CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP: FUNDAMENTALS

CASE STUDY BASED QUESTIONS

CASE STUDY-I
Sl.No. Read the passage given below and answer the following questions:

Arav and Bhart are partners in a firm sharing profits and losses. Their capitals on 1 April, 2015
were Rs.4,80,000 and Rs.5,40,000. On 1 October, 2015, they decided that the total capital of
the firm should be Rs.10,00,000 to be contributed equally by both of them.According to the
Partnerhip Deed, interest on capital is allowed to the partners @6% p.a.

1. You are required to compute interest on capital for the year ending 31 March, 2016.
(A) Rs.29,400, Rs.31,200
(B) Rs.14,400, Rs.16,200
(C) Rs.15,000, Rs.15,000
(D) None of these

2. What would be the profit sharing ratio of Arun and Barun?

(A) 1 : 1
(B) 2 : 3
(C) 3 : 2
(D) 3 : 4
CASE STUDY 2

Read the following information carefully and answer the question number 43 to 46 on that
basis

Information: The profit for the last five years were:

Year Ended Profits (Rs.)

31st March,2017 2,00,000 (including gain of Rs. 25,00,000 from sale of fixed
assets

31st March,2018 1,70,000 (Including abnormal loss of Rs. 50,000)

31st March,2019 2,10,000

31st March,2020 2,30,000

31st March,2021 2,50,000

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 Q1. Capital employed in the firm is Rs. 15,00,000 and normal rate of return in similar
businesses is 10% What is the amount of Actual Average Profit

(a) Rs. 2,50,000

(b) Rs. 1,20,000

(c) Rs. 2,17,000

(d) None of the above

Q2. Value of Goodwill at 3 years' purchase by super profit method

(a) Rs. 2,00,000

(b) Rs. 2,01,000

(c) Rs. 2,50,000

(d) Rs. 1,50,000

Q3. Under super profit method, goodwill is calculated by

(a) Number of years' purchase × Average profit

(b) Number of years' purchase × super profit

(c) Super profit ÷ Normal rate of return

(d) Super profit - Normal profit

Q4. When goodwill is not a purchased goodwill, Goodwill

(a) is not shown in the balance sheet

(b) is shown in the balance sheet

(c) many or may not be shown in the balance sheet

(d) is partly shown in the balance sheet

CASE Anu and Baatish started a new business in partnership and decided to share profits and
STUDY 3 losses in the ratio of 3 : 1. They contributed Capitals of rs. 50,000 and rs.30,000
respectively on April 1 , 2018 .Anu is a sleeping partner whereas Baatish is a full time
working partner.During the year ended 31st March, 2019 they earned a net profit of rs.
50,000. The terms of partnership are:

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 (a) Interest on capital is to allowed @ 6% p.a.

(b) Anu will get a commission @ 2% on turnover.

(c) Baatish will get a salary of rs. 500 per month.

(d) Baatish will get commission of 5% on profits after deduction of all expenses including
such commission.

Partners’ drawings for the year were: Anurs. 8,000 and Baatishrs. 6,000. Turnover for the
year was rs. 3,00,000.

On the basis of the information given above , answer the following questions -

Q1. What will be Anu’sandBaatish’sCommission ?

a. Anurs.6,000 ,Baatish- rs.1,660

b. Anurs.30,000 ,Baatish- rs.1,660

c. Anurs.6,000 ,Baatish- rs.1,660

d. Anurs.6,000 ,Baatish- rs.1,581

Q2. How much share of profits will be given to Anu and Baatish?

a. Anurs.23714 , Baatishrs.7,905

b. Anurs.15809.5 ,Baatishrs. 15,809.5

c. Anurs.22,000 , Baatishrs.7,000

d. None of the above

Q3. What will be the balance in Partners’ Capital Account at the end of the year?

a. Anurs.74,000 ,Baatishrs. 43,000

b. Anurs.74,714 ,Baatishrs. 41,286
c. Anurs.74,147 ,Baatishrs. 41,826
d. Anurs.70,714 ,Baatishrs. 41,286

Q4. Baatish wants that his share in profits should be higher than Anu as he is putting
more efforts to carry on the business. Is he correct in saying so?

a. Yes

b. No

c. Can’t say

d. May or may not be

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CASE Rohit and Ronit are two partners into firm sharing profits equally. On 1st January 2020,
STUDY-4 they decided to admit Ajay as a new partner into the firm for 1/5 th share. Ajay brings
10,00,000 for his share to capital and premium of goodwill in cash. Half goodwill is
withdrawn by the old partners. Goodwill of the firm is valued on the basis of one year
purchase of profits or losses of preceding last 3 years. Profits of last four years are
₹6,00,000 in 2016, ₹7,00,000 in 2017, ₹8,00,000 in 2018 and ₹15,00,000 in 2019.

1) Which of the following is a right of Ajay?

(a) All of these
(b) Share profits of firm
(c) Inspect books of accounts
(d) Share assets in the firm
Ans:- (A) All of these

2) What was the value of goodwill of the firm?

(a) ₹9,00,000
(b) ₹8,00,000
(c) ₹7,00,000
(d) ₹10,00,000
Ans:- (d) ₹10,00,000
3) What was the amount of capital brought in by Ajay?
(a) ₹22,00,000
(b) ₹10,00,000
(c) ₹8,00,000
(d) Can't be determined
(e) Ans:- ₹8,00,000
CASE Abhishek and Aishwarya were partners in a fast food corner. They sold fast food items
STUDY 5 across the counter and did home delivery too. For this purpose they needed a delivery
van, a few scooties and an additional person to support. Their initial fixed capital
contribution was 3,50,000 and 2,00,000 respectively.

Abhishek spends twice time that of Aishwarya to the business. He wants a salary of Rs.
10,000 per month for extra time spend by him. Aishwarya has advanced 1,00,000 to the
firm and want 6% interest per annum. They both have withdrawn 20,000 from the
business for personal use for which Abhishek was asking to interest on drawing @ 5% to
the business. They earned annual profit of Rs. 2,00,000.

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 1.Interest on drawing charged to Abhishek and Aishwarya are :

A) 5%

B) 6%

C) 1000 each

D) No interest on drawing will be charged

2. Profit shared by Abhishek and Aishwarya are :

A) 1,00,000 each
B) Equally
C) 50,000 each
D) None of these
3.“Abhishek spends twice time that of Aishwarya to the business”, for this purpose
Abhishek will be given a salary of :

A) 10,000 per month

B) Equal for both of them
C) No salary will be given
D) 5,000 per month
4. “Aishwarya has advanced 1,00,000 to the firm and want 6% interest per annum”,
interest received by Aishwarya on advances will be :

A) 6,000

B) 7,000

C) 8,000

D) 9,000

CASE Amar, Akbar and Anthony entered into partnership business on 1 st April 2020 with capital
STUDY 6 of Rs 3,00,000 , 2,00,000 and 1,00,000 respectively. In addition to capital Anthony has
advanced a loan of rs 1,00,000. Since they were good friends, they were not having any
explicit agreement of partnership. Akbar has worked hard to establish the business and
Amar was looking after the office work.

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 At the end of the year , they earned a profit of Rs. 1,80,000. Amar and Akbar wanted
remuneration of their work for five thousand per month and Anthony ask for interest on
advance @ 10% per annum. Since Amar has given maximum capital so he wants interest
on capital @12%. You are required to help them.

1.What is amount of the profit distributed to Amar, Akbar and Anthony respectively?

A) 50,000: 30,000: 20,0000

B) 80,000: 50,000: 20,0000
C) Profit will be distributed equally
D) None of these
2. Interest on advance given by Anthony to firm is:

A) 6%
B) 8%
C) 12%
D) 10%
3. Amar and Akbar will be given a remuneration of :

A) 5,000 per month each

B) 10,000 per month each

C) No remuneration will be given

D) Amar :5000 per month, Akbar :4000 per month

4. What will be the interest on capital given to Amar ?

A) 36,000

B) 46,000

C) 24,000

D) No interest on capital will be given

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 ANSWER KEY
CASE STUDY NO. Q.NO ANSWER

C.S-I 1 A

2 A

1 C

2 B
C.S-2
3 B

4 A

1 D

2 A
C.S-3
3 B

4 B

1 A

C.S-4 2 D

3 C

1 D

2 B
C.S-5
3 C

4 A

1 C

2 A
C.S-6
3 C

4 D

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