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D. K. Goel (Volume-1)Class-12 Text Book
Solutions Accounting For Partnership
Firms – Fundamentals
D. K. Goel (Volume-1)Class-12 Text Book Solutions
Chapter -1
Accounting For Partnership Firms – Fundamentals
SOLUTION : 12.
PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. for the year ended 31st March, 2016 Cr.
Particulars ` Particulars `
By Pro t & Loss
To Salary
A/c
(Pro t for the
A 600 x 127,200 1,72,000
year)
By Interest on
B 400 x 124,800 12,000
Drawings
To Commission (4% on annual

to C drawings)
(5% on 8,000 B 400
1,60,000)
To Interest on
C 600 1,000
Capital:
A 6,000
B 12,000
C 18,000 36,000
To Pro t

transferred to :
A’s Current
39,000
A/c
B’s Current
39,000
A/c
C’s Current
39,000 1,17,000
A/c
1,73,000 1,73,000
Note: Since 4% interest is to be charged on annual drawings, it will be charged for full
year instead of six months.
SOLUTION: 13.
PARTNER’S CAPITAL ACCOUNTS
Dr. Cr.
Particul Particul
Date A B C Date A B C
ars ars
` ` ` 2016 ` ` `
2017 April 1 By Bank
To
Mar. 31 10,00,0 8,00,00 5,00,00
Balance A/c
00 0 0
12,53,00 10,53,00 7,53,00
c/d 2017
0 0 0
Mar. 31 By P&L
Appr.
2,53,00 2,53,00 2,53,00
A/c
0 0 0
12,53,00 10,53,0 7,53,00 12,53,00 10,53,00 7,53,00

0 00 0 0 0 0

Dr. B’s LOAN ACCOUNT Cr.
Date Particulars ` Date Particulars `
To Balance
2017 March 31 2,09,000 2016 July 1 By Bank A/c 2,00,000
c/d
9,000
By Interest on
2,09,000 2017 March 31
Loan A/c
2,09,000

Dr. C’s LOAN ACCOUNT Cr.
1,00,000
To Balance 1,02,000 2016 Dec. 1 By Bank A/c
2017 March 31 By Interest on 2,000
c/d 2017 March 31
Loan A/c
1,02,000 1,02,000

Working Notes:
(1) In the absence of agreement, Interest on Loan is to be paid @6% p.a. and pro ts will
be shared equally.
`
(2) Interest on B’s Loan = 2,00,000 x 6/100 x 9/12 = 9,000
Interest on C’s Loan = 1,00,000 x 6/100 x 4/12 = 2,000
Total 11,000
(3) Net Pro t after interest on Loan = `7,70,000 – `11,000 = `7,59,000

(4) Each partner’s share of pro t = `7,59,000 ÷ 3 = `2,53,000

SOLUTION : 14.
PROFIT AND LOSS ACCOUNT
To Interest on By Pro t before
4,800 2,26,440
Mamta’s Loan interest
To Pro t transferred

to Pro t &
Loss Appropriation
2,21,640
A/c
2,26,440 2,26,440

To Interest on By Pro t &

Capital: Loss A/c —
Lata 21,000 Net Pro t 2,21,640
By Interest on
Mamta 14,000 35,000
Drawings :
To Salary
30,000 Lata 1,440
(Lata)
To General
16,000 Mamta 1,920 3,360
Reserve A/c
To Pro t
transferred to
:
Lata’s
1,00,800
Capital A/c
Mamta’s
43,200 1,44,000
Capital A/c
2,25,000 2,25,000

Notes: (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 Pro t =
2,25,000
Total of Credit side
(-) Total of Debit side (35,000 + 30,000) 65,000
General Reserve is 10% of 1,60,000 =
1,60,000
16,000

SOLUTION : 15.
Case (a) PROFIT AND LOSS ACCOUNT
Dr. for the year ending on 31st March, 2016 Cr.
To Interest on By Pro t before
7,500
Loan : interest
By Net Loss
A 9,000
transferred to :
B 4,500 13,500 A’s Capital 6,000
A/c 1,200
B’s Capital
A/c 1,800
C’s Capital
A/c 3,000
13,500 13,500

Case (b) PROFIT AND LOSS ACCOUNT
By Net Loss
To Loss before interest 7,500
transferred to :
A’s Capital A/c
To Interest on Loan:
4,200
B’s Capital A/c
A 9,000
6,300
C’s Capital A/c
B 4,500 13,500 21,000
10,500
21,000 21,000

Notes: (i) Interest on A’s Loan = `2,00,000 x 6/100 x 9/12 = `9,000
Interest on B’s Loan = `1,00,000 x 6/100 x 9/12 = `4,500

SOLUTION : 16.
To Interest on By Pro t & Loss

Capitals : A/c
Net Pro t
P 40,000
(`7,60,000
—Rent
Q 24,000 64,000 5,20,000
`2,40,000)
To Q’s Salary 60,000
To Commission:
60,000
P

16,000 76,000
Q
To Pro t

transferred to
P’s Capital
1,92,000
A/c
Q’s Capital
1,28,000 3,20,000
A/c
5,20,000 5,20,000

Dr. PARTNER’S CAPITAL ACCOUNTS Cr.
Particular Particular
Date P Q Date P Q
s s
2015 ` ` 2014 ` `
To
Mar. 31 40,000 30,000Apr. 1 By Bal. b/d 5,00,000 3,00,000
Drawings
Mar. 31 To Bal. c/d 7,52,000 4,98,0002015
By
Mar. 31 Interest
on
Capital 40,000 24,000
Mar. 31 By Salary 60,000
By
Mar. 31
Commi-
ssion 60,000 16,000
By P & L
Mar. 31
App.
A/c
1,92,000 1,28,000
(Pro t)
7,92,000 5,28,000 7,92,000 5,28,000

Working Notes:
(1) Net Pro t transferred from P & L A/c to P & L App. A/c
= `7,60,000 – Rent `2,40,000 = `5,20,000
(2) Net Pro t after deducting interest on capitals, salary and P’s commission:
`5,20,000 – `64,000 – `60,000 – `60,000 = 3,36,000
Q’s Commission = 3,36,000 x 5/105 = 16,000
(3) Rent will be credited to Rent Payable Account.

SOLUTION : 17.
To Interest on
Capital:
45,000 45,000
X 2/3 of45,000 By Net Pro t as per
30,000 Pro t & Loss A/c
Y 1/3 of 45,000
45,000 45,000
15,000

Working Note: `
Interest on X’s Capital = 8% on `10,00,000 80,000
Interest on Y’s Capital = 8% on `5,00,000 40,000
1,20,000
Since available pro t is only `45,000 which is less than appropriations of `1,20,000,
pro t will be distributed in the ratio of appropriations as follows :
Interest on Capital 80,000 : 40,000
or 2 : 1

SOLUTION : 18.
To Transfer to By Pro t and
8,000 80,000
Reserves Loss A/c
To Interest on Less : Interest

Capitals : on Puja’s
Pooja 7,000 Loan (20,000 x 6/100
Archna 3,000 10,000 x 5/12) 500 79,500
To Pro t
By Interest on
transferred to
drawings
:
Pooja’s
41,280 Pooja 240
Current A/c
Archna’s
20,640 61,920 Archna 180 420
Current A/c
79,920 79,920

Dr. CURRENT ACCOUNTS Cr.
Particulars Pooja Archna Particulars Pooja Archna
1.4.2013 ` ` 1.4.2013 ` `
To Balance By Balance
— 23,000 5,000 —
b/d b/d
31.3.2014 31.3.2014
By Interest on
To Drawings 4,800 3,600 7,000 3,000
Capital
To Interest on By Pro t and
240 180
Drawings Loss
To Balance 48,240 —Appropriation 41,280 20,640
c/d A/c
By Balance c/d — 3,140
53,280 26,780 53,280 26,780

Note: Interest on Loan is not recorded in the Current Account.

Interest on Drawings
SOLUTION : 19 (A).
(i) SIMPLE METHOD
Date Amount Period Interest @ 9%
` (Months upto March 31) `
April 30 8,000 11 660
June 30 6,000 9 405
September 30 5,000 6 225
December 31 12,000 3 270
January 31 10,000 2 150
41,000 1,710

(ii) PRODUCT METHOD
Date Amount Period Products
` (Months upto March 31)
April 30 8,000 11 88,000
June 30 6,000 9 54,000
September 30 5,000 6 30,000
December 31 12,000 3 36,000
January 31 10,000 2 20,000
41,000 2,28,000

Interest = Total of Products x 9/100 x 1/12
= 2,28,000 x 9/100 x 1/12 = `1,710

SOLUTION : 19 (B).
(i) SIMPLE METHOD
Date Amount Period Interest @ 10%
(Months upto March
` `
31)
1st June 1,000 10 83
1st August 750 8 50
1st October 1,250 6 63
1st December 500 4 17
1st February 500 2 8
4,000 221

(ii) PRODUCT METHOD
(Months upto March
`
31)
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
500 2 1,000
1st February
4,000 26,500

= 26,500 x 10/100 x 1/12 = `221

SOLUTION: 20 (A).
Gopal withdrew `1,000 p.m. regularly on the rst day of every month during the year
ended 31st March, 2014 for personal expenses. His interest on drawings will be
calculated as follows:
12,000 x 15/100 x 6.5/12 = `975

SOLUTION: 20 (B).
(i) The interest on drawings of X who draws at the beginning of every month is:
48,000 x 9/100 x 6.5/12 = `2,340
(ii) The interest on drawings of Y who draws at the end of every month is:
48,000 x 9/100 x 5.5/12 = `1,980
(iii) The interest on drawings of Z who draws in the middle of every month is:
48,000 x 9/100 x 6/12 = `2,160

SOLUTION : 21.
Total Drawings for the
Case (i) = `20,000
year = `5,000 x 4
Average Period = (12
= 7.5 months
months + 3 months) ÷ 2
Interest on Drawings =
= `1,000
`20,000 x 8/100 x 7.5/12
Case (ii) = `24,000
year = `6,000 x 4
Average Period = (9
= 4.5 months
months + 0 month) ÷ 2
= `720
`24,000 x 8/100 x 4.5/12
Case (iii) = `40,000
year = `10,000 x 4
Average Period = (10.5
= 6 months
months + 1.5 months) ÷ 2
= ` 1,600
`40,000 x 8/100 x 6/12

SOLUTION: 22.
Case (i) Average Period = (12 months +1 months)/2 = 6 ½ months
Interest on Drawings = `48,000 x 9/100 x 6.5/12 = `2,340
Case (ii) Average Period = (11 months + 0 months)/2 = 5 ½ months
Case (iii) Assuming that the drawings were made in the middle of every month:
Average Period = (11.5 months+ 0.5 month)/2 = 6 months
Interest on Drawings = `72,000 x 9/100 x 6/12 = `3,240
Case (iv) As the date of drawing is not given, interest will be calculated for an average
period of 6 months.
Case (v)
Amount of Drawings Period (Months upto Products
Date
` 31st March, 2007) `
30th April, 2015 10,000 11 1,10,000
1st July, 2015 15,000 9 1,35,000
1st Oct., 2015 18,000 6 1,08,000
30th Nov., 2015 12,000 4 48,000
31st March, 2016 20,000 0 —
4,01,000

Interest on Drawings = `4,01,000 x 9/100 x 1/12 = `3,008
Average Period =
Case (vi) = 7 ½ months
(12 months+ 3 months)/2
= `48,000
year = `12,000 x 4
= `2,700
`48,000 x 9/100 x 7.5/12
Case (vii) Average Period = (9 = 4 ½ months
months + 0 month)/2
= `72,000
year = `18,000 x 4
= `2,430
`72,000 x 9/100 x 4.5/12
Average Period = (10.5
Case (viii) = 6 months
months + 1.5 months)/2
= `72,000
year = `18,000 x 4
= `3,240
`72,000 x 9/100 x 6/12

SOLUTION : 23 (A).
Gupta withdraws `800 at the beginning of every month for the six months ending 30th
September, 2013. Hence, his drawings for the period of six months would be:
Total drawings = 6 x `800 = `4,800.
(Time left after rst drawing + Time left after last drawing)/2
= (6 + 1)/2 = 3.5 months.
4,800 x 15/100 x 3.5/12 = `210

SOLUTION : 23 (B).
Gupta withdraws `800 at the end of every month for the six months ending 30th
September, 2013.
Total drawings = 6 x `800 = `4,800
(Time left after rst drawing + Time left after last drawing)/2
= (5 + 0)/2 = 2.5 months.
4,800 x 15/100 x 2.5/12 = `150

SOLUTION : 23 (C).
Total Drawings of A = `15,000 x 6 = ` 90,000
Total Drawings of B = `20,000 x 6 = `1,20,000
Total Drawings of C = `25,000 x 6 = `1,50,000
A B C
(5 + 0)/2 = 2.5 (5.5 + 0.5)/2 = 3
Average Period (6+1)/2 = 3.5 months
months months
Interest on Drawings `90,000 x 10/100 x `1,20,000 x 10/100 x `1,50,000 x 10/100 x
3.5/12 = `2,625 2.5/12 = `2,500 3/12 = `3,750

SOLUTION : 24 (A).
Total Drawings = `10,000 x 9 months = `90,000
Average Period = (9 months + 1 month)/2 = 5 months

SOLUTION : 24 (B).
Average Period = (8 months + 0 month)/2 = 4 months

SOLUTION : 24 (C).
Average Period = (8.5 months + 0.5 month)/2 = 4.5 months

SOLUTION : 25.
Case (i) Interest on Drawings = `60,000 x 8/100 x 6/12= `2,400
Case (ii) Since rate of interest is 8% and not 8% p.a. interest will be calculated for 12
months:
Interest on Drawings = `60,000 x 8/100 = `4,800

SOLUTION : 26.
Dr. For the year ended 31st March. 2014 Cr.
To Salary to By Pro t &
18,000 74,040
Amit Loss A/c
To Pro ts By Interest
transferred on Drawings
to : :
Amit’s
30,000 Amit 1,560
Current A/c
Nami’s
20,000 Namit 1,320
Current A/c
Ruchi’s
10,000 60,000 Ruchi 1,080 3,960
Current A/c
78,000 78,000

Particul Particul
Date Amit Namit Ruchi Date Amit Namit Ruchi
ars ars
2013 ` ` ` 2013 ` ` `
To By
April 1 April 1
Balance Balance
b/d — — 1,000 b/d 5,000 2,000 —
2014 2014
By
March To Dra- March 18,000 — —
Salary
wings
31 To 24,000 24,000 24,00031 By P & L
Interest
on Dra- Appro-
Wings(1 priation
1,560 1,320 1,080 30,000 20,000 10,000
) A/c
To By
Balance Balance
c/d 27,440 — — c/d — 3,320 16,080
53,000 25,320 26,080 53,000 25,320 26,080

(1) Calculation of Interest on Drawings:
Amit withdraws on the First day of each month
24,000 x 12/100 x 6.5/12 = `1,560
Namit withdraws on the last date of each month
24,000 x 12/100 x 5.5/12 = `1,320
Ruchi withdraws at the end of each quarter:
Average Period = (9 months + 0 month)/2 = 4.5 months
Interest on Drawings = 24,000 x 12/100 = `1,080

SOLUTION : 27.
JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Q’s Capital
A/c
To Bank A/c
2016 Jan. 1 Dr. 1,20,000
(Withdrawal 1,20,000
by 0 out of
Capital)
March 31 Pro t and Dr. 4,30,000 4,30,000
Loss A/c
To Pro t and
Loss
Appropriation
A/c
(The transfer
of pro t to
Pro t and
Loss
Appropriation
A/c)
Interest on
Capital A/c
To P’s Capital
A/c
80,000
March 31 To Q’s Capital Dr. 1,27,000
47,000
A/c
(Interest on
partner’s
capitals)
Pro t and Loss
Appropriation A/c Dr.
To Interest on Capital A/c
1,27,000 1,27,000
(Transfer of interest on
Capital to Pro t and Loss
App. A/c)
P’s Capital A/c
R’s Capital
A/c
To Interest on Dr. 6,600
March 31 13,800
Drawings A/c Dr. 7,200
(Interest on
partner’s
drawings)
Interest on Drawings A/c Dr.
To Pro t and Loss
Appropriation A/c
13,800 13,800
(Transfer of interest on
drawings to Pro t and Loss
App. A/c)
March 31 Pro t and Dr. 3,16,800 1.05.600
Loss 1.05.600
Appropriation 1.05.600
A/c
To P’s Capital
A/c
To Q’s Capital
A/c
To R’s Capital
A/c
(Transfer of
pro t to
capital
accounts)

Dr. PARTNER’S CAPITAL ACCOUNTS Cr.
Particul Particul
Date P Q R Date P Q R
ars ars
2015 ` ` ` 2015 ` ` `
Apr. 1 To Bal. Apr. 1 By Bal.
8,00,00 5,00,00
b/d 20,000 b/d
0 0
2016 2016
Jan. 1 To Bank Mar. 31 By Int.
1,20,00 on
A/c
0 Capi-
Mar. 31 To Dra- tal A/c 80,000 47,000
wings Mar. 31 By P&L
1,20,00 1,20,00
A/c App. A/c 1,05,6001,05,6001,05,600
0 0
Mar. 31 To Int. Mar. 31 By Bal.
on c/d 41,600
Drawin-
gs A/c 6,600 7,200
Mar. 31 To Bal.
8,59,00 5,32,60
c/d
0 0
9,85,60 6,52,60 1,47,20 9,85,60 6,52,60
1,47,200
0 0 0 0 0

Working Notes:
(1) Interest on Q’s Capital: `
On `5,00,000 for 9 months :
37,500
5,00,000 x 10/100 x 9/12
On `3,80,000 for 3 months :
9,500
3,80,000 x 10/100 x 3/12
47,000
(2) Interest on drawings:
P’s Drawings : `10,000 x 12 =
6,600
`1,20,000 x 12/100 x 5.5/12 =
R’s Drawings : `1,20,000 x
7,200
12/100 x 6/12 =

Note : In the absence of actual dates of drawings of/?, interest thereon has been
calculated for the average period i.e. 6 months.
(3) Divisible Pro t =
`4,30,000 – Interest on Capital `1,27,000 + Interest on Drawings `13,800 =
`3,16,800
Each Partner’s share = `3,16,800 ÷ 3 = `1,05,600
SOLUTION : 28.
Books of Active, Blunt and Circle
Pro t & loss Appropriation A/c
To Interest on
By Pro t & Loss A/c
Capital :
Active 27,000 (Net Pro t for the year) 5,93,120
By Interest on
Blunt 36,000
Drawings :
Circle 21,000 84,000
Active 60,000 x 6/100
To Salary’ x 6.5/12
= 1,950
: Blunt 84,000 x 6/100
72,000 = 2,310
Blunt x 5.5/12
Circle = 2,400 6,660
Circle 80,000 x 6/100
To Commission 48,000 1,20,000 x 6/12
(Note 1)
Blunt 17,990
Circle 17,990 35,980
To Pro t Transferred

to :
(Note 2)
Active’s Current A/c

1,34,900
Blunt’s Current A/c
1,04,967

Circle’s Current A/c 1,19,933 3,59,800
5,99,780 5,99,780

Dr. PARTNERS CURRENT ACCOUNTS Cr.
Active Blunt Circle Active Blunt Circle
s s

` ` `
To By Int. on ` ` `
60,000 84,000 80,000
Drawings
To Int. on Capital 27,000 36,000 21,000
Dra-
wings 1,950 2,310 2,400By Salary 72,000 48,000
By
Commissi
To Bal. c/d 99,950 1,44,647 1,24,523 on 17,990 17,990
By P & L
App.
A/c 1,34,900 1,04,967 1,19,933
1,61,900 2,30,957 2,06,923 1,61,900 2,30,957 2,06,923

Working Note:
(1) Balance of Pro t: `5,93,120 + 6,660 – 84,000 – 1,20,000 = `3,95,780
Commission to Blunt and Circle is 5% to each partner after charging such commission.
Hence, the commission will be 5/110 to each partner.
Commission to Blunt = 3,95,780 x 5/110 = `17,990
Commission to Circle = 3,95,780 x 5/110 = `17,990
Divisible Pro t: `3,95,780 – 17,990 – 17,990 = `3,59,800

Active Blunt Circle
` ` `
Upto `2,70,000 90,00 90,00
90,000
Equally `3,59,800 – 2,70,000 = 0 0
`89,800
in 1/2 : 1/6 : 1/3 44,90
14,967 29,933
0
1,34,9 1,04,9
1,19,933
00 67

SOLUTION : 29.
Interest on Capitals:
A = `3,00,000 x 10% = `30,000
B = `2,00,000 x 10% = `20,000

A
` `
30. 6.2012 20,000 9 months 1,80,000
31. 7.2012 10,000 8 months 80,000
1.10.2012 10,000 6 months 60,000
1. 3.2013 16,000 1 month 16,000
Total 3,36,000

A’s Interest on Drawing = Total of Products/12 x Rate of Interest/100
A = 3,36,000/12 x 10/100 = `2,800
B’s Interest on Drawings = B withdraws `6,000 at the end of each month thus interest
on his drawings would be :
72,000 x 10/100 x 5.5/12 = `3,300

Interest on Capital

SOLUTION : 30.
Case (i)
Dr. PROFIT AND LOSS APPROPRIATION A/C Cr.
To Pro t By Pro t & Loss
transferred to : 6,000 A/c (Pro t for 9,000
X 2/3 the year)
Y 1/3 3,000 9,000 9,000
9,000

Case (ii)
To Pro t & Loss By Loss

A/c transferred to :
(Loss for the
6,000 X 2/3 4,000
year)
Y 1/3 2,000 6,000
6,000 6,000

Case (iii)
Cr.
Dr. PROFIT AND LOSS APPROPRIATION A/C
9,000
Capital : A/c
(Pro t for the
X 3,000
year)
Y 1,800 4,800
To Pro t

transferred to :
X 2/3 2,800
Y 1/3 1,400 4,200
9,000 9,000

Case (iv)
Cr.
Dr. PROFIT AND LOSS APPROPRIATION A/C
3,000
Capital: A/c
X 3,000 x (Pro t for the
1,875
5/8 year)
Y 3,000 x
1,125
3/8
3,000 3,000

Note : The available pro t is `3,000 whereas the interest due on capitals is `4,800 {i.e.,
`3,000 + `1,800). Since the pro t is less than the interest, the available pro t will be
distributed in the ratio of interest i.e., 3,000 : 1,800 or 5 : 3.
Case (v)
Dr. PROFIT AND LOSS A/C* Cr.
3,000
Capital : A/c
(Pro t for the

X 3,000 year)
Y 1,800 By Loss
4,800
transferred to :
X 2/3 1,200
Y 1/3 600 1,800
4,800 4,800
*Since Interest on Capital is to be allowed even if rm incurs loss, it is debited to P&L

A/c and not to P&L Appropriation A/c.

SOLUTION : 31.
(Case I)
To Interest on Capital 24,000
42,000
A 42,000 x 4/7 18,000 By Pro t & Loss Account
B 42,000 x 3/7
42,000 42,000

Note: The available pro t is `42,000 whereas the interest due on capitals is `56,000
(i.e., `32,000 + `24,000). Since the pro t is less than the interest, the available pro t
will be distributed in the ratio of interest i.e., 32,000 : 24,000 or 4 : 3.

(Case II)
Dr. PROFIT AND LOSS A/C Cr.
Particulars Particulars
To Interest on Capital By Pro t & Loss Account
32,000 42,000
A By Loss Transferred to :
56,000 A 3/5 8,400 14,000
B 24,000
56,000 B 2/5 5,600 56,000

SOLUTION : 32.
In the Books of Brij and Nandan
To Interest on Capital By Pro t & Loss A/c 2,00,000
Brij’s Capital A/c (Net Pro t)
2,00,000 x 2/5 = 80,000
Nandan’s Capital A/c 2,00,000
2,00,000 x 3/5 = 1,20,000
2,00,000 2,00,000

Working Notes:
Interest on capital of Brij = `1,20,000
Interest on capital of Nandan = `1,80,000
3,00,000
The available pro t is `2,00,000, whereas interest due on capitals is `3,00,000. Since
the pro t is less than interest, the available pro t will be distributed amongst the
partners in the ratio of their interest on capital i.e., 1,20,000 : 1,80,000 or 12 : 18 or 2 : 3.

SOLUTION : 33.
Case (i)
Dr. PROFIT AND LOSS ACCOUNT Cr.
To Interest on
Capital :

Kavita

Leela By Pro t before
48,000 80,000 1,10,000
To Pro t interest
32,000
transferred
30,000
to Pro t & Loss
App. A/c
1,10,000 1,10,000

Dr. PROFIT AND LOSS APPROPRIATION ACCOUNT Cr.
To Pro t transferred to : By Pro t & Loss A/c 30,000
Kavita’s Capital

A/c
(2/3) 20,000
Leela’s Capital

A/c
(1/3) 10,000 30,000
30,000 30,000

Case (ii)
By Pro t
To Interest on
before 35,000
Capital:
interest
By Loss
Kavita 48,000 transferred to
:
Kavita’s
Leela 32,000 80,000
Capital A/c
(2/3) 30,000
Leela’s

Capital A/c
(1/3) 15,000 45,000
80,000 80,000

Case (iii)
To Loss By Loss
before 10,000 transferred to
interest :
To Interest on Kavita’s
Capital: Capital A/c
Kavita 48,000 (2/3) 60,000
Leela’s
Leela 32,000 80,000
Capital A/c
(1/3) 30,000 90,000
90,000 90,000

SOLUTION : 34.
In the books of Lalan & Balan
Dr. for the year ended 31st March. 2011 Cr.
By Pro t before
To Interest on
Interest
Capital*
12,000 By Pro t and 30,000
Lalan’s Current
Loss
A/c
Appropriation
Balan’s Current 36,000 A/c (Loss 6,000
24,000
A/c 36,000 transferred) 36,000

To Pro t & Loss A/c By Interest on Drawings :
(Loss transferred) 6,000Lalan’s Current A/c 225
Balan’s Current A/c 375 600
By Net Loss transferred to :
Lalan’s Current A/c 3,240
Balan’s Current A/c 2,160 5,400
6,000 6,000

Note: As the time period of drawings is not given, the interest will be charged for 6
months
Lalan : 3,000 x 15/100 x 6/12 = `225
Balan : 5,000 x 15/100 x 6/12 = `375
*Since Interest on Capital is to be allowed even if rm incurs loss, it is debited to P&L
A/c and not to P&L Appropriation A/c.

SOLUTION 35
Ratio of e ective capital will be calculated as under:— Products
X: `90,000 for 6 months 5,40,000
3,60,000
`60,000 for 6 months
9,00,000
Y: `75,000 for 4 months 3,00,000
`90,000 for 4 months 3,60,000
2,40,000
`60,000 for 4 months
9,00,000
Z : `75,000 for 7 months 5,25,000
6,75,000
`1,35,000 for 5 months
12,00,000
Thus the pro t sharing ratio would be:

9,00.000 : 9,00.000 : 12.00,000 or 3 : 3 : 4

Dr. PROFIT AND I.OSS APPROPRIATION ACCOUNT Cr.
To Pro ts transferred to : By Pro t & Loss A/c 42,000
X 12,600
Y 12,600
Z 16,800 42,000
42,000 42,000

Adjustment in the Closed Accounts

SOLUTION : 36 (A).
`
Interest on A’s Capital of `8,00,000 @ 8%
64,000
Interest on B’s Capital of `4,00,000 @ 8% 32,000
Interest on C’s Capital of `3,00,000 @ 8% 24,000
Total Interest to be allowed ` 1,20,000
This amount of `1,20,000 is an item of expense for the rm but this has not been
recorded on the debit side of P & L Appropriation A/c of the previous year. As such the
pro t of the previous year will be reduced by this amount. Hence, this loss of `1,20,000
will be shared by the partners in their pro t sharing ratio, i.e.. 2:1:1
A = `1,20,000 x 2/4 = `60,000
B = `1,20,000 x 1/4 = `30,000
C = `1,20,000 x 1/4 = `30,000

TABLE SHOWING ADJUSTMENT
Adjustment Di erence
Partner
Dr. Cr. Dr. Cr.
A 60,000 64,000 4,000
B 30.000 32,000 2,000
C 30,000 24,000 6,000

JOURNAL ENTRY
C’s Capital A/c
Dr.
To A’s Capital
A/c
To B’s Capital

A/c
6,000 4,000
(Adjustment in
2,000
respect of
interest on
capital omitted
in previous
year’s accounts)

SOLUTION: 36 (B).
A’s Interest on Capital = `1,20,000 x 5/100 = `6,000
B’s Interest on Capital = `70,000 x 5/100= `3,500
C’s Interest on Capital = `50,000 x 5/100 = `2,500

Adjustment Di erence
Partner
Dr. Cr. Dr. Cr.
A 5,000 6,000 1,000
B 4,000 3,500 500
C 3,000 2,500 500

JOURNAL ENTRY
B’s Capital
A/c
C’s Capital A/c
To A’s Capital
A/c
(Adjustment Dr.
2016 500
in respect of Dr. 1,000
March, 31 500
interest on
capital
omitted in
previous
year’s
accounts)

SOLUTION : 37.
`
A 8% on `4,00,000 for 2 years = 64,000
B 8% on `6,00,000 for 2 years = 96,000
C 8% on `8,00,000 for 2 years = 1,28,000
2,88,000

A B C Total
Interest on (Cr.) ` ` `
Capital 64,000 96,000 1,28,000 2,88,000
Division of `2,88,000 in
pro t 48,000 96,000 1,44,000 2,88,000
sharing ratio i.e. 1 : 2 : 3 (Dr.)
Di erence (Cr.) 16,000 — (Dr.) 16,000 —

JOURNAL ENTRY
Date Particulars L.F. Dr.( `) Cr.( `)
C’s Current A/c
Dr.
To A’s Current

2016 A/c

March 31 (Omission of 16,000
16,000
interest on
Capital for 2
years recti ed)

SOLUTION: 38.
Interest charged on A’s drawings = `8,000
Interest charged on B’s drawings = `6,000
Interest charged on C’s drawings = `4,000
` 18,000
This amount of `18,000 is an item of income for the rm but this has not been recorded
on the credit side of P & L Appropriation A/c of the previous year. As such the pro t of
the previous year will now be increased by this amount. Hence, this pro t of `18,000
will be shared by the partners in their pro t sharing ratio of 5 : 3 : 1 which amounts to A
`10,000, B `6,000 and C `2,000.

TABLE SHOWING ADJUSTMENTS
Partner Adjustment Di erence
Dr. Cr. Dr. Cr.
A 8,000 10,000 2,000
B 6,000 6,000
C 4,000 2,000 2,000

JOURNAL ENTRY
C’s Capital A/c Dr.

To A’s Capital A/c 2,000
2,000
(Adjustment for omission of interest on drawings)

SOLUTION: 39.
Calculation of Interest on Drawings :
`
A : 6% on `20,000 for 6 months
600
B : 6% on `24,000 for 6 months 720
C : 6% on `32,000 for 6 months 960
D : 6% on `44,000 for 6 months 1,320
3,600

A B C D Total
` ` ` `
Interest on Drawings (Dr.)
600 720 960 1,320 3,600
Division of 3,600 in 2 : 2 : 3 : 3
(Cr.) 720 720 1,080 1,080 3,600
Di erence Cr. 120 — Cr. 120 Dr. 240 —

JOURNAL ENTRY
Date Particulars LF. Dr.( `) Cr.( `)
D’s Capital A/c Dr.

To A’s Capital A/c
240 120
To C’s Capital A/c
120
(Omission of interest on drawings, now recti ed)

SOLUTION : 40.
A’s Drawings = `50,000 x 12 = `6,00,000
Interest on A’s Drawings will be charged for 6.5 months
6,00,000 x 12/100 x 6.5/12 = `39,000
A B Total
`
Interest on Drawings (Dr.) ` 39,000
39,000
Division of `39,000 in 2 : 1 (Cr.) 26,000 13,000
Di erence Dr. 13,000 Cr. 13,000 39,000

ADJUSTMENT ENTRY
A’s Capital A/c Dr.
2016 To B’s Capital A/c
13,000
April 1 (Adjustment of Omission of interest on A’s 13,000
drawings)

SOLUTION : 41.
Anil Sunil Sanjay Total
Cr. (`) Cr. (`) Cr. (`) (`)
Interest on
Capitals @ 10%
p.a.
I) for the year
ended 31st March 80,000 70,000 30,000 1,80,000
2015
II) for the year
ended 31st March 80,000 70,000 30,000 1,80,000
2016
Total Amount
1,60,000 1,40,000 60,000 3,60,000
Payable (Cr.)
Division of
Firm’s loss will Dr. (`) Dr.( `) Dr.( `) (`)
be as under :
I) for the year
ended 31st March
2015
in the ratio of 4
80,000 60,000 40,000 1,80,000
:3:2
II) for the year
ended 31st March
2016
in the ratio of
90,000 60,000 30,000 1,80,000
3:2:1
Total Loss (Dr) 1,70,000 1,20,000 70,000 3,60,000

2016 Anil’s Current A/c Dr. 10,000
April 1 Sanjay’s Current A/c Dr. 10,000
To Sunil’s Current A/c 20,000
(Adjustment for the omission of two years’ interest
on capitals)

SOLUTION : 42.
P Q R Total
` ` ` `
Interest on Capitals @ 12%
6,000 3,600 2,400 12,000
p.a.
Salary to
6,000 — 12,000 18,000
Partners
Total Amount
Payable
Division of (Cr.) 12,000 3,600 14,400 30,000
rm’s loss of
`30,000
in 2 : 1 : 1 (Dr.) 15,000 7,500 7,500 30,000
Net E ect (Dr.) 3,000 (Dr.) 3,900 (Cr.) 6,900

JOURNAL ENTRY
2011 P’s Capital A/c Dr. 3,000
April 1 Q’s Capital A/c Dr. 3,900
To R’s Capital A/c 6,900
(Adjustment for the omission of interest on
capitals and salary)

SOLUTION : 43 (A)
A B Total
` ` `
Interest on Capital
48,000 24,000 72,000
(Cr.)
Commission due to B — 20,000 20,000
Salary to A 50,000 — 50,000
98,000 44,000 1,42,000
Less : Interest on
12,000 10,000 22,000
Drawings (Dr.)
(Cr.) 86,000 34,000 1,20,000
Division of Firm’s
loss of `1,20,000 in 2 80,000 40,000
: 1 (Dr.)
(Cr.) 6,000 (Dr.) 6,000 —

Adjustment Entry:—
10th April, 2016 B’s Capital A/c Dr. 6,000 6,000
To A’s Capital A/c
(Adjustment for
omissions)

SOLUTION : 43 (B)
Kumar Raja Total
Interest on ` ` `
(Cr.)
Capital 81,000 36,000 1,17,000
Salary (Cr.) 50,000 36,000 86,000
Division of
1,31,000 72,000 2,03,000
rm’s loss of (Dr.)
1,42,100 60,900 2,78,000
`2,03,000 in 7 : 3
Net E ect (Dr.) 11,100 (Cr.) 11,100 —

ADJUSTMENT ENTRY
Kumar’s Current A/c Dr.
2007 To Raja’s Current A/c
11,100
March 31 (Adjustment for omission of interest on capital 11,100
and salary)

SOLUTION : 44.
A B C Total
Salary ` ` ` `
Interest on 60,000 40,000 1,00,000
Capital 24,000 15,000 6,000 45,000
Total amount 24,000 75,000 46,000 1,45,000
payable (Cr.)
Division of
rm’s loss of `
1,45,000 in 2 : 2 : 58,000 58,000 29,000 1,45,000
1 (Dr.)
Adjustment for
Manager’s
Commission : (Dr.) 34,000 (Cr.) 17,000 (Cr.) 17,000
10/110 of
`2,20,000 =
`20,000 in 2:2:1 (Dr.) 8,000 (Dr.) 8,000 (Dr.) 4,000 20,000
(Cr.)
Net E ect (Dr.) 42,000 (Cr.) 13,000 (Cr.) 20,000
9,000

RECTIFYING ENTRY
A’s Current A/c
Dr.
To B’s Current
A/c
To C’s Current
A/c
To Manager’s 9,000
Commission 42,000 13,000
Outstanding A/c 20,000
(Adjustment for
omissions of
salary, interest
on capitals and
manager’s
commission)

SOLUTION : 45.
Suresh Ramesh Total
` ` `
Interest on Capital
45,000 30,000 75,000
(Cr.)
Salary (Cr.)
Pro t remaining
after allowing
interest on capital 60,000 24,000 84,000
and salary’ will be
`2,34,000 – `75,000
– `84,000 = `75,000.
It will be divided in
their pro t sharing 45,000 30,000 75,000
ratio, i.e. 3 : 2
Net amount which
should have been 1.50,000 84,000 2,34,000
received (Cr.)
Less : Pro t already
distributed equally 1,17,000 1.17,000 2,34,000
(Dr.)
Net E ect (Cr.) 33,000 (Dr.) 33,000

ADJUSTMENT ENTRY
Ramesh’s Current A/c Dr.
2007 To Suresh’s Current A/c
33,000
March 3 1 (Adjustment for interest on Capital, salary and 33,000
wrong distribution of pro t)

SOLUTION : 46.
STATEMENT OF ADJUSTMENT
A B C Total
` ` ` `
Salary to C — — 1,20,000 1,20,000
Interest on
Capitals @ 5% 25,000 12,500 12,500 50,000
p.a.
Balance pro t
i.e.
`3,30,000 –
`1,20,000 –
`50,000 =
80,000 40,000 40,000 1,60,000
`1,60,000
distributed
among partners
in the ratio of 2 :
1:1
Net amount
which should
1,05,000 52,500 1,72,500 3,30,000
have been
received (Cr.)
Less : Pro t
already 1,10,000 1,10,000 1,10,000 3,30,000
distributed (Dr.)
Net E ect (Dr.) 5,000 (Dr.) 57,500 (Cr.) 62,500.

ADJUSTMENT ENTRY
2016 A’s Capital A/c 5,000 62,500
March 31 Dr. 57,500
B’s Capital A/e
Dr.
To C’s Capital
A/c
(Adjustment for
the omission of
Salary and
interest on
Capital)

SOLUTION : 47.
STATEMENT OF ADJUSTMENT
A B C Total
` ` ` `
Interest on
5,000 10,000 1 5,000 30,000
capital
Salary 60,000 60,000
Commission : 16,500 16,500
(5% on
`3,60,000 –
Interest on
Capital `30,000) 50,700 76,050 1,26,750 2,53,500
Remaining Pro t
i.e. `3,60,000 –
`30,000 –
`60,000 –
`16,500 =
`2,53,500 will be
divided in their
pro t sharing
ratio i.e. 2:3:5
Net amount
which should
1,15,700 86,050 1,58,250 3,60,000
have been
received (Cr.)
Less : Pro t
already
60,000 1,20,000 1,80,000 3,60,000
distributed in 1 :
2 : 3 (Dr.)
Net E ect (Cr.) 55,700 (Dr.) 33,950 (Dr.) 21,750 —

ADJUSTMENT ENTRY
B’s Capital
A/c Dr.
2014 C’s Capital A/c
March 31 Dr. 33,950
To A’s Capital 21,750
A/c
(Adjustment for 55,700
the omissions)
SOLUTION : 48.
A B C Total
` ` ` `
Salary (Cr.) 6,000 12,000
Commission
18,000 18,000
(Cr.)
Pro t 6,000
guaranteed to
B (Cr.) 50,000(1)
Remaining
Pro t i.e. 50,000
`1,50,000 –
`12,000 –
`18,000 –
`50,000 =
`70,000 will
be divided
between A 42,000 — 28,000 70,000
and C in 3 : 2
(Cr.)
(Cr.) 48,000 56,000 46,000 1,50,000
Less : Pro t
already
distributed
(`1,50,000 in
60,000 60,000 30,000 1,50,000
2 : 2 : 1) (Dr.)
Net E ect (Dr.) (Dr.) (Cr.) —
12,000 4,000 16,000


Adjustment Entry :—

2016 B’s Capital A/c Dr. 12,000

March 31 To C’s Capital A/c 4,000
16,000
(Adjustment for omissions)

Working Note:
(1) Pro t remaining after allowing salary and commission will be
`1,50,000 – `12,000 – `18,000 = `1,20,000
B’s Share = 1,20,000 x 3/8 = `45,000.
Since it is less than guaranteed amount of `50,000, he will be entitled to `50,000.

SOLUTION : 49.
X Y Z Total
` ` ` `
Interest already
16,000 12,000 10,000 38,000
credited @ 8%
Interest that
should have been 20,000 15,000 12,500 47,500
credited @ 10%
Partners less 4,000 3,000 2,500 9,500
credited with
4,750 2,850 1,900 9,500
(Cr.
)
By allowing this
interest, the
pro ts of the
rm will be
reduced by
`9,500. This loss
will be divided in
the ratio of 5:3:2.
(Dr.)
(Dr.) (Cr.) (Cr.) —
Net e ect
750 150 600

X’s Current A/c Dr.

2014 To Y’s Current A/c
750 150
March 31 To Z’s Current A/c
600
(Interest less charged on capital, now recti ed)

SOLUTION : 50.
A B C Total
` ` `
Interest already credited @ 10% 10,000 20,000 30,000 60,000
Interest that should have been credited @
9,000 18,000 27,000 54,000
9%
Partners Over credited with (Dr.)
By disallowing this interest, the pro ts of 1,000 2,000 3,000 6,000
the rm will be increased by `6,000. This
pro t shall be divided in the ratio of
4:3:3 (Cr.) 2,400 1,800 1,800 6,000
(Cr.) (Dr.) (Dr.)
Net e ect —
1,400 200 1,200

B’s Current A/c Dr.
C’s Current A/c Dr.
2014 200
To A’s Current A/c
March 31 1,200
(Interest on Capitals excessive charged, now 1,400
recti ed)

SOLUTION : 51.
A B C Total
` ` ` `
Interest allowed
on Capitals @ Dr. Dr. Dr.
5% p.a.
For the year 2016 4,200 2,400 1,320 7,920
For the year 2017 4,320 2,520 1,320 8,160
Total amount
recoverable
8,520 4,920 2,640 16,080
from partners
(Dr.)
Division of
rm’s pro t will Cr Cr. Cr.
be as under:
For the year 2016
in the ratio of 2 : 3,168 3,168 1,584 7,920
2:1
For the year 2017
in the ratio of 3 : 2,448 3,264 2,448 8,160
4:3
Total pro t 5,616 6,432 4,032 16,080
distributed
among partners
(Cr.)

A’s Capital A/c (8,520 – 5,616) Dr.
To B’s Capital A/c (4,920 – 6,432)
2017
To C’s Capital A/c (2,640 – 4,032) 2,904 1,512
April 1
(Interest on Capital wrongly provided in the 1,392
accounts for two years, now adjusted)

SOLUTION : 52.
(a) Total Pro ts for the past three years:
`2,00,000 + `4,50,000 + `5,50,000 = `12,00,000
ADJUSTMENT TABLE
Particulars Charu Deepika Era
` ` `
Pro t already Credited
4,00,000 4,00,000 4,00,000
(`12,00,000 in 1 : 1 : 1)
Pro t to be Credited
4,80,000 3,60,000 3,60,000
(`12,00,000 in 4 : 3 : 3)
Net E ect Cr. 80,000 Dr. 40,000 Dr. 40,000

ADJUSTING JOURNAL ENTRY
Deepika’s Capital A/c Dr. 40,000
Era’s Capital A/c Dr. 40,000
To Charu’s Capital A/c 80,000
(Adjustment made for change in pro t sharing
ratio)
(b) Values involved are:

(i) Recognition of Charu’s e orts (ii) Ethics or Morality

SOLUTION: 53.
Particulars Sachin Kapil Rashmi
Total Pro ts for three
years
`60,000 + `47,000 +
`55,000 = ` 1,62,000 ` ` `
This Pro t has
already been divided
in
the ratio of 3 : 2 : 1
If Pro ts are shared 81,000 54,000 27,000
equally :
1,62,000/3 = 54,000 54,000 54,000 54,000
Net E ect (Dr.) 27,000 — (Cr.) 27,000

Sachin’s Capital A/c Dr.
To Rashmi’s Capital A/c
27,000
(Adjustment on account of change in pro t sharing 27,000
ratio for the last three years)
SOLUTION: 54 (A).
Interest on Capitals should always be calculated on the Capitals at the beginning of the
year. In the above question, the Capitals at the beginning of the year have not been
given. Hence, rst of all, it is necessary to calculate the amount of opening Capitals:
Particulars Mohan Vijay Anil
` `
Capitals as on 31 -3-2011 30,000
25,000 20,000
Less : Share of Pro t (which has already been added) 8,000 8,000 8,000
22,000 17.000 12,000
Add: Drawings (which were previously deducted)
5,000 4,000 3,000
Capitals as on 1-4-2010
27,000 21,000 15,000

NET EFFECT ON CAPITAL ACCOUNTS
Particulars Mohan Vijay Anil Firm
` ` `
Interest on Opening Capitals @ 10%
2,700 2,100 1,500
Less : Interest on Drawings 250 200 150
Balance 2,450 1,900 1,350 5,700
Division of rm’s loss equally 1,900 1,900 1,900 (Loss)
(Cr.) 550 — (Dr.) 550

Anil’s Capital A/c Dr.
2011 To Mohan’s Capital A/c
550
March 31 (Adjustment on account of the omission of the 550
interest on Capitals and Drawings in the accounts)

Dr. REVISED CAPITAL ACCOUNTS Cr.
Particul Particul
Date Mohan Vijay Anil Date Mohan Vijay Anil
ars ars
2014 ` ` ` 2013 ` ` `
By
Mar. 31 To April 1
Balance
Mohan’
b/d 30,000 25,000 20,000
s
Capital 2014
By
A/c — — 550Mar. 31
Anil’s
To
Mar. 31 Capital
Balance
c/d 30,550 25,000 19,450 A/c 550 — —
30,550 25,000 20,000 30,550 25,000 20,000

SOLUTION : 54 (B).
A B C
` ` `
Closing Capitals 20,000 15,000 10,000
Less : Share of Pro t 5,000 2,500 2,500
15,000 12,500 7,500
Add: Drawings 1,000 800 500
Opening Capitals 16,000 13,300 8,000

Particulars A B C Firm
` ` `
Interest on 1,600 1,330 800
Opening Capitals
Less : Interest on
130 90 50
Drawings
Balance (Cr.) 1,470 1,240 750 3,460
Division of
rm’s loss in the
1,730 865 865(Loss)
ratio of 2:1:1
(Dr.)
(Dr.) 260 (Cr.) 375 (Dr.) 115

A’s Capital A/c
Dr.
C’s Capital A/c
Dr.
To B’s Capital
A/c
260
(Adjustment on 375
115
account of the
omissions of the
interest on
Capitals and
Drawings in the
accounts)

SOLUTION : 54 (C).
A B
` `
Closing Capitals 2,00,000 1,50,000
Less : Share of Pro t 45,000 30,000
1,55,000 1,20,000
Add: Drawings 24,000 24,000
Opening Capitals 1,79,000 1,44,000

Particulars A B Firm
Interest on Opening ` `
Capitals (Cr.) 14,320 11,520 25,840
Division of rm’s 15,504 10,336 (Loss)
loss in the ratio of 3 :
2 (Dr.) (Dr.) 1,184 (Cr.) 1,184

A’s Capital
A/c
To B’s Capital
2011 A/c Dr.
1,184
March 31 (Adjustment 1,184
for omission
of interest on
Capitals)

SOLUTION : 55 (A).
Assuming the Capitals are xed in Q. 54 (A):
Mohan Vijay Anil
` ` `
Interest on Capital @ 10% p.a. 3,000 2,500 2,000

STATEMENT SHOWING THE ADJUSTMENT TO BE MADE
Particulars Mohan Vijay Anil Finn
` ` ` `
Interest on
3,000 2,500 2,000
Capitals
Less : Interest on
250 200 150
drawings
(Cr.) 2,750 2,300 1,850 6,900
Division of
rm’s loss in
(Loss)
pro t sharing
ratio
i.e., equally
2,300 2,300 2,300
(Dr.)
(Cr.) 450 (Dr.) 450

2011 Anil’s Current 450 450
March 31 A/c Dr.
To Mohan’s
Current A/c
(Adjustment on
account of
omission of the
interest on
capitals and
drawings in the
accounts)

SOLUTION : 55 (B).
Assuming the Capitals are xed in Q. 54 (B):
A B C
` ` `
Interest on Capital @
2,000 1,500 1,000
10% p.a.

Particulars A B C Firm
` ` ` `
Interest on
2,000 1,500 1,000
Capitals
Less : Interest on
130 90 50
drawings
(Cr.) 1,870 1,410 950 4,230
Division of
rm’s loss in the
2,115 1057.50 1057.50 (Loss)
ratio of 2:1:1
(Dr.)
(Dr.) (Cr.) (Dr.)

245 352.50 107.50

Date Particulars L.F. Dr.(`) Cr.(`)
A’s Current A/c Dr. 245.00
C’s Current A/c Dr. 107.50
To B’s Current A/c 352.50
(Adjustment on account of omission of the interest
on capitals and drawings in the accounts)

SOLUTION : 55 (C).
Assuming the Capitals are xed in Q. 54 (C):
A B
` `
Interest on Capital @ 8% p.a. 16,000 12,000

Particulars A B Firm
` ` `
Interest on Capitals (Cr.)
16,000 12,000 28,000
Division of rm’s loss in the pro t sharing ratio i.e.,
16,800 11,200 (Cr.)
3 : 2 (Dr.) (Loss)
(Dr.) 800 800

2011 A’s Current A/c 800
March 31 Dr. 800
To B’s Current
A/c
(Adjustment on
account of the
omission of
interest on
Capitals)

SOLUTION : 56.
Calculation of Interest on Capital:
For the calculation of interest on capital, Opening Capital has to be ascertained:
Particulars Esha Manav Daman
` ` `
Closing Capital 3,20,000 2,40,000 1,60,000
Add: Drawings already debited 48,000 48,000 60,000
3,68,000 2,88,000 2,20,000
Less : Pro t already credited 45,000 30,000 15,000
Opening Capital 3,23,000 2,58,000 2,05,000
3,23,000 x 2,58,000 x 10/100 2,05,000 x 10/100
Interest on Capital @10% p.a.
10/100 = 32,300 = 25,800 = 20,500

Total Interest on Capital = `32,300 + `25,800 – `20,500 = `78,600
Calculation of Interest on Drawings:
Esha and Manav each withdrew a sum of `48,000 in equal installments in the middle of
every month. Hence interest on drawings will be charged for 6 months:
48,000 x 6/12 x 5/100 = `1,200 each
Interest on Daman’s Drawings = `60,000 x 6/12 x 5/100 = `1,500
(Date of Drawings is not given, hence interest will be charged for 6 months)

Particulars Esha Manav Daman Total
` ` ` `
Interest on
32,300 25,800 20,500 78,600
Opening Capitals
Less : Interest on 1,200 1,200 1,500 3,900
Drawings
Balance (Cr.) 31,100 24,600 19,000 74,700
Division of
Firm’s Loss of
`74,700 37,350 24,900 12,450 74,700
in the ratio of 3 :
2 : 1 (Dr.)
Dr. 6,250 Dr. 300 Cr. 6,550 —

RECTIFYING ENTRY
Esha’s Capital
A/c
Manav’s
Capital A/c
To Daman’s
Capital A/c Dr. 6,250
6,550
(Interest on Dr. 300
capital and
interest on
drawings
omitted now
adjusted)

SOLUTION : 57.
Interest on capital should always be calculated on the opening capitals.
CALCULATION OF OPENING CAPITALS
A B
` `
Closing Capitals (as on 31 -3-2016) 6,00,000 4,00,000
Less : Share of Pro t (^4,50,000 in the ratio of 2 : 1) 3,00,000 1,50,000
3,00,000 2,50,000
Add: Drawings 1,00,000 50,000
Opening Capitals (as on 1-4-2015) 4,00,000 3,00,000

Particulars A B Total
` ` `
Interest on
Opening Capitals
@ 9% p.a.
36,000 27,000 63,000
Less : Interest on
Drawings @ 12%
p.a.
for six months 6,000 3,000 9,000
Balance
Division of
(Cr.) 30,000 24,000 54,000
Firm’s loss of
`54,000 in the
36,000 18,000
ratio of 2 : 1 (Dr.)
(Dr.) 6,000 (Cr.) 6,000

2016 To B’s Capital A/c
6,000
March 31 (Interest on Capital and interest on drawings not 6,000
charged, now adjusted)

In the Absence of Partnership Deed

SOLUTION : 58.
PROFIT & LOSS APPROPRIATION ACCOUNT
To Pro t:
By Pro t for the year
A 1,07,100x 1/2 1,07,100 1,07,100
1,08,300
53,550
Less : Interest on A’s
B 1,07,100x 1/2
1,07,100 loan 6% p.a. 1,200* 1,07,100
53,550
* If interest @ 15% is `3,000

interest @ 6% will be x 6 = `1,200

Guarantee of Minimum Share of Pro t

SOLUTION: 59 (A).
STATEMENT SHOWING APPROPRIATION OF PROFITS
A B C
` ` `
Share of Pro t `10,50,000 in the ratio (4:2: 1) 6,00,00
3,00,000 1,50,000
Less : Contribution to C from A and B of the amount 0
which fell short of Minimum Guarantee Amount i.e., (-)20,0
1,80,000 – 1,50,000 = `30,000 in the ratio of 4 : 2 or (+) 20,000
00 (-) 10,000
(+) 10,000
2:1
5,80,00
2,90,000 1,80,000
0

SOLUTION : 59 (B).
for the year ended
Dr. Cr.
To Interest on
By Pro t & Loss A/c 5,12,000
Capital :
A 64,000
B 48,000
C 40,000 1,52,000

)
A’s Capital A/c 1,56,000
B’s Capital A/c 1,04,000 3,60,000
C’s Capital A/c 1,00,000
5,12,000 5,12,000

Working Notes (1):
A B C
` ` `
1,80,00 1,20,00
60,000
Share of Pro t `3,60,000 in the ratio 3:2:1 0 0
Less : Contribution to C from A and B of the amount which (+)
fell short of Minimum Guarantee Amount i.e., 1,00,000 – (-) (-) 24,000
60,000= `40,000 in the ratio of 3 : 2 24,000 16,000 (+)
16,000
1,56,00 1,04,001,00,000
0 0

SOLUTION : 60 (A).
Dr. For the year ending 31st March, 2015 Cr.
By Pro t & Loss A/c 30,000
to :
A’s Capital A/c
10,000
(15,000 – 5,000)
B’s Capital A/c 10,000
C’s Capital A/c (5,000
10,000
+ 5,000)
30,000 30,000

Working Note:
Share of Pro t = A : `30,000 x 3/6 = `15,000
B : `30,000 x 2/6 = `10,000
C : `30,000 x 1/6 = `5,000

Dr. For the year ending 31st March, 2016 Cr.
To Pro t transferred to : By Pro t & Loss A/c 90,000
A’s Capital A/c (90,000 x 3/6) 45,000
B’s Capital A/c (90,000 x 2/6) 30,000
C’s Capital A/c (90,000 x 1/6) 15,000
90,000 90,000

SOLUTION : 60 (B).
Dr. for the year ended Cr.
Particulars – ` Particulars `
To Interest on
Capitals @ 8% p.a.
X 32,000
Y 24,000
Z 16,000
To Pro t transferred 72,000
2,52,000
to Capital A/cs : By Pro t & Loss A/c
X 90,000 –
20,000 = 70,000
Y 1,80,000
= 60,000
Z 30,000 +
20,000 = 50,000 2,52,000 2,52,000

Working Note:
Net Pro t after Interest on Capital = 2,52,000 – 72,000 = `1,80,000
Share of Pro t = X : `1,80,000 x 2/6 = `90,000
Y : `1,80,000 x 2/6 = `60,000
Z : `1,80,000 x 1/6 = `30,000
The minimum guaranteed amount to Z is `50,000 whereas his share of pro t amounts
to `30,000. Hence, the de ciency of `20,000 will be deducted from A’s share and will be
added to Z’s share.
Dr. CAPITAL ACCOUNTS Cr.
X Y Z X Y Z
s s
` ` ` ` ` `
To By Balance
50,000 40,000 35,000 4,00,000 3,00,000 2,00,000
Drawings b/d
To By
Balance 4,52,000 3,44,000 2,31,000 Interest
c/d on
Capital 32,000 24,000 16,000
By P&L
Appro-
priation
70,000 60,000 50,000
A/c
5,02,000 3,84,000 2,66,000 5,02,000 3,84,000 2,66,000

SOLUTION : 61.
JOURNAL
2016
Pro t & Loss
March 31 Dr. 6,50,000
A/c
To Pro t &
Loss
6,50,000
Appropriation
A/c
(Transfer of

pro ts)
March 31 Pro t & Loss Dr. 6,50,000
Appropriation
A/c
To S’s Capital
2,55,000
A/c
To T’s Capital
1,90,000
A/c
To W’s
1,25,000
Capital A/c
To X’s Capital
80,000
A/c
(Pro ts
distributed as

per working
note)
Working Note:
Share of Pro t = S : `6,50,000 x 4/10 = `2,60,000
T : `6,50,000 x 3/10 = `1,95,000
W : `6,50,000 x 2/10 = `1,30,000
X : `6,50,000 x 1/10 = `65,000

X’s share in pro ts amounts to `65,000 whereas the minimum guarantee amount is
`80,000. Hence, the de ciency of `15,000 will be met by S, T, W equally i.e. `5,000 each.
As such,
S’ s share = 2,60,000 – 5,000 = ?2,55,000
T s share = 1,95,000 – 5,000 = ? 1,90,000
JFs share = 1,30,000- 5,000 = ? 1,25,000
X’s share = 65,000 + 15,000 = ? 80,000

SOLUTION : 62.
Pro t & Loss Appropriation Account of Vikas, Vivek and Vandana
To Partners’ Capital
By Pro t & Loss A/c
A/cs
(transfer of Pro t)
Vikas’s Capital A/c
4,72,500 4,57,500 (Net Pro t) 9,00,000
Less : De ciency
15,000
Vivek’s Capital A/c
3,15,000
Less: De ciency
22,500

2,92,500
Vandana’s Capital
A/c 1,12,500
Add: from Vikas
15,000
from Vivek
1,50,000
22,500
9,00,000 9,00,000

`
Pro t of the Firm
9,00,000
Vandana’s share of Pro t = `9,00,000 x 1/8 1,12,500
Balance to be divided between Vikas and Vivek 7,87,500
Vikas’s share of Pro t = `7,87,500 x 3/5 4,72,500
Vivek’s share of Pro t = `7,87,500 x 2/5 3,15,000

Vandana’s de ciency = `1,50,000 – `1,12,500 = 37,500. Which is to be contributed by
Vikas & Vivek in the ratio 2:3, i.e., Vikas will contribute `15,000 and Vivek will contribute
`22,500

SOLUTION : 63.
STATEMENT SHOWING DISTRIBUTION OF PROFIT
Particulars Ram Mohan Sohan Rakesh
` ` ` `
Share of
Pro t (4 : 3 : 2
: 1)
Less : 1,60,000 1,20,000 80,000 40,000
Contribution
to Rakesh
from Ram and
Mohan of the
amount which
fell short of
Minimum
Guarantee +20,000
(-) 20,000 (-) 10,000
Amount i.e., +10,000
`70,000 –
`40,000 =
`30,000 in the
ratio of 2 : 1
Total 1,40,000 1,10,000 80,000 70,000

SOLUTION : 64.
JOURNAL
2015
X’s Capital
March 31 Dr. 60,000
A/c
Y’s Capital A/cDr. 30,000
Z’s Capital
Dr. 30,000
A/c
To Pro t and
1,20,000
Loss A/c
(Loss divided among
partners as per working
note)
X’s Capital
Dr. 78,000
A/c
Y’s Capital A/cDr. 52,000
To Z’s Capital
1,30,000
A/c
(De ciency of
Z’s share of

pro t met by
X and Y in
3:2)
Working Notes:
(i) Z’s share of Loss = `1,20,000 x 1/4 = `30,000
Remaining Loss = `1,20,000 – `30,000 = `90,000
X’s share of Loss = `90,000 x 2/3 = `60,000
Y’s share of Loss = `90,000 x 1/3 = `30,000
(ii) Z is guaranteed minimum pro t of `1,00,000 whereas share of loss debited to his
capital account is `30,000. Hence he will be credited by `1,30,000 borne by X and Fin 3 :
2.

SOLUTION : 65.
To Loss before
85,000 By Net Loss Transferred to
Interest
To Interest on
A’s Capital A/c 40,000
A’s Loan
(for 10 months) 5,000 B’s Capital A/c 30,000
C’s Capital A/c 20,000 90,000
90,000 90,000

JOURNAL
Interest on
A’s Loan A/c
To A’s Loan
A/c
2015 March 31 Dr. 5,000
(Interest 5,000
provided on
A’s Loan to
the rm)
Pro t & Loss
A/c
To Interest on
A’s Loan A/c
Dr. 5,000 5,000
(Interest on
loan charged
to Pro t &
Loss A/c)
A’s Capital A/c Dr. 40,000
B’s Capital A/c Dr. 30,000 90,000
C’s Capital A/c Dr. 20,000
To Pro t & Loss A/c
(Loss of `90,000 divided
among the partners in
4:3:2)
C’s Capital A/c Dr.
To B’s Capital A/c
1,20,000
(De ciency of B’s share of 1,80,000
60,000
pro t met by A and C in
their pro t sharing ratio of
4 : 2)
Working Note :
C is guaranteed a minimum pro t of `1,50,000 whereas share of loss debited to his
capital account is `30,000. Hence he will be credited by `1,80,000 (i.e. 1,50,000 +
30,000) borne by A and C in their pro t sharing ratio of 4 : 2)

SOLUTION : 66.

Capital A/c
Ali 40,000 (Net Pro t) 2,00,000
Bimal 30,000
Deepak 20,000 90,000
To Salary :
Bimal 24,000
Deepak 12,000 36,000
To Balance c/d 74,000

2,00,000 2,00,000
To Net Pro t transferred to By Balance b/d 74,000
Ali’s Capital A/c
(`74,000 x 5/10) 37,000
Bimal’s Capital

A/c
(`74,000 x 3/10) 22,200
Add: Transferred

from
Deepak 3,800 26,000
Deepak’s Capital

A/c
(`74,000×2/10) 14,800
Less : Transferred to Bimal

3,800
11,000
74,000 74,000

Working Notes:
(i) Bimal’s Share of Pro t = `74,000 x 3/10 = `22,200.
(ii) Bimal’s Share of Pro t + Salary = `22,200 + `24,000 = `46,200
(iii) Guaranteed Amount = `50,000.
(iv) De ciency to be borne by Deepak = `50,000 – `46,200 = `3,800

SOLUTION : 67.
PROFIT AND LOSS APPROPRIATION A/C
Dr. for the year ending 31st March, 2017 Cr.
To Ajoo’s Capital A/c By Pro t & Loss A/c 57,000
52,000 x 4/5 = 41,600
39,475
Less : Given to Sajoo 2,125
To Bajoo’s Capital A/c 10,400
52,000 x 1/5
To Sajoo’s Capital A/c 7,125
57,000 57,000

`
Pro t before Sajoo’s Salary and Commission 57,000
Less: Salary 2,400
54,600
Less : Sajoo’s Commission 5/105 of `54,600 2,600
52,000

Thus Sajoo as a manager will receive `
Salary `2,400 + Commission `2,600 5,000
Sajoo as a partner will receive 57,000 x 1/8 7,125
Excess received by Sajoo as a partner 2,125

This excess amount of `2,125 will be deducted from Ajoo’s Share.

SOLUTION : 68.
PROFIT AND LOSS APPROPRIATION /VC
By Pro t & Loss A/c
To P’s Capital A/c
4/7 of 3,50,000 2,00,000 3,85,000
Less: 3/5 of 12,500 7,500 1,92,5 Add: R’s Salary
4,05,000
00 20,000
To Q’ s Capital A/c
3/7 of 3,50,000 1,50,000 1,45,0
Less : 2/5 of 12,500 5,000 00
To R’s Capital A/c 67,500
4,05,0
4,05,000
00

Pro t before R’s Salary and Commission 4,05,000
Less : Salary to R 20,000
3,85,000
Less: Commission 10/110 of `3,85,000 35,000
3,50,0

00
Thus R as a manager will receive : Salary `20,000 + Commission `35,000 55,000
R as a partner will receive 4,05,000 x 1/6 67,500
Excess received by R as a partner 12,500

This excess amount of `12,500 will be deducted from P and Q’s share in the ratio of 3 : 2
respectively.

ADDITIONAL QUESTIONS

SOLUTION : 69.
Particulars ` Particulars ` Particulars
To General By Pro t & Loss
49,775 5,00,000
Reserve A/c A/c
To Interest on Less : Interest on 2,250 4,97,750
Capital: Loan
Shankar’s By Interest on
Current A/c Drawings
25,0 65,000Shankar’s Current A/c 1,800
00
Manu’s Current
A/c
40,
000
To Pro t
3,600
transferred to :
Manu’s Current
Shankar’s 1,800
3,86,575 A/c
Current A/c
5,01,350 5,01,350
2,31,94
5
Manu’s Current
A/c
1,54,
630

Dr. PARTNERS’ CAPITAL ACCOUNTS Cr.
Date Shankar Manu Date Shankar Manu
s s
2015 ` ` 2014 ` `
Mar. 31 To Bal. c/d 4,00,000 4,00,000 Apr. 1 By Bal. b/d 2,00,000 4,00,000
2015
By Bank
Jan. 1 2,00,000
A/c
4,00,000 4,00,000 4,00,000 4,00,000
Dr. PARTNERS’ CURRENT ACCOUNTS Cr.
Date Shankar Manu Date Shankar Manu
s s
2015 ` ` 2014 ` `
To By Balance
Mar. 31 24,000 24,000Apr. 1 50,000 1,00,000
Drawings b/d
To
Mar. 31 Interest 2015
on
By
Drawings 1,800 1,800Mar. 31 Interest
on
Mar. 31 To Bal. c/d 2,81,145 2,68,830 Capital 25,000 40,000
By Pro t &
Loss

Appro-
priation
2,31,945 1,54,630
A/c
3,06,945 2,94,630 3,06,945 2,94,630

Dr. MANU’S LOAN’S ACCOUNT Cr.
2015 2015
To
By Bank
Mar. 31 Balance 1,52,250 Jan. 1 1,50,000
A/c
c/d
By Interest on Loan
Mar. 31 2,250
A/c
1,52,250 1,52,250
Working Note:
Interest on Drawings:
Since drawings are made at the beginning of each quarter, interest will be charged for
7.5 months: 24,000 x 12/100 x 7.5/12 = `1,800
Interest on Loan will be allowed @6% p.a.

SOLUTION: 70.
Following values were considered by Ram, Mohan and Rakhi while preparing the new
Partnership Deed:
Sensitivity towards di erently abled people.
Development of naxal a ected areas by providing entrepreneurial opportunities.
Upliftment of girls belonging to Scheduled Castes and Scheduled Tribes by providing
employment.
Ful lment of social responsibility.

To Prime Minister’s
Relief Fund 1,00,000 By Pro t and Loss
10,00,000
To National Blind 50,000 A/c (Trading Pro t)
Relief Fund
To Net Pro t
transferred to :
Ram’ Capital A/c 8,50,000
2,83,334
Mohan’s Capital A/c 10,00,000 10,00,000
2,83,333
Rakhi Capital A/c
2,83,333

SOLUTION : 71.
By Pro t &
To Interest on
Loss A/c By
Capital: 50,000
Interest on 4,400 3,50,000
D 70,000
Drawings :
E
D
F
To Salary to F 2,00,000
80,000 E 4,500 8,900
To Pro t 1,20,000
transferred to
Capital A/cs :
9,725
D 5/20
13,615 38,900
E 7/20
15,560
F 8/20
3,58,900 3,58,900

SOLUTION : 72.
To Salary : By Pro t & Loss A/c
Simmi 12,000 (Pro t for the year) 1,50,000
By Interest on
Sonu 9,000 21,000
Drawings
To Interest on 600
Capitals : Simmi

Simmi 1,500 450 1,050
Sonu
Sonu 3,000 4,500

to
Current Accounts:
Simmi 94,163
Sonu 31,387 1,25,550
1,51,050 1,51,050

Dr. PARTNER’S CURRENT ACCOUNT Cr.
Date Simmi Sonu Date Simmi Sonu
s s
2016 ` ` ` `
2015
To By Balance
March 31 20,000 15,000 April 1 30,000 15,000
Drawings b/d
To
March 31 2016
Interest
600 450
on
March 31 By Salary 12,000 9,000
Drawings
To By
March 31 Balance 1,17,063 42,937 March 31 Interest
1,500 3,000
c/d on
Capital
By Pro t &
Loss
March 31 Appro- 94,163 31,387
priation
A/c
1,37,663 58,387 1,37,663 58,387

SOLUTION : 73.
Dr. for the year ending on March 31, 2016 Cr.
To Salary to Pappu
30,000 By Pro t & Loss A/c
(2,500 x 12) 90,575
10,000 (Pro t for the year)
To Commission to Munna
To Interest on Capital :
By Interest on Drawings
1,250
17,500 Pappu 1,675
Pappu 10,000 425
Munna
Munna 7,500
To Pro t transferred to :
34,750
Pappu’s Current A/c 20,850 92,250
92,250
Munna’s Current A/c 13,900

SOLUTION : 74.
A B C
` ` `
(i) `56,000 Ratio 5:3:2 28,000 16,800 11,200
(ii) First `1,00,000 50,000 30,000 20,000
Balance `1,56,000 52,000 52,000 52,000
Total Pro t 1,02,000 82,000 72,000

SOLUTION : 75.
To Interest on Capital
By Pro t & Loss A/c
(at 6% p.a.)
A : on `1,00,000
6,000
B : on ` 1,00,000 (Net Pro t as per P &
24,000 2,70,000
6,000 L A/c)
C : on `2,00,000
12,000
To Salary (A)
To Pro t transferred 60,000
to :
A’s Current A/c
50,000
B’s Current A/c
1,86,000
54,000
C’s Current A/c
82,000
2,70,000 2,70,000

JOURNAL ENTRY (For Appropriation of Pro t)
2014 Pro t & Loss 1,86,000 50,000
March 31 Appropriation 54,000
A/c Dr. 82,000
To A’s Current
A/c
To B’s Current
A/c
To C’s Current
A/c
(Pro t
transferred to
current
accounts)

Working Note: Pro t after Interest on capital and Salary :
`2,70,000 – `24,000 – `60,000 = `1,86,000

A(`) B(`) C(`)
First `40,000 in Capital Ratio i.e. 2:3:5
8,000 12,000 20,000
Next `80,000 in Capital Ratio i.e. 1:1:2 20,000 20,000 40,000
Remaining `66,000 equally 22,000 22,000 22,000
50,000 54,000 82,000

SOLUTION: 76.
Particul Particul
Date X Y Z Date X Y Z
ars ars
2016 ` ` ` 2015 ` ` `
Mar. 31 To Dra- April 1
By Bal. 2,00,00 1,00,00
wings 1,20,000
8,000 8,000 8,000 2016 b/d 0 0
To Bal.
c/d 2,62,00 1,98,00 1,62,00 Mar. 31 — 25,000 20,000
0 0 0 By
Salary
10,000 6,000 5,000
By
Interest
on
Capital
By P&L
Appropr
iation
A/c
(X =
40,000
60,000
+
20,000)
(Y =
35,000
55,000
+
20,000)
(Z =
25,000
45,000
+
20,000)
2,70,00 2,06,00 1,70,00 2,70,00 2,06,00 1,70,00

0 0 0 0 0 0

Working Notes :
P & L APPROPRIATION ACCOUNT

Capital: A/c
X 10,000 — being pro t 1,81,000
Y 6,000
Z 5,000 21,000
To Pro t

transferred to
First 1,00,000
X 40% 40,000
Y 35% 35,000
Z 25% 25,000 1,00,000
Balance 60,000

equally
X 20,000
Y 20,000
Z 20,000 60,000
1,81,000 1,81,000

SOLUTION : 77.
To Manager’s
Commission
(10% of ?3,00,000) 30,000 By Pro t for the year
3,00,000
To Net Pro t (before Tulsi’s
transferred to 2,70,000 salary)
2,28,000 + 72,000
P & L Appropriation
A/c 3,00,000 3,00,000

To Tulsi’s Salary
By Pro t & Loss
To Interest on 72,000 2,70,000
A/c
Capital :
Tulsi 48,000
Kabir 36,000 84,000
To Pro t
Transferred to
Capital A/cs :
Tulsi 3/5 68,400
Kabir 2/5 45,600 1,14,000
2,70,000 2,70,000

SOLUTION : 78.
A’s commission (before charging such commission) = 55,000 x 10/100 = `5,500
B’s commission (after charging A’s commission and his own commission)
= (55,000 – 5,500) x 10/110 = `4,500

SOLUTION : 79.
To Interest on Capital : By Pro t & Loss A/c 40,000
A 6,800 Less: Manager’s Commission
B 3,800 10,600 10% on 40,000 4,000
To Pro t transferred:
A’s Current A/c 15,240 36,000
B’s Current A/c 10,160 25,400
36,000 36,000

Date A B Date A B
s s
2013 ` ` 2013 ` `
By Balance
July 1 To Bank 20,000 —April 1 1,00,000 40,000
b/d
2014 July 1 By Bank — 10,000
To
Mar. 31 Balance 80,000 50,000
c/d
1,00,000 50,000 1,00,000 50,000

Date A B Date A B
s s
2013 ` ` 2013 ` `
To
By Balance
April 1 Balance — 3,200April 1 8,420 —
b/d
b/d
2014 2014
By
To
Mar. 31 12,000 10,000Mar. 31 Interest
Drawings
on
To
Mar. 31 Balance 18,460 760 Capital(1) 6,800 3,800
c/d
Mar. 31 By P&L
Appropria
-
tion A/c 15,240 10,160
30,460 13,960 30,460 13,960
Working Notes:
Calculation of Interest on

Capital:
From 1.4.2013 to 30.6.2013 ` `
1,00,000 x
A = 2,000
8/100 x 3/12
40,000 x 8/100
B = 800
x 3/12

From 1.7.2013 to 31.3.2014 ` `
A 80,000 x 8/100 x 9/12 = 4,800
B 50,000 x 8/100 x 9/12 = 3,000
6,800 3,800

SOLUTION : 80.
To Salary to .4 (? 500 x 12) 6,000By Balance b/d 35,700
By Interest on
To Commission to B 4,000
Drawings
To Interest on
225
Capital A
2,400 75 300
A B

1,200 3,600
B

to
A’s
13,440
Current A/c
B’s
8,960 22,400
Current A/c
36,000 36,000

Date A B Date A B
s s
2014 ` ` 2013 ` `
To
By Balance
Mar. 31 Balance 40,000 20,000 April 1 40,000 20,000
b/d
c/d
40,000 20,000 40,000 20,000

Date A B Date A B
s s
2014 ` ` 2013 ` `
To By Balance
Mar. 31 5,000 2,000 April 1 16,000 12,000
Drawings b/d
Mar. 31 To 2014
Interest
225 75 By Salary’
on Mar. 31 6,000 —
Drawings to A
Mar. 31 To 32,615 24,085 Mar. 31 By 2,400 4,000
Balance Mar. 31 Commiss- 13,440 1,200
c/d Mar. 31 ion to B 8,960
By
Interest
on Capital
By P&L
Appropri
ation A/c
37,840 26,160 37,840 26,160

SOLUTION: 81.
Calculation of Interest on Drawings:
Case (a). In this case interest will be charged for six months because it will be assumed
that the drawings were made evenly throughout the year:
60,000 x 8/100 x 6/12 = `2,400
Case (b). In this case interest will be charged for 6.5 months as the drawings are made in
the beginning of every month:
60,000 x 8/100 x 6.5/12 = `2,600
Case (c). In this case interest will be charged for 5.5 months as the drawings are made at
the end of every month:
60,000 x 8/100 x 5.5/12 = `2,200
Case (d). In this case interest will be charged for 6 months as the drawings are made
during i.e., middle of every month.
60,000 x 8/100 x 6/12 = `2,400
Case (e).
Period
Amount
Date (Months upto Products
`
31st March, 2016)
2015
June 1 10,000 10 1,00,000
August 31 12,000 7 84,000
November 1 16,000 5 80,000
December 31 13,000 3 39,000
2016
9,000 2 18,000
February 1
60,000 3,21,000

= 3,21,000 x 8/100 x 1/12 = `2,140

SOLUTION : 82.
Average Period = (12 months + 3 months)/2 = 7.5 months.
Total Drawings for the year = `10,000 x 4 times in a year = `40,000
Interest on Drawings = `40,000 x 9/100 x 7.5/12 = `2,250.

SOLUTION : 83.
Average Period = (9 months + 0 month)/2 = 4.5 months.
Total Drawings for the year = `10,000 x 4 = `40,000
Interest on Drawings = `40,000 x 9/100 x 4.5/12 = `1,350.

SOLUTION : 84.
Since date of drawing is not given, it will be assumed that drawings are made during i.e.
middle of each quarter.
Average Period = (10.5 months +1.5 months)/2 = 6 months.
Total Drawings for the year = `10,000 x 4 = `40,000
Interest on Drawings = `40,000 x 9/100 x 6/12 = `1,800.
SOLUTION : 85.
Average Period = (6 months +1 month)/2 = 3.5 months.
Interest on Drawings = `24,000 x 9/100 x 3.5/12 = `630.

SOLUTION : 86.
Average Period = (5 months + 0 month)/2 = 2.5 months.
Interest on Drawings = `24,000 x 9/100 x 2.5/12 = `450

SOLUTION : 87.
Since date of drawing is not given, it will be assumed that drawings are made in the
middle of each month.
Average Period = (5.5 months + 0.5 month)/2 = 3 months.
Interest on Drawings = `24,000 x 9/100 x 3/12 = `540

SOLUTION : 88.
Dr. for the year ending on 31st March. 2014 Cr.
To Interest on By Pro t &
24,605
Capital : Loss A/c
By Interest on
A 3,600
Drawings :
B 1,800 A 140
C 1,200 6,600 B 165
To Salary’ to
A
To Pro t 6,000 C 90 395
Transferred
to
A 6,200
B 3,720
C 2,480 12,400
25,000 25,000

(i) When Capital are xed:
Dr. CAPITAL ACCOUNTS Cr
Particul Particul
ars ars
2014 ` ` ` 2013 ` ` `
To By
Mar. 31 April 1
Balance Balance
c/d 60,000 30,000 20,000 b/d 60,000 30,000 20,000

Particul Particul
ars ars
2013 ` ` ` 2014 ` ` `
By
June 1 To Dra- Mar. 31
Interest
wings 2,000 2,000 1,000 on
Oct. 1 To Dra- Capital 3,600 1,800 1,200
By
wings 1,000 1,500 1,000 Mar. 31 6,000
Salary
Dec. 1 To Dra- Mar. 31 By P & L
Appropr
wings 500 1,000 500
ia-
2014 tion A/c 6,200 3,720 2,480
To
Mar. 31
Interest
on Dra-
wings(1
140 165 90
)
Mar. 31 To
Bala-
nee c/d 12,160 855 1,090
15,800 5,520 3,680 15,800 5,520 3,680

(ii) When Capitals are oating :
Dr. Cr.
Particul Particul
ars ars
2013 ` ` ` 2013 ` ` `
By
June 1 To Dra- April 1
Balance
wings 2,000 2,000 1,000 b/d 60,000 30,000 20,000
Oct. 1 To Dra- 2014
By
wings 1,000 1,500 1,000 Mar. 31
Interest
Dec. 1 To Dra- on
wings 500 1,000 500 Capital 3,600 1,800 1,200
By
2014 Mar. 31 6,000 — —
Salary
To
Mar. 31 Mar. 31 By P&L
Interest
on Dra- Appro-
wings 140 165 90 priation
To
Mar. 31 A/c 6,200 3,720 2,480
Bala-
nee c/d 72,160 30,855 21,090
75,800 35,520 23,680 75,800 35,520 23,680


Working Notes:
(i) Calculation of Interest on Drawings :
A B C
Period Period Period
Amou Pro Amou Pro Amou Pro
Date Month Date Month Date Month
nt ducts nt ducts nt ducts
s s s
` ` ` ` ` `
1.6.13 10 1.6.13 10 1.6.13 10
2,000 20,000 2,000 20,000 1,000 10,000
1.10.13 1,000 6 6,000 1.10.13 1,500 6 9,000 1.10.13 1,000 6 6,000
1.12.13 500 4 2,000 1.12.13 1,000 4 4,000 1.12.13 500 4 2,000
28,000 33,000 18,000

Interest on Drawings:
A = 28,000/12 x 6/100 = `140
B = 33,000/12 x 6/100 = `165
C = 18,000/12 x 6/100 = `90

SOLUTION : 89.
Books of P, Q and R
By Pro t &
To Interest on Capitals :
Loss A/c
(Net Pro t for
P 36,000 4,96,310
the year)
By Interest on
Q 27,000
Drawings :
R 21,000 84,000 P `60,000 x
To Salary : 8/100 x 6.5/12
48,000
P
Q 60,000 = 2,600

To Commission (Note 1) 1,08,000 Q `90,000 x
P 15,650 8/100 x 5.5/12

Q 29,810
14,160
= 3,300
To Pro t transferred to (Note 2): 8,700
R `70,000 x
P’s Capital A/c 94,400
8/100 x 6/12
Q’s Capital A/c 77,200
R’s Capital A/c 1,11,600 2,83,200 = 2,800
5,05,010 5,05,010

P Q R P Q R
s s
` ` ` ` ` `
To
60,000 90,000 70,000By Bank 6,00,000 4,50,000 3,50,000
Drawings
To
Interest By Int. on
on
Drawings 2,600 3,300 2,800Capital 36,000 27,000 21,000
By Salary
To Bal. c/d 7,31,450 5,35,060 4,09,800 By 48,000 60,000 —
Commi-
ssion 15,650 14,160 —
By P & L
App. A/c 94,400 77,200 1,11,600
7,94,050 6,28,360 4,82,600 7,94,050 6,28,360 4,82,600

Working Notes :
(1) Balance of Pro t = `4,96,310 + `8,700 – `84,000 – `1,08,000 = `3,13,010
Commission to P =
= ` 15,650
3,13,010 x 5/100
Remaining Pro t =
= `2,97,360
3,13,010 – 15,650
Commission to Q =
= ` 14,160
2,97,360 x 5/105
(2) Divisible Pro t
= U,83,200
=2,97,360 – 14,160
P Q R
` ` `
Upto `1,80,000 Equally 60,000 60,000 60,000
2,83,200 – 1,80,000 =
34,400 17,200 51,600
1,03,200 in 1/3:1/6:1/2
94,400 77,200 1,11,600

SOLUTION : 90.
Case (i) If partnership deed is silent as to the treatment of interest as a charge or
appropriation :
To Interest on Capital : By Pro t & Loss A/c
X 60,000 x 3/6 30,000(Pro t for the year) 60,000
Y 60,000 x 2/6 20,000
Z 60,000 x 1/6 10,000
60,000 60,000

Note : The available pro t is `60,000 whereas the interest due on capitals is `72,000
(i.e., `36,000 + `24,000 + `12,000). Since the pro t is less than the interest, the
available pro t will be distributed in the ratio of interest i.e., 36,000 : 24,000 : 12,000 or
3 : 2 : l.

Case (ii) If partnership deed provides for interest even if it involves the rm in loss :

Capital: A/c
(Pro t for the
X 36,000 60,000
year)
By Loss
Y 24,000
Transferred to :
Z 12,000 72,000 X 5/10 6,000
Y 3/10 3,600
Z 2/10 2,400 12,000
72,000 72,000

Adjustments in the Closed Accounts

SOLUTION : 91.
Particulars Raja Roopa Mala Total
` ` ` `
Interest already
72,000 54,000 36,000 1,62,000
credited @ 6%
Interest that
should have been 60,000 45,000 30,000 1,35,000
credited @ 5%
Partner’s excess
12,000 9,000 6,000 27,000
credited with
By disallowing
this interest, the
pro ts of the
rm will be
9,000 9,000 9,000 27,000
increased by
`27,000. This
pro t will be
divided equally
(Dr.) (Cr.)
Net e ect — —
3,000 3,000

Adjustment Entry :
Date Particulars L.F. Dr.(`) Cr.(`)
2016 Raja’s Current Dr. 3,000 3,000
Mar. 31 A/c
To Mala’s
Current A/c
(Adjustment
for excess
interest on
capital
allowed to
partners)

SOLUTION : 92.
Particulars P Q Total
` ` `
Interest already credited @ 12% 60,000 96,000 1,56,000
Interest that should have been credited @
50,000 80,000 1,30,000
10%
Partners Over credited with 10,000 16,000 26,000
By recovering this interest from the partners,
the pro ts of the rm will be increased by
18,200 7,800 26,000
`26,000. This pro t will be divided in the
ratio of 7 : 3
Net e ect (Cr.) 8,200 (Dr.) 8,200 —

Adjustment Entry :
Q’s Current A/c
2014 To P’s Current A/c
Dr. 8,200
March 31 (Interest excessive 8,200
charged, now recti ed)

SOLUTION : 93.
Case (a)
Particulars A B C Total
` ` ` `
Interest on
Capital already
16,000 24,000 32,000 72,000
credited @ 8%
p.a.
Division of
rm’s gain of
24,000 24,000 24,000 72,000
`72,000 in pro t
sharing ratio
Net E ect (Cr.) 8,000 — (Dr.) 8,000 —

Adjustment Entry :
C’s Current
A/c
To A’s
Current A/c
2014 Dr.
(Interest on 8,000
March 31 8,000
capital
wrongly
credited, now
recti ed)

Case (b)
` ` ` `
Interest allowed 16,000 24,000 32,000 72,000
on capitals @
8% p.a.
Division of
rm’s loss of
`72,000 in
pro t sharing
24,000 24,000 24,000 72,000
ratio
Net E ect (Dr.) 8,000 — (Cr.) 8,000 —

Adjustment Entry :
A’s Current A/c Dr.
2014 To C’s Current A/c
8,000
March 31 (Adjustment for omission of interest on 8,000
Capitals)

Case (c)
Particulars A B c Total
` ` ` `
Interest already
16,000 24,000 32,000 72,000
credited @ 8%
Interest that
should have been 20,000 30,000 40,000 90,000
credited 10%
Partners less
4,000 6,000 8,000 18,000
credited with
By allowing this 6,000 6,000 6,000
interest, the
pro ts of the
rm will be
reduced by
`18,000. This
loss will be
divided in pro t
sharing ratio i.e.,
equally
Net E ect (Dr.)2,000 — (Cr.)2,000 —

Adjustment Entry :
A’s Current A/c Dr.
2014
To C’s Current A/c 2,000
March 31 2,000
(Interest less charged on capital, now recti ed)

Case (d)
Particulars A B c Total
` ` ` `
Interest already
20,000 30,000 40,000 90,000
credited @ 10%
Interest that
should have been 16,000 24,000 32,000 72,000
credited 8%
Partners over
4,000 6,000 8,000 18,000
credited with
By recovering 6.000 6,000 6,000 18,000
this interest
from the
partners, the
pro ts of the
rm will be
increased by
`18,000. This
will be divided in
pro t sharing
ratio i.e., equally
Net E ect (Cr.)2,000 — (Dr.)2,000 —

Adjustment Entry :
C’s Current A/c
Dr.
To A’s Current
A/c
2014
(Interest 2,000
March 31 2,000
excessive
charged on
capital now
recti ed)

SOLUTION : 94.
Calculation of Opening Capitals :
Particulars E F G
Capitals on 31.3.2016
` ` `
Less : Share of Pro t
2,95,000 3,30,000 3,35,000
(which has already
90,000 60,000 30,000
been credited)

2,05,000 2,70,000 3,05,000
Add: Drawings
40,000 40,000 40,000
(which were
previously deducted
2,45,000 3,10,000 3,45,000
Capitals on 1.4.2015

Particulars E F G Total
` ` ` `
Interest allowed
on opening
capitals @ 12%
29,400 37,200 41,400 1,08,000
Division of
rm’s loss of
`1,08,000
in 3 : 2 : 1 54,000 36,000 18,000 1,08,000
(Dr.) (Cr.) (Cr.) —
24,600 1,200 23,400

Adjustment Entry :
E’s Capital A/c
Dr.
To F’s Capital
A/c

2016 To G’s Capital
24,600 1,200
March 31 A/c
23,400
(Adjustment for
omission of
interest on
capitals)

SOLUTION : 95.
Particulars A (`) B(`)
Closing Capitals 6,40,000 4,60,000
Less : Share of Pro t 2,00,000 2,00,000
4,40,000 2,60,000
Add: Drawings 1,20,000 1,40,000
Opening Capitals 5,60,000 4,00,000

Interest on Capitals:
A = `5,60,000 x 12/100 = `67,200
B = `4,00,000 x 12/100 = `48,000

SOLUTION : 96.
JOURNAL
Param’s
Currrent A/c Dr.
Priya’s Current
A/c Dr.
To Prem’s
1,55,000
Current A/c 3,10,000
1,55,000
(Change in the
pro t sharing
ratio
incorporated
retrospectively)

Working Notes : Total Pro t = 2,00,000 + 3,50,000 + 4,75,000 + 5,25,000 = `15,50,000

Particulars Prem Param Priya Total
Pro ts already
` ` ` `
distributed (Dr.)
(in the ratio of 2 :3,10,000 4,65,000 7,75,000 15,50,000
3 : 5)
Pro ts to be
distributed (Cr.)
(in the ratio of 2 :
6,20,000 3,10,000 6,20,000 15,50,000
1 : 2)
(Cr.) (Dr.) (Dr.)
Net e ect
3,10,000 1,55,000 1,55,000

SOLUTION : 97. (HOTS)
STATEMENT OF ADJUSTMENTS
Particulars Alex John Sam
1. Amount which
should have been ` ` `
credited :
Salary 12,000
10,000 6,000
Interest on Capital 8,000
Pro t (`75,000 –
`12,000 – `24,000 +
`300 for interest on 16,375 13,100 9,825
drawings = `39,300)
in 5 : 4 : 3
Cr. 26,375 33,100 15,825
2. Amount which
should have been
100 100 100
debited :
Interest on Drawings
Pro t already
25,000 25,000 25,000
distributed equally
Dr. 25,100 25,100 25,100
Net E ect (Cr.) 1,275 (Cr.) 8,000 (Dr.) 9,275

ADJUSTMENT ENTRY
Sam’s Capital A/c Dr.
To Alex’s Capital A/c

To John’s Capital A/c
9,275 1,275
(Adjustment for salary, interest on capital,
8,000
interest on drawing and wrong distribution of
pro t)

SOLUTION : 98.
STATEMENT OF ADJUSTMENTS
` ` ` `
Salary to C (Cr.) 60,000 60,000
Commission
(Cr.) 80,000 80,000
to A
Interest on
(Cr.) 30,000 15,000 15,000 60,000
Capital
Pro t remaining after 50,000 25,000 25,000 1,00,000
allowing salary, commission
and interest on Capital will
be `3,00,000 – `60,000 –
`80,000 – `60,000 =
`1,00,000. It will be divided
in their pro t sharing ratio
i.e. 2:1:1.
Net amount which should
have been received (Cr.) 1,60,000 40,000 1,00,000 3,00,000
Less : Pro t already 1,00,000 1,00,000 1,00,000 3,00,000
distributed equally (Dr.)
(Cr.) 60,000 (Dr.) 60,000 — —

ADJUSTMENT JOURNAL ENTRY
B’s Capital A/c
Dr.
To A’s Capital
A/c
(Adjustment for
2017 salary,
60,000
March 31 commission, 60,000
interest on
capital and
wrong
distribution of
pro t)

Guarantee of Pro t to a Partner

SOLUTION : 99.
JOURNAL
2014 Pro t & Loss A/c 39,500
March 31 To Pro t & Loss Dr. 39,500
Appropriation A/c
(Transfer of pro ts)
March 31 Pro t & Loss Dr. 39,500
Appropriation A/c
16,857
To X^s Capital A/c
To y’s Capital A/c 12,643
To Z’s Capital A/c 10,000

(Pro ts distributed as
per working note)

Working Note:
Distribution of Pro t:
X 39,500 x 16/35 = `18,057
Y 39,500 x 12/35 = `13,543
Z 39,500 x 7/35 = `7,900
Z’s share in pro ts amounts to `7,900 whereas the minimum guaranteed amount is
`10,000. Hence, the de ciency will be borne by X and Y in the ratio of 16 : 12.
X’s share = 2,100 x 16/28 = `1,200
Y’s share = 2,100 x 12/28 = `900

To X’s Capital By Pro t & Loss
18,057
A/c A/c
Less :
1,200 16,857– being pro t 39,500
Transferred to Z
To Y’s Capital 13,543
A/c
Less :
900 12,643
Transferred to Z
To Z’s Capital
7,900
A/c
Add : From X 1,200
From Y 900 10,000
39,500 39,500

SOLUTION : 100.
JOURNAL
Pro t & Loss
A/c
To Pro t &
Loss
2014 March 31 Dr. 25,000
Appropriation 25,000
A/c
(Transfer of
pro ts)
Pro t & Loss Dr. 25,000
Appropriation 10,000
A/c 6,000
To A’s Capital
A/c
To B’s Capital
A/c
To C’s Capital
A/c
(Pro ts
distributed as
per working
note)

Working Note:
Distribution of Pro t:
A 25,000 x 2/5 = `10,000
B 25,000 x 2/5 = `10,000
C 25,000 x 1/5 = `5,000
C’s share in pro ts amounts to `5,000 whereas the minimum guaranteed amount is
`6,000. Hence, the de ciency will be borne by A.

To A’ s Capital A/c 10,000 Less :
9,000
Transferred to C 1,000

By Pro t & Loss A/c – being 25,000
10,000
To B’s Capital A/c pro t

To C’s Capital A/c 5,000
6,000
Add: From A 1,000
25,000 25,000

SOLUTION : 101.
Pro t of `1,40,000 divided in the ratio of 5 : 4 : 1
A’s Share : 1,40,000 x 5/10 = `70,000
B’s Share 1,40,000 x 4/10 = `56,000
C’s Share : 1,40,000 x 1/10 = `14,000
C’s share in pro ts amounts to `14,000 whereas the minimum guaranteed amount is
`20,000. Hence, the de ciency of `6,000 will be borne by A and B in the ratio of 3 : 2.
The adjustment entry will be:
A’s Capital A/c
Dr.
B’s Capital A/c
Dr.

To C’s Capital 3,600
2016 March 31
A/c 2,400
6,000
(De ciency of C
met by A and B
in the ratio of 3 :
2)

SOLUTION : 102.
Dr. for the year ended Cr.
Tory’s Capital
A/c
2/3 of 2,70,000
Less : Given to Z
By Pro t & Loss
To P’s Capital 1,80,000 1,67,600 3,22,000
A/c
A/c 1/3 of 12,400 90,000
2,70,000 64,400
To Z’s Capital
A/c
3,22,000 3,22,000

`
Pro t before Z’s Salary and Commission
3,22,000
25,000
Less: Salary
2,97,000
27,000
Less : Z’s Commission 10/110 of 2,97,000
2,70,000
Thus Z as a manager will receive : `
Z as a partner will receive : 3,22,000 x 1/5 64,400
Excess received by Z as a partner This excess amount of
12,400
` 12,400 will be deducted from A’s share.

SOLUTION : 103.
To X’s Capital
A/c 2/3 of
1,22,400
Less : Given
By Pro t &
to Z
Loss A/c 1,28,520
81,600 79,200
Add: Z’s 21,480 1,50,000
To Y’s Capital 2,400 40,800
Salary
A/c 1/3 of 30,000
1,22,400
To Z’s Capital
A/c
1,50,000 1,50,000

`
Pro t before Z’s Salary and Commission
1,50,000
21,480
Less: Z’s Salary
1,28,520
6,120
Less : Z’s Commission 5/105 of 1,28,520
1,22,400
Thus Z as a manager will receive : `
Z as a partner will receive : 1,50,000 x 1/5 30,000
Excess received by Z as a partner This excess amount of `2,400 will be
2,400
deducted from X’s share.

SOLUTION : 104.
To Pranshu’s Capital By Pro t & Loss A/c 90,000
A/c (Pro t for the year)
(75,000 x 3/5 )
45,000 30,000
Less : Transferred to
Anshu 30,000
15,000

To Himanshu’s
Capital A/c
(75,000 x 2/5) 30,000
To Anshu’s Capital

A/c
(90,000 x 1/6 )

15,000
Add: Received from
Pranshu
15,000
90,000 90,000

Working Note:
Anshu’s share of pro t = 90,000 x 1/6 = `15,000
Remaining pro t = 90,000 – 15,000 = `75,000
Pranshu’s share = 75,000 x 3/5 = `45,000
= 75,000 x 2/5
Himanshu’s share = `30,000

Since Anshu’s share of pro t amounts to `15,000 whereas minimum guaranteed

amount is `30,000, de ciency of `15,000 will be deducted from Pranshu’s share and
added to Anshu’s share.

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Accounting For Partnership Firms – Fundamentals

(3) Net Pro t after interest on Loan = `7,70,000 – `11,000 = `7,59,000

*Since Interest on Capital is to be allowed even if rm incurs loss, it is debited to P&L

Thus the pro t sharing ratio would be:

B’s Interest on Capital = `70,000 x 5/100= `3,500

C’s Interest on Capital = `50,000 x 5/100 = `2,500

TABLE SHOWING ADJUSTMENT

(b) Values involved are:

* If interest @ 15% is `3,000

Z : `1,80,000 x 1/6 = `30,000

B 25,000 x 2/5 = `10,000

C 25,000 x 1/5 = `5,000

B’s Share 1,40,000 x 4/10 = `56,000

Since Anshu’s share of pro t amounts to `15,000 whereas minimum guaranteed

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