss appropriation account, current accounts of partners and balance sheet of the firm.

Answer:

Trial Balance of Partnership Firm of Luv and Kush as on 31-3-2017

Particulars	Debit balance (Rs.)	Credit balance (Rs.)
Luv's capital - drawings	40,000	1,20,000
Kush's capital - drawings	12,000	80,000
Current accounts : Luv		8,000
Kush	12,000
Profit and loss A/c		80,000
Stock (31-3-2017)	72,000
Prepaid insurance premium	3,200
Building	1,60,000
Debtors and creditors	80,000	28,000
Cash and bank balance	4,800	20,000
Bills payable		14,000
Mortgage loan		1,00,000
Goodwill	40,000
Outstanding wages		2,800
Receivable rent	1,600
Commission received in advance		800
Bad debts reserve		8,000
Patents	12,000
Furniture	24,800
Total	4,61,600	4,61,600

Adjustments:(1) Provide interest on capital at 6% and on drawings at 10 %. (2) Provide 10% interest on opening balance of current accounts. (3) Monthly salary of Rs. 1,800 is outstanding, payable to Kush. (4) After information of above mentioned adjustments, on remaining profit 10% commission is payable to Kush.

Profit and Loss Appropriation Account of partnership firm of Luv and Kush for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Interest on capital :		By Profit and loss A/c	80,000
Luv	7,200	(Net profit)
Kush	4,800
	12,000	By Interest on drawings A/c :
To Interest on current A/c : Luv	800	Luv	4,000
To Salary - Kush (1,800 x 12)	21,600	Kush	1,200
To Commission - Kush	5,200		5,200
To Partners capital A/c :		By Interest on current A/c : Kush	1,200
Luv	29,328
kush	17,472
	46,800
Total	86,400	Total	86,400

Partners' Current Accounts

Dr. Date	Particulars	Luv (Rs.)	Kush (Rs.)	Cr. Date	Particulars	Luv (Rs.)	Kush (Rs.)
1-4-16	To Balance b/d		12,000	1-4-16	By Balance b/d	8,000
	To Drawings A/c	40,000	12,000	31-3-17	By Interest on capital A/c	7,200	4,800
31-3-17	To Interest on current A/c		1,200	31-3-17	By Interest on current A/c	800
31-3-17	To Interest on drawings A/c	4,000	1,200	31-3-17	By Salary A/c		21,600
31-3-17	To Balance c/d	1,328	22,672	31-3-17	By Commission A/c		5,200
				31-3-17	By Profit and Loss Appro. A/c (Divisible profit)	29,328	17,472
Total		45,328	49,072	Total		45,328	49,072

Balance sheet of partnership firm of Luv and Kush as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts :		Non-current Assets :
Luv	1,20,000	Fixed Assets :
Kush	80,000	Building	1,60,000
	2,00,000	Furniture	24,800
Current Accounts :		Intangible Assets :
Luv	1,328	Goodwill	40,000
Kush	22,672	Patent	12,000
	24,000	Current Assets :
Non-current Liabilities :		Closing stock	72,000
Mortgage loan	1,00,000	Debtors	80,000
Current Liabilities :		- B.D.R. (A)	8,000
Creditors	28,000		72,000
Bills payable	14,000	Cash	4,800
Bank overdraft	20,000	Prepaid insurance	3,200
Outstanding wages	2,800	Outstanding rent (Receivable)	1,600
Pre-received commission	800
Total	3,89,600	Total	3,89,600

Profit distribution among partners: Rs. 46,800

60% (Rs. 28,080)
Luv \( \left(\frac{3}{5}\right) \) = Rs. 16,848
Kush \( \left(\frac{2}{5}\right) \) = Rs. 11,232

40% (Rs. 18,720)
Luv \( \left(\frac{2}{3}\right) \) = Rs. 12,480
Kush \( \left(\frac{1}{3}\right) \) = Rs. 6,240

Thus, Total profit for Luv = Rs. 16,848 + Rs. 12,480 = Rs. 29,328
Total profit for Kush = Rs. 11,232 + Rs. 6,240 = Rs. 17,472

In simple words: This problem involves preparing various financial statements—the Profit and Loss Appropriation Account, Partners' Current Accounts, and the Balance Sheet—for a partnership firm named Luv and Kush. It requires incorporating several adjustments, such as interest on capital, drawings, current accounts, and a partner's salary and commission, to accurately reflect the firm's profitability and financial position. The divisible profit is distributed according to the specified ratios for 60% and 40% portions.

🎯 Exam Tip: Pay close attention to the profit-sharing ratios and how they apply to different portions of the profit. Ensure all adjustments, particularly those involving interest on capital, drawings, and partner's remuneration, are correctly recorded in the appropriation and current accounts. Balance sheet accuracy is critical for a complete solution.

Question 11. From the Trial Balance and adjustments of partnership firm of Salim and Shabana, prepare final accounts of the firm.

Answer:

Trial Balance of partnership firm of Salim and Shabana as on 31-3-2017

Particulars	Debit balance (Rs.)	Credit balance (Rs.)
Capital Account : Salim		1,60,000
Shabana		1,20,000
Current Account : Salim	10,000
Shabana		40,000
Stock of goods (31-3-17)	54,600
Cash balance	560
Current account with bank.	14,000
Fixed deposit of SBI	80,000
Debtors - creditors	36,800	24,000
Salary	37,000
Land-building	1,20,000
Plant-machinery	40,000
Furniture	10,000
Insurance premium	2,000
Leasehold machinery (from 1-4-16 for 5 years)	60,000
Stationery and printing	2,000
Bad debts - bad debts reserve	1,200	2,000
Advertisement expense	800
Travelling expense	800
Trading A/c		61,800
Loan of Shabana (from 1-10-16)		60,000
Discount reserve		760
Total	4,68,560	4,68,560

Adjustments :(1) Salim withdrew goods of Rs. 4,000 for personal use. It is not recorded in the books. (2) Goods of Rs. 8,000 purchased at the end of the accounting year, which is not recorded. (3) Prepaid insurance is Rs. 400. (4) From debtors Rs. 800 is not recoverable. Provide 5% bad debts reserve on debtors. (5) Discount reserve on debtors is not required. (6) Provide depreciation on plant-machinery at 20% and on furniture at 5%.

Revised Trading Account of partnership firm of Salim and Shabana for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Unrecorded purchase	8,000	By Balance b/d	61,800
To Goods withdrawn (Salim)	4,000
	4,000
To Profit and Loss A/c (Revised goods profit)	57,800
Total	61,800	Total	61,800

Profit and Loss Account of partnership firm of Salim and Shabana for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
Administrative expenses :		By Trading A/c (Gross profit)	57,800
To Salary	37,000	By Discount reserve on debtors	760
To Insurance premium	2,000	By Current account (divisible loss)
- Prepaid Insurance Prem.	400	Salim	3,270
	1,600	Shabana	3,270
To Stationery and Printing	1,200		6,540
To Travelling expense	800
Selling-Distribution expense :
To Advertisement expense	1,200
Financial expense :
To Interest on Shabana's loan	1,800
Other expenses and losses :
To Bad debts (T.B.)	400
+ B.D. (A)	800
+ B.D.R. (A)	1,800
	3,000
- B.D.R. (T.B.)	2,000
	1,000
To Depreciation :
Plant-Machinery	8,000
Furniture	500
	8,500
To Written off lease hold machinery	12,000
To Profit and Loss Appro. A/c (Net profit)	65,100
Total	65,100	Total	65,100

Partners' Current Accounts

Dr. Date	Particulars	Salim (Rs.)	Shabana (Rs.)	Cr. Date	Particulars	Salim (Rs.)	Shabana (Rs.)
1-4-16	To Balance b/d	10,000		1-4-16	By Balance b/d		40,000
	To Drawing A/c (Goods)	4,000		31-3-17	By Balance c/d		13,270
31-3-17	To Profit and Loss A/c (Divisible Loss)	3,270	3,270
31-3-17	To Balance c/d	32,730
Total		40,000	13,270	Total		40,000	13,270

Balance sheet of partnership firm of Salim and Shabana as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts :		Non-current Assets :
Salim	1,60,000	Fixed Assets :
Shabana	1,20,000	Land-Building	1,20,000
	2,80,000	Plant-Machinery	40,000
Current Account :		- Depreciation	8,000
Salim	32,730		32,000
		Furniture	10,000
Non-current Liabilities :		- Depreciation	500
Loan of Shabana	60,000		9,500
Current Liabilities :		Leasehold machinery	60,000
Creditors	24,000	- written off	12,000
+ Unrec. purchase	8,000		48,000
	32,000	Investments :
O/s interest on loan of Shabana	1,800	Fixed deposits of SBI	80,000
		Current Assets :
		Closing Stock	54,600
		Debtors	36,800
		- B.D. (A)	800
			36,000
		- B.D.R. (A)	1,800
			34,200
		Cash balance	560
		Current account with bank	14,000
		Prepaid insurance premium	400
		Current A/c - Shabana	13,270
Total	4,06,530	Total	4,06,530

Notes:
(1) Here, partners' transactions with the firm, such as interest on capital, interest on drawings, interest on current account, and salary, are not provided in the trial balance. Therefore, a Profit and Loss Appropriation Account is not prepared.
(2) Discount reserve on debtors is not required (Adjustment 5). It is shown on the credit side of the Profit and Loss A/c.
(3) Profit and loss ratio is not specified. Therefore, the divisible loss is distributed equally among partners.
(4) The leasehold machinery period is 5 years. Thus, the current year's written-off amount is \( \frac{60,000}{5} \) = Rs. 12,000.

In simple words: This solution provides the complete final accounts for Salim and Shabana, including a revised Trading Account, Profit and Loss Account, Partners' Current Accounts, and the Balance Sheet. It meticulously incorporates all given adjustments, such as unrecorded purchases, goods withdrawn by a partner, prepaid expenses, bad debts, depreciation, and the write-off of leasehold machinery, to present an accurate financial picture.

🎯 Exam Tip: When adjustments affect multiple accounts, ensure you record both debit and credit impacts correctly. For instance, goods withdrawn for personal use reduce purchases and increase partner's drawings. Always re-evaluate initial trial balance figures after adjustments.

Question 12. Dhara and Mira are partners sharing profit-loss in the proportion of 3 : 2. Final accounts of their partnership firm are as follows :

Answer:

Trading Account and Profit and Loss Account of partnership firm of Dhara and Mira for year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To cost of goods sold	4,64,000	By sales	7,84,000
To office expense	80,000	By sundry income	7,000
To show-room rent	10,000	By bad debts returned	1,000
To packing expense	12,000
To bad debts	8,000
To advertisement expense	14,000
To selling-distribution expense	20,000
To financial expense	6,000
To sundry expense	16,000
To salary	8,000
To tax-insurance	2,000
Net profit : Dhara	91,200
Mira	60,800
	1,52,000
Total	7,92,000	Total	7,92,000

Balance Sheet of Partnership Firm of Dhara and Mira as on 31-3-17

Capital-Liabilities	Amt. (Rs.)	Assets-Debts	Amt. (Rs.)
Dhara :		Non-current assets:
Capital	1,60,000	Fixed assets :
+ Net profit	91,200	Building	2,40,000
	2,51,200	Plant-Machinery	20,000
- Drawings	48,000	Furniture	20,000
	2,03,200	Investments	24,000
Mira :		Current assets :
Capital	1,20,000	Cash balance	10,000
+ Net profit	60,800	Bank balance	25,000
	1,80,800	Bills receivable	5,000
- Drawings	24,000	Debtors	56,000
	1,56,800
Creditors	32,000
Bills payable	8,000
Total	4,00,000	Total	4,00,000

After preparation of annual accounts, it is found that :
(1) 5% interest on capital is not calculated.
(2) 10% depreciation on building is to be provided.
(3) Prepaid salary is of Rs. 400.
(4) Interest on investments not received Rs. 800.
(5) Bad debts reserve of Rs. 1,200 is to be maintained.
(6) Credit purchase of Rs. 1,600 is not recorded.

Prepare revised Trading account/Profit and loss a/c, Profit and loss appropriation a/c and Balance sheet.

Revised Trading Account of partnership firm of Dhara and Mira for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Cost of goods sold	4,64,000	By Sales	7,84,000
+ Unrecorded purchase	1,600
	4,65,600
To Profit and Loss A/c (Gross Profit)	3,18,400
Total	7,84,000	Total	7,84,000

Profit and Loss Account of partnership firm of Dhara and Mira for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
Administrative expense :		By Trading A/c (Gross profit)	3,18,400
To Office expenses	80,000	By Bad debts recovered	1,000
To Salary	8,000	By Sundry income	7,000
+ Prepaid salary	400	By Interest on investments	800
	8,400
To Tax-Insurance	2,000
To Sundry expense	16,000
Selling-Distribution expense :
To Advertisement expense	20,000
To Packing expense	14,000
	12,000

Profit and Loss Account of partnership firm of Dhara and Mira for the year ending on 31-3-2017 (continued)

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Showroom rent	10,000
Financial expenses	6,000
Other expenses - losses:
To Bad debts (TB)	8,000
+ B.D.R.(A)	1,200
	9,200
To Depreciation - Building	24,000
To Profit and loss Appro. A/c (Net profit)	1,26,400
Total	3,27,200	Total	3,27,200

Profit and Loss Appropriation Account of partnership firm of Dhara and Mira for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Interest on capital		By Profit and Loss A/c (Net profit)	1,26,400
Dhara	8,000
Mira	6,000
	14,000
To Capital A/c (Divisible profit)
Dhara	67,440
Mira	44,960
	1,12,400
Total	1,26,400	Total	1,26,400

Partners' Capital Accounts

Dr. Date	Particulars	Dhara (Rs.)	Mira (Rs.)	Cr. Date	Particulars	Dhara (Rs.)	Mira (Rs.)
31-3-17	To Drawings A/c	48,000	24,000	1-4-16	By Balance b/d	1,60,000	1,20,000
31-3-17	To Balance c/d	1,87,440	1,46,960	31-3-17	By Interest on capital A/c	8,000	6,000
				31-3-17	By Profit and Loss Appro. A/c (Divisible profit)	67,440	44,960
Total		2,35,440	1,70,960	Total		2,35,440	1,70,960

Balance sheet of partnership firm of Dhara and Mira as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts :		Non-current Assets :
Dhara	1,87,440	Fixed Assets :
Mira	1,46,960	Building	2,40,000
	3,34,400	- depreciation	24,000
Current Liabilities :			2,16,000
Creditors	32,000	Plant-Machinery	20,000
+ unrec. purchase	1,600	Furniture	20,000
	33,600	Investments	24,000
Bills payable	8,000	Current Assets :
		Cash balance	10,000
		Bank balance	25,000
		Debtors	56,000
		- B.D.R. (A)	1,200
			54,800
		Prepaid salary	400
		Receivable interest on investments	800
Total	3,76,000	Total	3,76,000

Notes:
(1) Cost of goods sold = Opening stock + Purchase – Closing stock.
(2) Unrecorded credit purchase, recorded on the credit side of Trading A/c, will be added to the creditors amount.

In simple words: This problem involves preparing a revised set of final accounts for Dhara and Mira, including the Trading Account, Profit and Loss Account, Profit and Loss Appropriation Account, Partners' Capital Accounts, and the Balance Sheet. It starts with initial accounts and then applies specific adjustments like interest on capital, depreciation, prepaid salary, unreceived investment interest, bad debts reserve, and unrecorded credit purchases to present an accurate and updated financial overview of the partnership firm.

🎯 Exam Tip: When given an existing set of accounts and additional adjustments, treat the original accounts as preliminary and ensure every adjustment's dual effect is correctly applied across all relevant financial statements. Accuracy in calculating and allocating profits/losses is key.

Question 13. Harsha and Chhaya are partners of a partnership firm. From the following information prepare final accounts :

Answer:

Trial Balance of Partnership Firm of Harsha and Chhaya as on 31-3-2017

Name of Accounts	Debit balance (Rs.)	Credit balance (Rs.)
Drawings : Harsha (1-10-16)	5,000
Chhaya (1-1-17)	10,000
Current account : Harsha	6,000
Interest on capital: Harsha	700
Chhaya	1,000
Machinery	40,000
Interest on loan	200
Salary (Monthly Rs. 1,000)	13,000
Salary of Chhaya	5,500
Debtors	15,000
Receivable rent	2,000
Bad debts	1,300
Stock of goods (31-3-17)	10,000
Insurance premium (Out of which Rs. 1,200 is for the year ending on 30-6-17)	2,000
Capital accounts: Harsha		20,000
Chhaya		30,000
Current account: Chhaya		4,000
Interest on drawings : Harsha		100
Chhaya		50
Loan of Harsha (from 1-10-2016)		10,000
Rent		12,000
Creditors		5,000
Trading account		24,700
Bank balance		5,450
Interest on current account: Harsha		100
Suspense account		300
Total	1,11,700	1,11,700

Adjustments:
(1) Provide interest 5% on capital, 6% on drawings and 10% on opening balance of current A/c.
(2) Provide 10% depreciation on machines.
(3) Monthly salary of Chhaya is Rs. 500.
(4) Total of sales book is undercast by Rs. 300.
(5) Rs. 1,700 are to be transferred to general reserve.

Revised Trading Account of partnership firm of Harsha and Chhaya for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Profit and loss A/c (Gross profit)	25,000	By Balance b/d	24,700
		By Total of Sale book is undercasted	300
Total	25,000	Total	25,000

Profit and Loss Account of partnership firm of Harsha and Chhaya for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
Administrative expenses :		By Trading A/c (Gross profit)	25,000
To Salary	13,000	By Rent	12,000
- Prepaid salary	1,000
	12,000
To Insurance Premium	2,000
- Prepaid	300
	1,700
Financial expenses :
To Interest on Harsha's loan	200
+ Unpaid interest	100
	300
Other expense and losses:
To Bad debts (TB)	1,300
To Depreciation - Machine	4,000
To Profit and Loss Appro. A/c (Net profit)	17,700
Total	37,000	Total	37,000

Profit and Loss Appropriation Account of partnership firm of Harsha and Chhaya for the year ending on 31-3-2017

Dr. Particulars	Amt. (Rs.)	Cr. Particulars	Amt. (Rs.)
To Interest on capital		By Profit and loss A/c (Net profit)	17,700
Harsha	700	By Interest on drawings
+ Unpaid	300	Harsha	100
	1,000	+ O/s	50
Chhaya	1,000		150
+ Unpaid	500	Chhaya	50
	1,500	+ O/s	100
	2,500		150
To Interest on current A/c - Chhaya	400		300
To Salary - Chhaya		By Interest on current A/c
Paid	5,500	Harsha	100
+ Unpaid	500	+ O/s	500
	6,000		600
To General reserve A/c	1,700
To Partners current A/c (Divisible profit)
Harsha	4,000
Chhaya	4,000
	8,000
Total	18,600	Total	18,600

In simple words: This solution guides through the preparation of final accounts for the partnership firm of Harsha and Chhaya. It details a revised Trading Account, Profit and Loss Account, and Profit and Loss Appropriation Account, meticulously applying various adjustments such as interest on capital and drawings, depreciation on machinery, unrecorded sales, and transfers to general reserve to determine the divisible profit and financial performance.

🎯 Exam Tip: For problems with various adjustments, create a clear working note for each adjustment to avoid errors, especially for interest calculations on capital, drawings, and loans. Ensure that both effects of each adjustment are recorded in the correct accounts.

Question 15. With consideration of following trial balance and adjustments of Harsh and Yesha, prepare final accounts for the year ending on 31-3-17 of their firm.
Answer:

Trial Balance of Partnership Firm of Harsh and Yesha as on 31-3-2017

Name of Accounts	Debit balance (Rs.)	Credit balance (Rs.)
Capital and drawings: Harsh	5,000	35,000
Yesha	2,500	15,000
Goodwill	5,000	-
Patent and Trade-mark	2,700	-
Receivables and payables	31,000	25,000
Accounts of goods	40,000	89,250
Opening stock	15,000	-
Furniture	6,000	-
Goods return accounts	3,000	5,000
Wages	7,500	-
Depreciation on furniture	4,000	-
Depreciation on furniture	300	-
Stationery and printing	300	-
Building	1,550	-
Legal charges	46,000	-
Cash balance	6,500	-
Railway freight	300	-
Insurance premium	600	-
Bills	1,150	2,500
Postage expense	4,000	-
Bad debts and bad debts reserve	2,000	2,000
Discounts	1,500	1,500
Stamps on hand and bad debts return	750	1,250
12% HDFC loan (1-7-16)	150	10,000
Total	10,000
	1,86,500	1,86,500

Adjustments:
(1) Closing stock Rs. 10,000 out of which 50% has no market value.
(2) Legal charges included of legal charges of building purchase Rs. 4,000.
(3) Provide 5% bad debts reserve on debtors.
(4) Provide depreciation 10% on furniture and 5% on building.
(5) \( \frac{1}{3} \) share of patent and trade mark is to be written off.

Trading Account of partnership firm of Harsh and Yesha for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Opening stock		6,000	By Sales		89,250
To Purchase		40,000	- Sales return		7,500
- Purchase return		5,000		81,750
		35,000	By Closing stock		5,000
To Wages		4,000
To Railway freight		600
To Profit-loss A/c (Gross profit)		41,150
		86,750			86,750

Profit and Loss Account of partnership firm of Harsh and Yesha for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
By Trading A/c (Gross profit)		41,150
By Discount received		1,500
By Bad debts recovered		1,250
Administrative expenses:
To Stationery and printing		1,550
To Legal exp.		6,500
- W.R. Building legal exp.		4,000
		2,500
To Postage expense		2,000
To Insurance premium		1,150
Selling-Distribution expense:
To Discount allowed		750
Financial expense:
To Interest on HDFC loan		900
Other expenses and losses:
To Bad debts (T.B.)		1,500
+ B.D.R. (A)		1,550
		3,050
- B.D.R. (T.B.)		2,000
		1,050
To Depreciation:
Building		2,500
Furniture		330
		2,830
To Written off patent and trademark		900
To Partners capital A/c (Divisible Profit)		30,270
Harsh		15,135
Yesha		15,135
		43,900			43,900

Profit and Loss Appropriation Account of partnership firm of Harsh and Yesha for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
By Profit and loss A/c - Net profit		30,270
To Partners capital A/c (Divisible Profit)
Harsh		15,135
Yesha		15,135
		30,270			30,270

Partners Capital Accounts

Dr. Date	Particulars	Harsh (Rs.)	Yesha (Rs.)	Cr. Date	Particulars	Harsh (Rs.)	Yesha (Rs.)
1-4-16	By Balance b/d	35,000	15,000
31-3-17	By Profit-loss A/c (Divisible profit)	15,135	15,135
	To Drawing A/c	5,000	2,500
31-3-17	To Balance c/d	45,135	27,635
		50,135	30,135			50,135	30,135

Balance sheet of partnership firm of Harsh and Yesha as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts:		Non-current Assets:
Harsh	45,135	Fixed Assets:
Yesha	27,635	Machines	15,000
	72,770	Furniture	3,000
Non-Current Liabilities:		- Depreciation (T.B.)	300
12% HDFC loan	10,000		3,300
Current Liabilities:		- Depreciation (Adj.)	330
Creditors	25,000		2,970
Bills payable	2,500	Building	46,000
Outstanding interest on loan	900	+ Legal exp.	4,000
			50,000
		- Depreciation	2,500
			47,500
Intangible Assets:
Goodwill	5,000
Patent and Trademark	2,700
- Written off	900
			1,800
Current Assets:
Closing stock	5,000
Debtors	31,000
- BDR (A)	1,550
			29,450
Bills receivables	4,000
Stock of postal stamps	150
Cash balance	300
	1,11,170		1,11,170

Notes:
(1) Legal expenses paid for building purchase are considered capital expenditure and are added to the building cost.
(2) Depreciation on furniture is calculated at 10% on the opening balance of Rs. 3,300. Thus, depreciation on furniture amounts to Rs. 330.
(3) Outstanding interest on the HDFC loan for nine months is calculated as Rs. 10,000 \( \times \frac{9}{12} \times \frac{12}{100} \) = Rs. 900.
(4) Since specific partner transactions or adjustments are not provided, the Profit and Loss Appropriation Account is not prepared for such details.
(5) The profit-loss sharing ratio is not specified, so divisible profit is distributed equally among partners.In simple words: This question required the full preparation of a partnership firm's final accounts, including the Trading Account, Profit and Loss Account, Profit and Loss Appropriation Account, Partners' Capital Accounts, and the Balance Sheet, after considering various adjustments like depreciation, outstanding expenses, and bad debt reserves. The main challenge was to correctly apply these adjustments to the relevant accounts and ensure the balance sheet balances.

🎯 Exam Tip: When preparing final accounts, carefully classify each item as an asset, liability, income, or expense. Pay close attention to adjustments, as they often have a dual effect on two different accounts, ensuring accuracy in both the income statements and the balance sheet.

Question 16. Mela are partners of partnership firm sharing profit-loss in capital proportion. From the following trial balance and adjustments prepare final accounts of the firm.
Answer:

Trial balance of Partnership Firm of Neela and Sheela as on 31-3-17

Name of Accounts	Debit balance (Rs.)	Credit balance (Rs.)
Neela's capital and drawings	20,000	1,00,000
Sheela's capital and drawings	14,000	50,000
Suppliers and customers	90,000	60,000
Goods returned	2,000	3,000
Bills	15,000	20,800
Cash and Bank	1,000	14,000
Bad debts and bad debts reserve	400	1,300
Purchase and sales	1,40,000	2,60,500
Wages and outstanding wages	35,000	2,000
Machinery	36,500	-
Depreciation on machinery	3,500	-
Furniture	12,000	-
Opening stock	46,100	-
Prepaid insurance	200	-
Salary	23,000	-
Insurance premium	2,000	-
Rent-taxes	12,000	-
Advertisement expenses	2,900	-
Goodwill	72,000	-
Leasehold building (from 1-10-14 for 5 years)	14,000	-
8% Leela's loan (1-11-16)	-	30,000
Total	5,41,600	5,41,600

Adjustments:
(1) Closing stock Rs. 1,10,000 and having market value 20% more than book value.
(2) Per annum 6% interest is payable on Partners' capital.
(3) Interest on drawings recoverable from partners: Neela Rs. 900, Sheela Rs. 600.
(4) Provide 5% bad debt reserve on debtors.
(5) Outstanding expenses at the end of accounting year: rent Rs. 300 and salary Rs. 950.
(6) Provide depreciation: 10% on machinery and 5% on furniture.

Trading Account of partnership firm of Neela and Sheela for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Opening stock		46,100	By Sales		2,60,500
To Purchase		1,40,000	- Goods returns		2,000
- Goods return		3,000		2,58,500
		1,37,000	By Closing stock		1,10,000
To wages		35,000
To Profit and loss A/c (Gross profit)		1,50,400
		3,68,500			3,68,500

Profit and Loss Account of partnership firm of Neela and Sheela for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
By Trading A/c (Gross profit)		1,50,400
Administrative expenses:
To Salary		23,000
+ Unpaid		950
		23,950
To Rent and Taxes		12,000
+ Outstanding rent		300
		12,300
To Insurance premium		2,000
Selling distribution expense:
To Advertisement expense		2,900
Financial expense:
To Interest on loan of Leela		1,000
Other exp. and losses:
To Bad debts (TB)		400
+ BDR (A)		4,500
- BDR (TB)		1,300
		3,600
To Depreciation:
Machinery		4,000
Furniture		600
		4,600
To Written off leasehold building		4,000
To Profit and loss Appro. A/c (Net Profit)		96,050
		1,50,400			1,50,400

Profit and Loss Appropriation Account for the partnership firm of Neela and Sheela for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Interest on capital:			By Profit and loss A/c (Net profit)		96,050
Neela		6,000	By Interest on drawings A/c:
Sheela		3,000	Neela		900
		9,000	Sheela		600
To Partners Capital A/c (Divisible profit)					1,500
Neela		59,033
Sheela		29,517
		88,550
		97,550			97,550

Partners Capital Accounts

Dr. Date	Particulars	Neela (Rs.)	Sheela (Rs.)	Cr. Date	Particulars	Neela (Rs.)	Sheela (Rs.)
1-4-16	By Balance b/d	1,00,000	50,000
31-3-17	By Interest on capital A/c	6,000	3,000
31-3-17	By Profit and loss Appro. A/c (Divisible profit)	59,033	29,517
	To Drawing A/c	20,000	14,000
31-3-17	To Interest on drawings A/c	900	600
31-3-17	To Balance c/d	1,44,133	67,917
		1,65,033	82,517			1,65,033	82,517

Balance sheet of partnership firm of Neela and Sheela as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts:		Non-current Assets:
Neela	1,44,133	Fixed Assets:
Sheela	67,917	Leasehold building	14,000
	2,12,050	- Written off	4,000
Non-current liabilities:			10,000
8% Leela's loan	10,000	Machinery	36,500
Current Liabilities:		+ Depreciation (TB)	3,500
Creditors	60,000		40,000
Bills payable	20,800	- Depreciation (A)	4,000
Bank overdraft	14,000		36,000
Outstanding wages	2,000	Furniture	12,000
Outstanding interest on Leela's loan	1,000	- Depreciation	600
Outstanding Salary	950		11,400
Outstanding Rent	300	Intangible Assets:
		Goodwill	72,000
	3,41,100	Current Assets:
		Debtors	90,000
		- BDR (A)	4,500
			85,500
		Closing stock	1,10,000
		Bills receivable	15,000
		Cash balance	1,000
		Prepaid insurance	200
			3,41,100

Notes:
(1) The leasehold building has a 5-year period from 1-10-2014, with 1.5 years already completed by 31-3-2016. The remaining Rs. 14,000 is to be written off over 3.5 years, meaning Rs. 4,000 per year.
(2) The outstanding interest on Leela's loan is Rs. 30,000 \( \times \frac{8}{100} \times \frac{5}{12} \) = Rs. 1,000.
(3) Depreciation at 10% per annum on machinery (Adjustment) and 5% on furniture is to be calculated on their opening balances as shown in the balance sheet.In simple words: This question involves preparing the financial statements for a partnership, including adjustments for closing stock, partner's capital and drawings interest, bad debt reserves, outstanding expenses, and depreciation on fixed assets. The goal is to accurately reflect the firm's profitability and financial position by correctly processing all trial balance items and adjustments.

🎯 Exam Tip: Always double-check the calculations for interest on capital, drawings, and depreciation, especially when periods or specific percentages are mentioned in the adjustments. Ensure all adjustments are posted to two accounts to maintain the double-entry system's integrity.

Question 17. Man and Mohan are partners of a firm sharing profit and loss in the proportion of 1 : 1. From the given below trial balance and adjustments prepare final accounts for the year ending on 31-1-2017
Answer:

Trial Balance of Partnership Firm of Man and Mohan as on 31-3-17

Name of Accounts	Debit balance (Rs.)	Credit balance (Rs.)
Capital and drawings: Man	3,000	2,80,000
Mohan	4,500	2,20,000
Purchase-sales	80,000	1,20,000
Advertisement expense	7,000	-
Carriage outward	850	-
Machines (office)	1,50,000	-
Purchase of office machine (1-4-16)	40,000	-
Building	2,50,000	-
Office salary	15,000	-
Customers - Suppliers	25,000	35,000
Goods returned	16,000	14,000
Weight charges	450	-
Loan of Man	-	10,000
Custom duty	1,300	-
Goods stock (1-4-16)	42,000	-
Trading expense	1,300	-
Wages and outstanding wages	750	2,600
Commission paid in advance	350	-
Bank account and cash account	20,700	3,000
Interest on loan	400	-
Investment in 8% govt. security	30,000	-
Current accounts: Man	-	8,000
Mohan	-	12,000
Total	6,96,600	6,96,600

Adjustments:
(1) The value of closing stock is Rs. 80,000. Its market value is 10% more.
(2) Provide depreciation at 10% on machines and building.
(3) Debtor of Rs. 10,000 became insolvent. 50% amount will be received as per instructions of his receiver. Provide 5% bad debt.
(4) 10% interest is outstanding on bank overdraft.
(5) Goods of Rs. 2,000 are missed out to record in sales return book.

Trading Account of partnership firm of Man and Mohan for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Opening stock		42,000	By Sales		1,20,000
To Purchase		80,000	- Sales return		16,000
- Pur. Return		14,000		1,04,000
		66,000	- Unrec. sales return		2,000
To Tolai		450		1,02,000
To Custom duty		1,300	By Closing stock		80,000
To Wages		750
To Profit and loss A/c (Gross profit)		71,500
		1,82,000			1,82,000

Profit and Loss Account of partnership firm of Man and Mohan for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
By Trading A/c (Gross profit)		71,500
By Interest on Govt. Security		2,400
By Partners current A/c (Divisible loss)
Man		400
Mohan		400
		800
Administrative expenses:
To Office salary		15,000
To Trading expense		1,300
Selling Distribution expenses:
To Advertisement expense A/c		7,000
To Carriage outward		850
Financial Expenses:
To Interest on bank overdraft		300
To Interest on Man's loan		400
+ Outstanding interest		200
		600
Other Exp. and losses:
To Bad debts (A)		5,000
+ BDR (A)		650
		5,650
To Depreciation:
Building		25,000
Machinery		19,000
		44,000
		74,700			74,700

Partners' Current Accounts

Dr. Date	Particulars	Man (Rs.)	Mohan (Rs.)	Cr. Date	Particulars	Man (Rs.)	Mohan (Rs.)
1-4-16	To Balance b/d	8,000	-	1-4-16	By Balance b/d	-	12,000
	To Drawings A/c	3,000	4,500	31-3-17	By Balance c/d	11,400	-
31-3-17	To Profit and loss Appro. A/c (Divisible loss)	400	400
31-3-17	To Balance c/d	-	7,100
		11,400	12,000			11,400	12,000

Balance sheet of the partnership firm of Man and Mohan as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts:		Non-current Assets:
Man	2,80,000	Fixed Assets:
Mohan	2,20,000	Machine	1,50,000
	5,00,000	+ Purchase	40,000
Current Account: Mohan	7,100		1,90,000
Non-Current Liabilities:		- Depreciation	19,000
Man's Loan	10,000		1,71,000
Current Liabilities:		Building	2,50,000
Bank overdraft	3,000	- Depreciation	25,000
+ O/s int. on bank o/d	300		2,25,000
	3,300	Investments:
Creditors	35,000	Inv. in 8% govt. security	30,000
Outstanding wages	2,600	Current Assets:
Outstanding interest on Man's loan	200	Debtors	25,000
		- Sales returns	2,000
			23,000
		- B.D. (A)	5,000
			18,000
		- B.D.R. (A)	650
			17,350
		Closing Stock	80,000
		Cash balance	20,700
		Prepaid commission	350
		Outstanding int. on 8% Govt. Sec.	2,400
		Current Account: Man	11,400
	5,58,200		5,58,200

Notes:
(1) Man's loan interest is Rs. 10,000 \( \times \frac{6}{100} \) = Rs. 600; out of which Rs. 400 is already paid. Thus, outstanding interest on loan is Rs. 600 - Rs. 400 = Rs. 200.
(2) Bad debts reserve should be created only for doubtful debts. Therefore, B.D.R. is calculated at 5% on Rs. 13,000 (Rs. 23,000 - Rs. 10,000 for the insolvent debtor).
(3) Since partner transactions with the firm are not given, the Profit and Loss Appropriation A/c is not prepared.In simple words: This question required the preparation of full financial statements for a partnership, including the Trading Account, Profit and Loss Account, Partners' Current Accounts, and the Balance Sheet. Key adjustments involved calculating depreciation, accounting for bad debts and a bad debt reserve, noting outstanding interest, and correcting sales returns.

🎯 Exam Tip: For complex adjustments like bad debts with partial recovery, calculate the net amount of doubtful debt before applying the bad debt reserve percentage. Always distinguish between capital accounts and current accounts for partners when recording transactions.

Question 18. Sant and Mahant are partners of a firm sharing profit and loss in the proportion of 3 : 2. From the trial balance of 31-3-2017 and adjustments prepare final accounts of the partnership firm.
Answer:

Trial Balance of Partnership Firm of Sant and Mahant as on 31-3-17

Debit Balances	Amt. (Rs.)	Credit Balances	Amt. (Rs.)
Drawings: Sant	7,000	Capital accounts: Sant	80,000
Mahant	3,000	Mahant	40,000
Plant and Machines	33,300	Creditors	48,000
Addition in plant and machines (from 1-7-2016)	24,000	Sale of plants and machines (on 1-4-16, book value Rs. 6,900)	4,800
Furniture-fittings	2,560	Sales	2,68,000
Debtors	64,940	5% loan from Gyani (from 1-10-16)	10,000
Advertisement expense	13,248	Commission	800
Cash-bank balance	8,496
Purchases	1,81,168
Productive wages	45,272
Electricity expense (Factory)	4,296
Rent-taxes (Office)	872
Rent-taxes (Factory)	9,384
Technical expense	400
Opening stock	33,696
Factory expense	1,780
Office salary	8,780
Discount allowed	4,800
Carriage inward	1,700
Bad debts	836
Office expenses	2,072
	4,51,600		4,51,600

Adjustments:
(1) There was stock of Rs. 85,500.
(2) Provide 15% depreciation on plant and machines and 7.5% on furniture and fittings.
(3) Provide bad debts reserve of Rs. 2,000 on debtors.
(4) 6% interest is payable on capital of partners.
(5) Outstanding expenses: Productive wages Rs. 784, advertisement expense Rs. 312, office salary Rs. 400, technical expense Rs. 320.

Trading Account of partnership firm of Sant and Mahant for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Opening stock		33,696	By Sales		2,68,000
To Purchase		1,81,168	By Closing stock of goods		85,500
To Productive wages		45,272
+ O/s pro. wages		784
		46,056
To Electricity expense (Factory)		4,296
To Rent-taxes (Factory)		9,384
To Technical expense		400
+ Outstanding Tec. exp.		320
		720
To Factory expense		1,780
To Carriage inward		1,700
To Dep. on plant and machines		6,660
To Profit and Loss A/c (Gross Profit)		68,040
		3,53,500			3,53,500

Profit and Loss Account of partnership firm of Sant and Mahant for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
By Trading A/c (Gross profit)		68,040
By Commission		800
Administrative expenses:
To Rent and Taxes (Office)		872
To Office salary		8,780
+ Unpaid		400
		9,180
To Office expenses		2,072
Selling-Distribution expenses:
To Advertisement expense		13,248
+ Outstanding adv. exp.		312
		13,560
To Discount allowed		4,800
Financial expense:
To Interest on loan to Gyani		250
Other expenses and losses:
To Bad debts (T.B.)		836
+ B.D.R. (A)		2,000
		2,836
To Depreciation on Furniture and fittings		192
To Loss due to sale of machine		2,100
To profit and Loss Appro. A/c (Net profit)		32,978
		68,840			68,840

Profit and Loss Appropriation Account of partnership firm of Sant and Mahant for the year ending on 31-3-2017

Dr. Particulars		Amt. (Rs.)	Cr. Particulars		Amt. (Rs.)
To Interest on capital:			By Profit and loss A/c - Net profit		32,978
Sant		4,800
Mahant		2,400
		7,200
To Partners capital A/c (Divisible profit)
Sant		15,467
Mahant		10,311
		25,778
		32,978			32,978

Partners Capital Accounts

Dr. Date	Particulars	Sant (Rs.)	Mahant (Rs.)	Cr. Date	Particulars	Sant (Rs.)	Mahant (Rs.)
1-4-16	By Balance b/d	80,000	40,000
31-3-17	By Interest on capital A/c	4,800	2,400
31-3-17	By Profit and loss Appro. A/c (Divisible profit)	15,467	10,311
	To Drawings A/c	7,000	3,000
31-3-17	To Balance c/d	93,267	49,711
		1,00,267	52,711			1,00,267	52,711

Balance sheet of the partnership firm of Sant and Mahant as on 31-3-2017

Capital - Liabilities	Amt. (Rs.)	Assets - Receivables	Amt. (Rs.)
Capital Accounts:		Non-current Assets:
Sant	93,267	Fixed Assets:
Mahant	49,711	Plant and Machines	33,300
	1,42,978	+ Addition	24,000
Non-current Liabilities:			57,300
5% loan from Gyani	10,000	- Sold	6,900
Current Liabilities:			50,400
Creditors	48,000	- Depreciation	6,660
Outstanding Productive wages	784		43,740
Outstanding Advertisement expense	312	Furniture and fittings	2,560
Outstanding Office salary	400	- Depreciation	192
Outstanding Technical expense	320		2,368
Outstanding Interest on loan of Gyani	250	Current Assets:
		Closing stock	85,500
	2,03,044	Debtors	64,940
		- B.D.R. (A)	2,000
			62,940
		Cash and bank balance	8,496
	2,03,044		2,03,044

Notes:
(1) This partnership firm is engaged in production, so production expenses are debited to the Trading A/c.
(2) Depreciation on Plant and Machines: Initial book value was Rs. 33,300, minus Rs. 6,900 for sold items, leaving Rs. 26,400. Depreciation at 15% on this amount equals Rs. 3,960. For the addition of a machine worth Rs. 24,000, depreciation at 15% for 9 months is Rs. 24,000 \( \times \frac{15}{100} \times \frac{9}{12} \) = Rs. 2,700. Total depreciation is Rs. 3,960 + Rs. 2,700 = Rs. 6,660.In simple words: This question involves preparing the complete financial statements for a partnership firm, including the Trading Account, Profit and Loss Account, Profit and Loss Appropriation Account, Partners' Capital Accounts, and the Balance Sheet. Key steps involve calculating and adjusting for depreciation on assets, outstanding expenses, bad debts, and interest on partners' capital.

🎯 Exam Tip: When dealing with assets like plant and machinery that have additions or disposals during the year, calculate depreciation separately for each component (opening balance, additions, disposals) based on their usage period to ensure accuracy.

Question 19. Jay and Prafulla are partners of a partnership firm sharing profit and loss in equal proportion. From the trial balance dated 31-3-17 and additional information, prepare financial accounts of the firm.
Answer:

Trial Balance of Partnership Firm of Jay and Prafulla as on 31-3-17

Name of Accounts	Debit balance (Rs.)	Credit balance (Rs.)
Capital and drawings: Jay	12,000	1,00,000
Prafulla	16,000	1,40,000
Current accounts: Jay	12,000	-
Prafulla	-	4,000
Good stock (1-4-16)	60,000	-
Purchase and sales	2,00,000	3,80,000
Goods returned	7,000	12,000
Cash and bank	3,700	15,750
Bills	18,000	14,000
Rent (upto February 2017)	22,000	-
Building	1,20,000	-
Currents year's depreciation on building	12,000	-
Freight	5,300	-
Furniture	84,600	-
Sale of furniture (1-10-16)	-	14,600
Debtors and creditors	48,000	16,800
Salary	20,000	-
Insurance premium (including Rs. 3,600 for the year ending on 30-6-17)	5,700	-
Bad debts and bad debt reserve	1,000	2,000
Loan of Prafulla (from 1-10-16)	-	20,000
Wages	11,000	-
Discount	650	850
Trading expenses	1,050	-
Advertisement expenses	8,000	-
Machines (Addition of 12,000 on 31-12-16)	52,000	-
	7,20,000	7,20,000

Adjustments:
(1) The value of closing stock is Rs. 60,000. Out of which the market value of 10% goods is 20% less and the market value of 20% goods is 10% less. The remaining goods of Rs. 42,000 are valued at 25% less than book value.
(2) Provide 10% interest on capital, 9% on balance of current accounts and 12% on drawings.
(3) Monthly salary of Rs. 700 is payable to Jay. He has withdrawn salary for 4 months, which is included in his total salary.
(4) Prafulla introduced additional capital of Rs. 20,000 on 1-1-17.
(5) Jay has withdrawn Rs. 1,000 per month on the last day of each month. Prafulla has withdrawn on 1-10-2016.
(6) Calculate depreciation at 9% on machines and 5% on furniture.
(7) Prafulla has withdrawn goods of Rs. 2,000 on 1-12-2016, which is recorded in the sales book at Rs. 2,400.
(8) One debtor of Rs. 2,400 became insolvent and 40 paise per rupee dividend is receivable.

 

Question 19. Jay and Prafulla are partners of a partnership firm sharing profit and loss in equal proportion. From the trial balance dated 31-3-17 and additional information, prepare financial accounts of the firm.
Answer: The financial accounts for the partnership firm of Jay and Prafulla, considering the trial balance dated 31-3-2017 and all additional information, are prepared as follows:

Trading Account of Partnership Firm of Jay and Prafulla for the Year Ending on 31-3-2017

Dr. Particulars	Amount (Rs.)	Cr. Particulars	Amount (Rs.)
To Opening stock	60,000	By Sales	3,80,000
To Purchase	2,00,000	- Sales return	7,000
- Goods return	12,000		3,73,000
	1,88,000	- Goods withdrawn for personal use (wrongly recorded)	2,400
Goods withdrawn by Prafulla for personal use	2,000		3,70,600
	1,86,000	By Closing stock	47,100
To Railway freight	5,300
To Wages	11,000
To Profit and Loss A/c (Gross profit)	1,55,400
Total	4,17,700	Total	4,17,700

Profit and Loss Account of Partnership Firm of Jay and Prafulla for the Year Ending on 31-3-2017

Dr. Particulars	Amount (Rs.)	Cr. Particulars	Amount (Rs.)
Administrative expenses :		By Trading A/c (Gross profit)	1,55,400
To Rent	22,000	By Bad debts return	2,000
+ Outstanding rent	2,000	By Discount received	850
	24,000
To Salary (Jay's Salary)	20,000
- Jay's withdrawn salary	2,800
	17,200
To Insurance Premium	5,700
- Prepaid Insurance Premium	900
	4,800
To Trading expenses	1,050
Selling-distribution expenses :
To Advertisement expense	8,000
To Discount allowed	650
Financial expenses :
To Interest on loan of Prafulla	600
Other expenses and losses:
To Bad debts (Trial Balance)	1,000
+ Bad Debts Reserve (Adjusted)	1,440
	2,440
To Depreciation :
Building	12,000
Furniture	3,865
Machines	3,870
	19,735
To Profit and Loss Appropriation A/c (Net profit)	79,775
Total	1,58,250	Total	1,58,250

Profit and Loss Appropriation Account of Partnership Firm of Jay and Prafulla for the Year Ending on 31-3-2017

Dr. Particulars	Amount (Rs.)	Cr. Particulars	Amount (Rs.)
To Interest on capital :		By Profit and Loss A/c (Net profit)	79,775
Jay	10,000	By Interest on drawings A/c :
Prafulla	12,500	Jay	660
	22,500	Prafulla	1,040
To Interest on Current A/c - Prafulla	360		1,700
To Salary - Jay	8,400	By Interest on Current A/c - Jay	1,080
To Partners' Capital A/c (Divisible profit) :
Jay	25,648
Prafulla	25,647
	51,295
Total	82,555	Total	82,555

Partners' Current Accounts

Dr. Date	Particulars	Jay (Rs.)	Prafulla (Rs.)	Cr. Date	Particulars	Jay (Rs.)	Prafulla (Rs.)
1-4-16	To Balance b/d	12,000	-	1-4-16	By Balance b/d	-	4,000
	To Drawing A/c	-	16,000	31-3-17	By Interest on Capital A/c	10,000	12,500
1-10-16	To Drawings A/c	-	-	31-3-17	By Interest on Current A/c	-	360
1-12-16	To Drawings A/c (Goods)	-	2,000	31-3-17	By Salary A/c	8,400	-
31-3-17	To Salary A/c (Cash A/c)	2,800	-	31-3-17	By Profit and Loss Appropriation A/c (Divisible Profit)	25,648	25,647
31-3-17	To Interest on drawings A/c	660	1,040
31-3-17	To Interest on Current A/c	1,080	-
31-3-17	To Balance c/d	15,508	23,467
Total		44,048	42,507	Total		44,048	42,507

Balance Sheet of Partnership Firm of Jay and Prafulla as on 31-3-2017

Capital - Liabilities	Amount (Rs.)	Assets - Receivables	Amount (Rs.)
Capital Accounts :		Non-current Assets :
Jay	1,00,000	Fixed Assets :
Prafulla	1,40,000	Building	1,20,000
	2,40,000	Machines	40,000
Current Account :		+ Addition	12,000
Jay	15,508		52,000
Prafulla	23,467	- Depreciation	3,870
	38,975		48,130
Non-current Liabilities :		Furniture	84,600
Prafulla's loan	20,000	- Sold (dt. 1-10-16)	14,600
Current Liabilities :			70,000
Creditors	16,800	- Depreciation	3,865
Bills payable	14,000		66,135
Bank overdraft	15,750	Current Assets :
Outstanding rent	2,000	Closing stock	47,100
Outstanding interest on loan of Prafulla	600	Debtors	48,000
		- Wrongly recorded sales	2,400
			45,600
		- Bad debts (Adjusted)	1,440
			44,160
		Bills receivables	18,000
		Cash balance	3,700
		Prepaid insurance premium	900
Total	3,48,125	Total	3,48,125

**Notes for Question 19:**
(1) Rent payment was made up to February 2017, covering 11 months. Therefore, the outstanding rent for one month amounts to Rs. 2,000, calculated as \( \frac{22,000}{11} \).
(2) The prepaid insurance premium for three months is calculated as Rs. 900, derived from \( 3,600 \times \frac{3}{12} \).
(3) Goods valued at Rs. 2,000 were withdrawn by Prafulla for personal use. This amount is subtracted from the purchase account on the debit side of the Trading Account and debited to Prafulla's Drawings Account. Additionally, Rs. 2,400, representing sales incorrectly recorded for goods withdrawn, is deducted from the sales account on the credit side of the Trading Account and also from debtors.
(4) From the debtors totaling Rs. 2,400, only 40 paise per rupee is recoverable, implying a 60% bad debt. Thus, the bad debts amount to Rs. 1,440, calculated as \( 2,400 \times \frac{60}{100} \).
(5) The machinery has a value of Rs. 52,000, which includes new machinery worth Rs. 12,000 added on 31-12-2016. Depreciation at 9% per annum is applied to Rs. 40,000 for the full year and to Rs. 12,000 for three months. This results in depreciation of Rs. 3,600 for Rs. 40,000 (\( 40,000 \times \frac{9}{100} \)) and Rs. 270 for Rs. 12,000 (\( 12,000 \times \frac{9}{100} \times \frac{3}{12} \)). The total depreciation on machinery is Rs. 3,870 (\( 3,600 + 270 \)).
(6) The opening balance of the furniture account was Rs. 84,600. Furniture valued at Rs. 14,600 was sold on 1-10-2016. Full year depreciation at 5% is calculated on the remaining Rs. 70,000, amounting to Rs. 3,500 (\( 70,000 \times \frac{5}{100} \)). Depreciation on the sold furniture of Rs. 14,600 for six months is Rs. 365 (\( 14,600 \times \frac{5}{100} \times \frac{6}{12} \)). Therefore, the total depreciation on furniture is Rs. 3,865 (\( 3,500 + 365 \)).
(7) Jay's total salary of Rs. 8,400 (at Rs. 700 per month) is debited to the Profit and Loss Appropriation A/c and credited to Jay's Current A/c. Jay had withdrawn Rs. 2,800 as salary for 4 months, which is included in the total salary amount. This withdrawn amount is subtracted from the salary A/c on the debit side of the Profit and Loss A/c and recorded as a drawing in Jay's Current Account.
(8) Interest on Prafulla's capital is calculated at 10% per annum on the opening balance of Rs. 1,20,000 for the full year and on an additional Rs. 20,000 for three months.
(9) Interest on drawings: For Jay, interest on drawings is Rs. 660 (\( 1,000 \times \frac{12}{100} \times \frac{66}{12} \)). For Prafulla, interest on drawings amounts to Rs. 960 (\( 16,000 \times \frac{12}{100} \times \frac{6}{12} \)). Additionally, interest on goods withdrawn by Prafulla is Rs. 80 (\( 2,000 \times \frac{12}{100} \times \frac{4}{12} \)). Thus, the total interest on drawings for Prafulla is Rs. 1,040 (\( 960 + 80 \)). The total interest on drawings for Jay is Rs. 660.
(10) The calculation for the closing stock value is as follows: The total initial value was Rs. 60,000. This includes Rs. 6,000 (10% goods) and Rs. 12,000 (20% goods), with the remaining Rs. 42,000. The total loss on these components is Rs. 1,200 + Rs. 1,200 + Rs. 10,500, totaling Rs. 12,900. Therefore, the closing stock is valued at Rs. 47,100 (\( 60,000 - 12,900 \)).
In simple words: The final accounts provide a complete financial overview of the Jay and Prafulla partnership. It includes their trading performance, net profit distribution, changes in partners' capital, and the overall financial health through the balance sheet, incorporating various adjustments and calculations for clarity.

🎯 Exam Tip: Pay close attention to adjustments impacting multiple accounts, such as depreciation and interest on capital/drawings. Ensure accurate posting to both debit and credit sides and correct allocation between current and capital accounts based on the firm's capital method for maximum marks.