Unit 1: Accounting for Partnership Firms – Basic Concepts · NCERT · Class 12 · Accountancy · Part 1

Q11Written answer

Ramesh and Suresh were partners in a firm, sharing profits in the ratio of their capital contributed on commencement of business which was ₹ 80,000 and ₹ 60,000, respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹ 2,000 and ₹ 3,000, respectively.
The profits for the year ended March 31, 2017, before making the above appropriations, was ₹ 1,00,300. The drawings of Ramesh and Suresh were ₹ 40,000 and ₹ 50,000, respectively. Interest on drawings amounted to ₹ 2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and Partners’ Capital Accounts, assuming that their capitals are fluctuating.

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The solution to this question is as follows:

Profit and Loss Appropriation Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
Interest on Capital			Profit and Loss		1,00,300
Ramesh	9,600		Interest on Drawings
Suresh	7,200	16,800	Ramesh	2,000
			Suresh	2,500	4,500
Partners’ Salaries
Ramesh	24,000
Suresh	36,000	60,000

Profit Transferred to
Ramesh’s Capital {28,000 × (4/7)}		16,000
Suresh’s Capital {28,000 × (3/7)}		12,000
		1,04,800			1,04,800

Partners’ Capital Account
Dr.					Cr.
Particulars	Ramesh	Suresh	Particulars	Ramesh	Suresh
Drawings	40,000	50,000	Cash	80,000	60,000
Interest on Drawings	2,000	2,500	Interest on Capital	9,600	7,200
Balance c/d	87,600	62,700	Partners’ Salaries	24,000	36,000
			Profit & Loss Appropriation	16,000	12,000
	1,29,600	1,15,200		1,29,600	1,15,200

Capital Ratio	=	Ramesh	:	Suresh
		80,000	:	60,000
		4	:	3

Q12Written answer

Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2.

(ii) 5% interest is to be allowed on capital.

(iii) Vanita should be paid a monthly salary of ₹ 600.

The following balances were extracted from the books of the firm on March 31, 2017.

	Sukesh	Verma
	₹	₹
Capital Accounts	40,000	40,000
Current Accounts	(Cr.) 7,200	(Cr.) 2,800
Drawings	10,850	8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary, was ₹ 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.

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Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Amount ₹	Particulars	Amount ₹
Interest on Capital			Profit and Loss	9,500
Sukesh	2,000
Vanita	2,000	4,000

Profit Transferred to
Sukesh’s Current {5,500 × (3/5)}		3,300
Vanita’s Current {28,000 × (2/5)}		2,200
		9,500		9,500

Partner’s Capital Account
Dr.					Cr.
Particulars	Sukesh	Vanita	Particulars	Sukesh	Vanita
			Balance b/d	40,000	40,000
Balance c/d	40,000	40,000
	40,000	40,000		40,000	40,000

Partner’s Current Account
Dr.					Cr.
Particulars	Sukesh	Vanita	Particulars	Sukesh	Vanita
Drawings	10,850	8,150	Balance b/d	7,200	2,800
			Partner’s Salaries		7,200
			Profit and Loss Appropriation	3,300	2,200
Balance c/d	1,650	6,050	Interest on Capital	2,000	2,000
	12,500	14,200		12,500	14,200

Q13Written answer

Sunflower and Pink Rose started a partnership business on April 01, 2016, with capitals of ₹ 2, 50,000 and ₹ 1,50,000, respectively. On October 01, 2016, they decided that their capital should be ₹ 2,00,000 each. The necessary adjustments in the capital are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.

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The solution to this question is as follows:

Product Method

Sunflower

01 April 2016 to 30 September 2016	2,50,000 × 6 =	15,00,000
01 October 2016 to 31 March 2017	2,00,000 × 6 =	12,00,000
	Sum of Product	27,00,000

Pink Rose

01 April 2016 to 30 September 2016	1,50,000 × 6 =	9,00,000
01 October 2016 to 31 March 2017	2,00,000 × 6 =	12,00,000
	Sum of Product	21,00,000

Alternative Method:

Simple Interest Method

Sunflower

April 01, 2016 to September 30, 2016	2,50,000 ×	10	×	6	=	₹ 12,500
		100		12
October 01, 2016 to March 31, 2017	2,00,000 ×	10	×	6	=	₹ 10,000
		100		12
	Interest on Sunflower’s Capital					₹ 22,500

Pink Rose

April 01, 2016 to September 30, 2016	1,50,000 ×	10	×	6	=	₹ 7,500
		100		12
October 01, 2016 to March 31, 2017	2,00,000 ×	10	×	6	=	₹ 10,000
		100		12
	Interest on Pink Rose’s Capital					₹ 17,500

Q14Written answer

On March 31, 2017, after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹ 4,00,000, ₹ 3,00,000 and ₹ 2,00,000, respectively. Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted to ₹ 1,50,000, and the partner’s drawings were – Mountain ₹ 20,000, Hill ₹ 15,000 and Rock ₹ 10,000. Calculate interest on capital.

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The solution to this question is as follows:

Generally, interest on Capital is calculated on the opening balance of capital if additional capital is not given.

	Mountain	Hill	Rock
Closing Capital	4,00,000	3,00,000	2,00,000
Add: Drawings	20,000	15,000	10,000
Less: Profit (1:1:1)	(50,000)	(50,000)	(50,000)
Opening Capital	3,70,000	2,65,000	1,60,000

Interest on Capital

Mountain	3,70,000 ×10 / 100= ₹ 37,000
Hill	2,65,000 × 10 / 100= ₹ 26,500
Rock	1,60,000 × 10 / 100= ₹ 16,000

Q15Written answer

Following is the extract of the Balance Sheet of, Neelkant and Mahadev as on March 31, 2017:

Balance Sheet as of March 31, 2017
	Amount		Amount
Liabilities	₹	Assets	₹
Neelkant’s Capital	10,00,000	Sundry Assets	30,00,000
Mahadev’s Capital	10,00,000
Neelkant’s Current Account	1,00,000
Mahadev’s Current Account	1,00,000
Profit and Loss Appropriation
(March 2017)	8,00,000
	30,00,000		30,00,000

During the year, Mahadev’s drawings were ₹ 30,000. Profit during 2017 was ₹ 10, 00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.

Interest on Capital

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Neelkant’s	10,00,000 × 5 / 100= ₹ 50,000
Mahadev’s	10,00,000 × 5 / 100= ₹ 50,000

Q16Written answer

Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2018.

May 01, 2017	₹ 12,000
July 31, 2017	₹ 6,000
September 30, 2017	₹ 9,000
November 30, 2017	₹ 12,000
January 01, 2018	₹ 8,000
March 31, 2018	₹ 7,000

Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.

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Worked solution

Interest is calculated as follows:

Product Method

	Drawings × Period	Product
01 May 2017 to 31 March 2018	12,000 × 11 =	1,32,000
31 July 2017 to 31 March 2018	6,000 × 8 =	48,000
30 September 2017 to 31 March 2018	9,000 × 6 =	54,000
30 Nov. 2017 to 31 March 2018	12,000 × 4 =	48,000
01 Jan. 2018 to 31 March 2018	8,000 × 3 =	24,000
31 March 2018 to 31 March 2018	7,000 × 0 =	0
	Sum of Product	3,06,000

Q17Written answer

The capital accounts of Moli and Golu showed balances of ₹ 40,000 and ₹ 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings @ 12 p.a. Golu advanced a loan of ₹ 10,000 to the firm on August 01, 2016. During the year, Moli withdrew ₹ 1,000 per month at the beginning of every month, whereas Golu withdrew ₹ 1,000 per month at the end of every month. Profit for the year before the above-mentioned adjustments was ₹ 20,950. Calculate interest on drawings showing the distribution of profits and prepare partner’s capital accounts.

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The solution to this question is as follows:

Profit and Loss Adjustment Account
Dr.					Cr.
Particulars		Amount ₹	Particulars		Amount ₹
Interest on Capital			Profit and Loss Account		20,950
Moli	4,000		Interest on Drawings
Golu	2,000	6,000	Moli	780
			Golu	660	1,440
Interest on Partner’s Loan
Golu’s {10,000 × (6/100) × (8/12)}		400

Profit Transferred to
Moli’s Capital {15,990 × (3/5)}	9,594
Golu’s Capital {15,990 × (2/5)}	6,396	15,990

		22,390			22,390

Partners’ Capital Account
Dr.					Cr.
Particulars	Moli	Golu	Particulars	Moli	Golu
Drawings	12,000	12,000	Balance b/d	40,000	20,000
Interest on Drawing	780	660	Interest on Capital	4,000	2,000
Balance c/d	40,814	15,736	Profit and Loss Adjustment	9,544	6,396


	53,594	28,396		53,594	28,396

Q18Written answer

Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of ₹ 40,000 and ₹ 30,000, respectively. They withdrew the following amounts from the firm for their personal use:

Rakesh	Month	₹
	May 31, 2016	600
	June 30, 2016	500
	August 31, 2016	1,000
	November 1, 2016	400
	December 31, 2016	1,500
	January 31, 2017	300
	March 01, 2017	700
Rohan	At the beginning of each month	400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts is closed on March 31, 2017.

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The solution to this question is as follows:

Rakesh’s Interest on Drawings

	Drawings × Period	Product
31 May 2016 to 31 March 2017	600 × 10 =	6,000
30 June 2016 to 31 March 2017	500 × 9 =	4,500
31 August 2016 to 31 March 2017	1,000 × 7 =	7,000
1 November 2016 to 31 March 2017	400 × 5 =	2,000
31 December 2016 to 31 March 2017	1,500 × 3 =	4,500
31 January 2017 to 31 March 2017	300 × 2 =	6,00
01 March 2017 to 31 March 2017	700 × 1 =	700
	Sum of Product	25,300

Q19Written answer

Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017, were ₹ 2,50,000 and ₹ 1,50,000, respectively. They share profits equally. On July 01, 2017, they decided that their capital should be ₹ 1,00,000 each. The necessary adjustment in the capital was made by introducing or withdrawing cash from the partners. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both partners for the year ending on March 31, 2018.

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The solution to this question is as follows:

Interest on Capital

Raj

	Capital × Period	Product
1 April 2017 to 30 June 2017	2,50,000 × 3 =	7,50,000
1 July 2017 to 31 March 2018	1,00,000 × 9 =	9,00,000
	Sum of Product	16,50,000

Neeraj

	Capital × Period	Product
1 April 2017 to 30 June 2017	1,50,000 × 3 =	4,50,000
1 July 2017 to 31 March 2018	1,00,000 × 9 =	9,00,000
	Sum of Product	13,50,000

Q20Written answer

Harish is a partner in a firm. He withdrew the following amounts during the year 2017:

	₹
February 01	4,000
May 01	10,000
June 30	4,000
October 31	12,000
December 31	4,000

Interest on drawings is to be charged @ 7.5 % p.a.

Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.

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The solution to this question is as follows:

Calculation of interest on Harish’s drawings

	Drawings × Period	Product
01 Feb. 17 to 31 Dec. 17	4,000 × 11 =	44,000
01 May 17 to 31 Dec. 17	10,000 × 8 =	80,000
30 June 17 to 31 Dec. 17	4,000 × 6 =	24,000
31 Oct. 17 to 31 Dec. 17	12,000× 2 =	24,000
31 Dec. 17 to 31 Dec. 17	4,000 × 0 =	0
	Sum of Product	1,72,000

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Unit 1: Accounting for Partnership Firms – Basic Concepts

Numerical Questions for NCERT Accountancy Solutions Class 12 Part 1 Chapter 2