CBSE Class 12 Accountancy Accounting For Partnership Firms Worksheet Set B

MCQ Questions for NCERT Class 12 Accountancy Accounting For Partnership Firms

Question. Seeta and Geeta are partners sharing profits and losses in the ratio 4 : 1. Meeta was manager who received the salary of ₹4,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profit for the year is ₹6,78,000 before charging salary. Find the total remuneration of Meeta.
(a) ₹78,000
(b) ₹88,000
(c) ₹87,000
(d) ₹76,000

Answer: A

Question. If the Partners’ Capital Accounts are fixed ‘salary payable to partner’ will be recorded :
(a) On the debit side of Partners’ Current Account
(b) On the debit side of Partners’ Capital Account
(c) On the credit side of Partners’ Current Account
(d) None of the above

Answer: C

Question. For the firm interest on drawings is
(a) Capital Payment
(b) Expenses
(c) Capital Receipt
(d) Income

Answer: D

Question. Interest on Partner’s drawings will be debited to :
(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Current Account
(d) Interest Account

Answer: C

Question. If a fixed amount is withdrawn by a partner in each quarter, interest on the total amount is charged for ……………….. months
(a) 3
(b) 6
(c) 4.5
(d) 7.5

Answer: B

Question. A and B contribute ₹1,00,000 and RS₹60,000 respectively in a partnership firm by way of capital on which they agree to allow interest @ 8% p.a. Their profit or loss sharing ratio is 3 : 2. The profit at the end of the year was ₹2,800 before allowing interest on capital. If there is a clear agreement that interest on capital will be paid even in case of loss, then S’s share will be:
(a) Profit ₹6,000
(b) Profit ₹4,000
(c) Loss ₹6,000
(d) Loss ₹4,000

Answer: D

Question. Which of the following statement is true
(a) Fixed capital account will always have a credit balance
(b) Current account can have a positive or a negative balance
(c) Fluctuating capital account can have a positive or a negative balance
(d) All of the above

Answer: D

Question. When partners’ capital accounts are fixed, which one of the following items will be written in the partner’s capital account :
(a) Partner’s Drawings
(b) Additional capital introduced by the partner in the firm
(c) Loan taken by partner from the firm
(d) Loan Advanced by partner to the firm

Answer: B

Question. A, B and C are partners. A’s capital is ₹3,00,000 and B’s capital is ₹1,00,000. C has not invested any amount as capital but he alone manages the whole business. C wants RS30,000 p.a. as salary. Firm earned a profit of ₹1,50,000. How much will be each partner’s share of profit:
(a) A ₹60,000; B ₹60,000; C ₹Nil
(b) A ₹90,000; B ₹30,000; C ₹Nil
(c) A ₹40,000; B ₹40,000 and C ₹40,000
(d) A ₹50,000; B ₹50,000 and C ₹50,000.

Answer: D

Question. It the Partner’s Capital Accounts are fixed, interest on capital will be recorded:
(a) On the credit side of Current Account
(b) On the credit side of Capital Account
(c) On the debit side of Current Account
(d) On the debit side of Capital Account

Answer: A

Question. If a fixed amount is withdrawn by a partner in the middle of every month, interest on the total amount is charged for …………… months
(a) 6
(b) 6 1/2
(c) 5 1/2
(d) 12

Answer: A

Question. Sushil is a partner in a firm. He withdrew ₹4,000 per month in the middle of every month during the year ended 31st March, 2019. If interest on drawings is charged @ 8% p.a. the interest charged will be :
(a) ₹2,080
(b) ₹1,760
(c) ₹3,840
(d) ₹1,920

Answer: D

Question. On 1st April 2018, 2fs Capital was ₹2,00,000. On 1st October 2018, he introduces additional capital of ₹1,00,000. Interest on capital @ 6% p.a. on 31st March, 2019 will be :
(a) ₹9,000
(b) ₹18,000
(c) ₹10,500
(d) ₹15,000

Answer: D

Question. X and Y are partners in the ratio of 3 : 2. Their capitals are RS2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of RS60,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) V ₹8.000; Y ₹4,000
(c) X ₹14,400; Y ₹9,600
(d) No Interest will be allowed

Answer: A

Question. X and Y are partners in the ratio of 3:2. Their capitals are ₹2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of ₹15,000 for the year ended 31st March 2019. As per partnership agreement, interest on capital is treated a charge on profits. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) X ₹9,000; Y ₹6,000
(c) X ₹10,000; Y ₹5,000
(d) No Interest will be allowed

Answer: A

Question. Bipasa is a partner in a firm. She withdrew ₹6,000 at the end of each quarter during the year ended 31st March, 2019. Interest on her drawings @ 10% p.a. will be :
(a) ₹900
(b) ₹600
(c) ₹1,500
(d) ₹1,200

Answer: A

Question. Partners are suppose to pay interest on drawing only when by the
(a) Provided, Agreement
(b) Permitted, Investors
(c) Agreed, Partners
(d) ‘A’ & ‘C’ above

Answer: D

Question. Where will you record interest on drawings :
(a) Debit Side of Profit & Loss Appropriation Account
(b) Credit Side of Profit & Loss Appropriation Account
(c) Credit Side of Profit & Loss Account
(d) Debit Side of Capital/Current Account only

Answer: B

Question. Vikas is a partner in a firm. His drawings during the year ended 31st March, 2019 were RS72,000. If interest on drawings is charged @ 9% p.a. the interest charged will be :
(a) ₹324
(b) ₹6,480
(c) ₹3,240
(d) ₹648

Answer: C

Question. X and Y are partners in the ratio of 3:2. Their capitals are RS2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm incurred a loss of ₹60,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) A ₹8,000; Y ₹4,000
(c) X ₹14,400; Y ₹9,600
(d) No Interest will be allowed

Answer: D

Question. If a fixed amount is withdrawn by a partner on the last day of every month, interest on the total amount is charged for …………… months :
(a) 12
(b) 6 1/2
(c) 5 1/2
(d) 6

Answer: C

Question. X and Y are partners in the ratio of 3:2. Their capitals are ₹2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of ₹15,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) X ₹9,000; Y ₹6,000
(c) X ₹10,000; Y ₹5,000
(d) No Interest will be allowed

Answer: C

Question. In a partnership firm, a partner withdrew ₹5,000 per month on the first day of every month during the year for personal expenses. If interest on drawings is charged @ 6% p.a. the interest charged will be : 
(a) ₹3,600
(b) ₹1,950
(c) ₹1,800
(d) ₹1,650

Answer: B

Question. If fixed amount is withdrawn by a partner on the first day of each quarter, interest on the total amount is charged for …………….. months
(a) 4.5
(b) 6
(c) 7.5
(d) 3

Answer: C

Question. If a fixed amount is withdrawn by a partner on the last day of each quarter, interest on the total amount is charged for ……………… months
(a) 6
(b) 4.5
(c) 7.5
(d) 3

Answer: B

Question : What is partnership deed?

Question : Explain the features of partnership.

Question : Explain the nature of partnership.

Question : List any five contents of partnership deed.

Question : What are the provisions to be followed in case the partnership deed is silent?

Question : Differentiate between fixed capital A/c and fluctuating capital A/c.

Question : How would you treat interest on capital in the following cases?

(i) When the question is silent regarding charge/appropriation.

(ii) When it is treated as a charge against profit.

(iii) When it is treated as an appropriation of profits.

Question : Calculate the duration for which interest on drawings will be calculated when uniform amount is withdrawn at a uniform interval of time.

(i) fixed amount withdrawn on first day o f every month during period of 12 months.

(ii) amount withdrawn in the middle of each month during period of 12 months.

(iii) amount withdrawn on the last day of each month during period of 12 months.

(iv) amount withdrawn in the beginning of each quarter.

(v) amount withdrawn in the middle of each quarter.

(vi) amount withdrawn at the end of each quarter.

(vii) amount withdrawn in the beginning of each half year.

(viii) amount withdrawn at the end of each half year.

Question : Distinguish between drawings against profits and drawings against capital.

According to Section -4 of the Indian Partnership Act, 1932:

 

(ii) Current Account 

The Current account may show a debit or credit balance. All the usual adjustments such as interest on Capital, partner’s salary/commission, drawings (out of profits), interest on drawings and share in profits or losses etc. are recorded in this account.All the Current Year's adjustments are recorded in this account, that is why it is called Current account.

 

Partner’s Current A/Cs

 

Note :

1. Debit balance of Current Account is shown in Assets side of Balance Sheet.

2. Credits balance of Current Account A/c is shown in Liabilities side of balance Sheet.

3. Balance of Fixed Capital Accounts are always shown in Liabilities side of Balance Sheet as it will be always be credit balance.

 

2. Fluctuating Capital Accounts

In this method only one account i.e., Capital Account of each and every partner is prepared and all the adjustment such as interest on capital interest on drawings etc, are recorded in this account under this method, Capital account may show a debit or credit balance and the balance of this account changes frequently from time to time therefore it is called fluctuating Capital Account.In this method the capitals are not fixed. In the absence of information, the Capital Accounts should be prepared by this method.

 

Partner’s Capital

 

INTEREST ON CAPITAL

Interest on partners capital will be allowed only when it has been specifically mentioned in the partnership deed. If interest on capital is to be allowed as per the agreement, it should be calculated with respect to the time, rate of interest and the amount of capital. Interest on Capital can be treated as either:

a. An Appropriation of profit; or 

b. A charge against profit.

 

A. Interest on Capital: An Appropriation of Profits:

 

B. Interest on Capital: As a Charge against Profits:

Interest on Capital is always allowed in full irrespective of amount of profits of losses.

 

Note:

Interest on Capital is always calculated on the OPENING CAPITAL.

Il’ Opening Capital is not given in the question, it should be ascertained as follows:

 

INTEREST ON DRAWINGS

Interest on drawing is charged by the firm only when it is clearly mentioned in Partnership Deed. It is calculated with reference to the time period for which the money was withdrawn. There are two cases in which calulation of interest on drawings may arise:

 

Case 1: When Rate of Interest on Drawings is given in %

Interest on Drawings is calculated on flat rate irrespective of period.

Case 2: When Rate of Interest on Drawings is given in % p.a.

 

1. When date of Drawing is not given

 

2. When date of Drawings is given

 

 

Case 3: When different amount are withdrawn on different dates:

We have the following two methods to calculate the amount of interest on Drawing:

 

1. Simple Interest Method

In this method, interest on drawing is calculated for each amount of drawing individually on the basis of periods for which it remained withdrawn till the close of accounting period.

 

2. Product Method

In this method, the amounts of drawings are multiplied by the period for which it remained withdrawn during the period;Thereafter the products are added and interest is calculated on the total of products so arrived at for one month. The advantage of this system is that separate calculations are not required each time.

We can explain the above mentioned two methods with the help of an example.

 

 

Interest on drawings is to be charged @ 9% p.a

 

SIMPLE METHOD

 

 

 

Interest = Total of products * 9/100* 1/12= 306000*9/100*1/12 = Rs 2295/-.

 

Case 4: When an equal amount is withdrawn regularly

Interest on Drawing can be calculated using either Product Method or Direct Method (i.e. Short Cut Method)

Direct Method will be used only if all the following three conditions are satisfied:

1. Amount should be same throughout the period

2. Date of Drawings should be same throughout the period

3. Drawings should be made regularly without any gap.

 

To Interest on Loan A/c

(Being Interest on loan transferred to P & L A/c)

It is always DEBITED to Profit and Loss A/c

Rent Paid to Partner.

Rent paid to a partner is also a charge against profits and it will also be

 

DEBITED to Profit and Loss A/c

 

PAST ADJUSTMENTS

If, after preparation of Final Accounts of firm, it is found that some errors or commission in accounts has occurred than such errors or omissions are rectified in the next year by passing an adjustment entry.

A statement is prepared to ascertain the net effect of such errors or omissions on partner’s capital/current accounts in the following manner.

 

Statement showing adjustment

 

+ Indicates Amount to be Credited to Partner’s Capital Account – Indicates Amount to be Debited to Partners Capital Account

During Past Adjustment it is not compulsory that capital accounts of all partners are affected.

More than one partners Capital Account may be debited or credited but amount of debit & credit should be equal.

 

GUARANTEE OF PROFITS TO A PARTNER

 

Guarantee is an assurance given to the partner of the firm that at least a fixed amount shall be given to him/her irrespective of his/her actual share in profits of the firm. If actual share in profits is less than the guaranteed amount in that case the deficit amount shall be borne either by the firm or by any partner as the case may be or as may have been decided bya na agreement.

 

Note: Guarantee to a partner is given for minimum share in profits. If the actual share in profits is more than the minimum share in profits, then the actual profits will be allowed to the partner.

 

Case: 1. When guarantee is given by FIRM (i.e. by all the Partners of the firm)

1. If share in actual profits is less than the guaranteed amount then. Guaranteed amount to a partner is first written off against the profits and then,

2. Remaining profits are distributed among the remaining partners in the remaining ratio.

 

Case: 2. When guarantee is given by a partner or partners to another partner.

1. Calculate the share in profits for the partner to whom guarantee is given.

2. If share in profits is more than the guaranteed amount, distribute the profit as per the profit and loss sharing ratio in usual manner.

3. If share in profits is less than the guaranteed amount, find the difference between the share in profits and the guaranteed amount and the difference known as deficiency.

Deficiency is contributed by the partner or partners who guaranteed in certain ratio and subtracted from his or their respective shares.

Q.1. A and B are partners. A gave a loan of ₹ 8,000 to the firm on 1.4.12. The Partnership Deed is silent upon interest on loan. How much interest on loan will be provided to him?
Accounting year is calendar year
(a) ₹ 480
(b) ₹360
(c) ₹ 200
(d) none of the above
Answer : B

Q.2. On 31.3.12, after the close of books of accounts, the capital a/c of Ram, Shyam & Mohan showed a balance of ₹24,000, ₹ 18,000 and ₹ 12,000 respectively. The profits for the year ended 31.3.12 amounted to Rs. 36,000 and the partner’s drawings had been Ram-Rs. 3,600, Shyam-₹ 4,500 and Mohan-₹ 2,700. The Profit Sharing Ratio was 3:2:1. How much will be the opening capital?
(a) Ram-₹15,600, Shyam-₹10,500, Mohan-₹ 8,700
(b) Ram-₹15,650, Shyam-₹ 10,550, Mohan-₹ 2,750
(c) Ram-₹15,600, Shyam-₹10,500, Mohan-₹ 2,800
(d) None of the above
Answer : A

Q.3. If Partnership Deed is silent, how much salary will be provided to partners?
(a) Proportionate to capital contribution
(b) Proportionate to time spent
(c) Nil
(d) none of the above
Answer : C

Q.4. A, B and C are partners in a firm. They decided to share profits upto ₹ 10,000 in the ratio of 50%, 30% and 20% respectively. Above this amount, profits are shared equally. If the profits of the firm for the year was ₹25,600. Distribute the profits.
(a) A-₹10,000, B-₹8,500, C-₹7,500
(b) A-₹10,200, B-₹8,100, C-₹7,300
(c) A-₹10,200, B-₹8,200, C-₹7,200
(d) A-₹10,200, B-₹8,200, C-₹.7,500
Answer : C

Q.5. A, B and C are partners sharing profits and losses in the ratio of 2:1:2. Their capitals were ₹3,00,000, ₹1,00,000 and ₹2,00,000 respectively. Interest on capital for the year 2011 was credited to them @ 9% p.a. instead of 10% p.a. The profits for the year before charging interest was ₹ 2,50,000. Which of the following journal entry is correct?
(a) A’s Capital A/c Dr. 200
     C’s Capital A/c Dr. 400
             To B’s Capital A/c 600
(b) B’s Capital A/c Dr. 200
     C’s Capital A/c Dr. 400
             To A’s Capital A/c 600
(c) B’s Capital A/c Dr. 200
     A’s Capital A/c Dr. 400
             To C’s Capital A/c 600
(d) None of the above
Answer : B

Q.6. X and Y are partners. X drew regularly ₹400 at the beginning of every month for six months ending 30.6.12. Calculate interest on drawings @ 5% p.a.?
(a) ₹ 40
(b) ₹ 38
(c) ₹ 29
(d) ₹35
Answer : D

Q.1 X is a partner who used the stock of the firm worth ₹ 10,000 and suffered a loss of₹ 2,000. He went the firm to bear the loss. How much ‘X’ is liable to pay to firm.

Q.2 Rajesh and Rakesh two partners draw for private use ₹ 1,28,000 and ₹ 86000 .Interest is chargeable at 6% per annum on drawings .What is the interest?

Q.3 A and B contribute ₹ 80,000 and ₹ 40,000 respectively by way of capital on which they agree to pay interest @ 6% p.a. Their respective share of profit is 2:3 and the business profit (before interest) for the year is 6,000. Show the relevant account to allocate interest about the treatment of interest on capital.

Q.4 It was discovered that in arriving at the profit for 2014, the following two items have been ignored.
(i) Outstanding expenses of ₹ 3500 and
(ii) Accurate interest on investment of ₹ 2,000 Make journal entries relevant to adjustments.

Q.5 A, B and C shared the profit of ₹ 9,00,000 in the ratio of 2:2:1 without providing for interest on B’s loan, B granted a loan of ₹ 4,00,000 in the beginning of accounting year. Whereas the partnership deed is silent on the interest on loan and the profit sharing ratio. Give adjusting entry.

Q.6 Calculate interest on X’s drawings @ 12% if he withdraws ₹ 2,000 per month during the year.

Q.7. Calculate interest on X’s drawings @ 12% p.a if he withdraws ₹ 2,000 per month during the year.

Q.8. Is a partner entitled to salary if he works more than others if partnership deed is silent?

Q.9 Distinguish between drawings against profit and drawings against capital. (Any two)

Q.10 There is no agreement regarding sharing of profits (or) partnerships salary. Rose is a whole-time partner whereas Lilly does not attend business regularly. Rose claims ₹3,000 salary a month and 60% of balance profits ₹24,600 Lilly advanced ₹ 10,000as loan and now she claims 10% interest. State how you will settle the accounts.

Q.11 Tariq and Bilal are partners in a firm. Their capital contribution were ₹6,00,000 and ₹4,00,000 respectively. The terms of the Partnership agreement are as follows.
(I) 20% of the profit should be transferred to General Reserve.
(ii) Interest on capital @ 12% p.a and Interest on drawings @ 10% p.a.
(iii) Tariq and Bilal to get a monthly salary of ₹3,000 and ₹4,000 respectively.
(iv) Bilal is entitled to a commission of ₹14,000
(v) Sharing profits and losses will be in the capital ratio. The profit for the year ended 31st December, 2014 before making above appropriations was ₹4,80,000/-. The drawings of Tariq and Bilal were ₹ 80,000 and ₹60,000 respectively. Prepare Profit and loss appropriation account.

Q12.On 1st April 2014 A and B entered into partnership contributing ₹4,00,000 and ₹3,00,000 respectively. They agreed to share profits and losses in the ratio 3:2. B is allowed a salary of ₹4,000 per quarter. Interest on capital is to be allowed @10%p.a. During the year A withdrew ₹18,000 and B ₹36,000 as drawings. Interest on drawings of A and B was ₹600and ₹1,200 respectively. Profit as on 31st December 2014 before the adjustment were ₹1,25,000. Prepare profit and loss Appropriation Account and Capital account of partner.

Q13.What entries will you pass to record the following transactions in the books of the firm A and B before distributing the profits earned?
(a) Commission of ₹50,000 payable to B
(b) Interest on capital: A ₹16,000 and B ₹10,000.
(c) Interest on drawings A ₹4,000 and B ₹3,000.
(d) Salary payable to A ₹3,000 per month.
(e) Transfer to General Reserve ₹20,000.

Q14. A is a partner in a firm. A has withdrawn ₹12,000 during the year 2014.
(a) Calculate interest on drawings @12% when period is not given.
(b) Calculate interest on drawings @12% irrespective of the period.
(c) Calculate interest on drawings @12% when A has withdrawn the money on 1st Sep.2014.
(d) Calculate interest on drawings @12% when A has withdrawn the money on 15th Nov.2014.

Q15. A is a partner in a firm. A’s drawings during the year 2014-15 were as follows: Accounts are closed on 31st March every year.

1st May 14 ₹1,000                       1st November 14 ₹ 750
30th June 14 ₹1,250                    31st December14 ₹ 500
1st September14 ₹ 500               1st March 2015 ₹1,000
Interest on drawings is charged @10% p.a. Calculate interest on drawings of A.

Q16. A, and B were partners sharing profits and losses in the ratio of 2:1.The drawings of the partners were:-
(i) ₹1,200 per month by A throughout the year
(ii) ₹600 per month by B for 6 months. Calculate interest on drawing @6% p.a in the following cases. When drawings are made
(a) In the beginning of every month,
(b) In the middle of every month and
(c) At the end of every month.

Q17. M and N are partners in a firm. M has given a loan of ₹8,000 to the firm on 1st April, 2011. The partnership deed is silent upon the question of provision of interest on partner’s loan. Compute the amount of interest payable on the loan advanced by M to the firm assuming the books are closed on 31st December every year.

Q18. A and B are partners sharing profits in proportion of 3:2 with capitals of ₹80,000 and ₹60,000 respectively. Interest on capital is agreed at 5%p.a. B is to be allowed an annual salary of ₹6,000 which has not been withdrawn. During 2011, the profits for the year prior to calculation of interest on capital but after charging B’s salary amounted to ₹24,000. A provision of 5%of this amount is to be made in respect of commission to the manager. Prepare P&L Appropriation a/c.

Q.19. A, B and C were partners in a firm having capitals of ₹80,000, 80,000 and 1,40,000 respectively. According to partnership deed the partners were entitled to interest on capital @ 5% p.a B was also entitled annual salary of ₹6,000. The profits were to be divided as follows:
(i) The first 30,000 in proportion to capitals of partner.
(ii) Next ₹30,000 in the ratio of 5:3:2.
(iii) Remaining profits to be shared equally.
During the year the firm made a profit of ₹1,56,000 before charging any of the above items. Prepare the profit & loss appropriation A/c.

Q20. A and B are partners in a firm. Their fixed capitals as on 1st Jan.2009 were ₹2,10,000 and ₹90,000 respectively. They share profits in the ratio2:1. On 1st May 2009, They decided that their capitals should be readjusted according to their profit sharing ratio. The necessary adjustments in the capitals were made by withdrawing and introducing cash. Interest is allowed on capital @ 12%p.a. Prepare Fixed Capital Account and Compute interest on capital for the year 2009.

Q.21 The Capitals of A,B and C stood at ₹60,000. ₹40,000 and ₹30,000 respectively after the necessary adjustment in respect of Drawings and Net profits. Subsequently it was discovered that interest on capital @ 10% p.a and interest on drawings ₹130, ₹90 and ₹50 respectively have been ignored. Profits for the year ₹20,000 was already adjusted. The drawings of the partners were ₹1,500, ₹1,000 and ₹500 respectively. They share profits and losses in the ratio 2:2:1. Give necessary adjustment journal entry and prepare Profit and Loss adjustment account.

Q22. A, B and C were partners in a firm. On 1stJan.2012 their capital stood at ₹1,00,000, ₹50,000 and ₹50,000 respectively. As per the provisions of the deed:
(a) C was entitled for a salary of ₹2000 per month.
(b) Partners were entitled to interest on Capital@ 10% p.a.
(c) Profits were to be shared in the ratio of Capital.
The net profits for the year 2012 of ₹90,000 was divided equally without providing for the above terms. Pass an adjustment entry to rectify the above errors.

Q23. The partners of a firm distributed the profits for the year ended 31st March , 2013, ₹3,00,000 equally without providing for the following adjustments:
(i) A and C were entitled to a salary of ₹10,000 each per annum .
(ii) B was entitled to a commission of ₹10,000
(iii) A and C had guaranteed a minimum profit of ₹1,20,000 p.a. to B.
(iv) Profits were to be shared in the ratio of 2:2:1. Pass necessary journal entries for the above adjustments in the books of the firm and Prepare Profit and Loss appropriation Account.

Q24. The following is the Balance sheet of X and Y as on 31st December 2014. You are required to pass an adjustment entry for the omission of interest on capital @10% p.a.

During the Year 2014, X’s drawings were ₹5,000 and Y’s drawings were ₹3,000. Profit during the year 2014 were ₹12,000.

Q25. A & B are partners sharing profits and losses in the ratio 3 : 2. At the end of the year, i.e. 31st Dec. 2011, they decided to take their Manager C into partnership. As manager C was getting annual salary of ₹9,000. He had also advanced ₹60,000 to the firm by way of a loan on which he is getting interest @ 10% P.a. During the three years, firm’s profit after adjusting salary to C, interest on loan and interest on capital of the partners were –
2009     Profit    ₹80,000
2010     Loss     ₹40,000
2011     Profit    ₹1,20,000

According to the new agreement, C is to be given annual salary of ₹7,000 and 1/5th share in the profits of the firm. C’s loan shall be treated as his capital from the beginning and similar to other partners, his capital will carry interest @6% P.a. Record the necessary entries.

Q.26. A,B and C are sharing profits in the ratio of 3:2:1 respectively. C wants that profits be shared equally and it should be applicable retrospectively for the last three year. Other partners have no objection to this. Profits for the last three years were ₹1,20,000, ₹94,000 and ₹1,10,000 respectively. Record adjustment by means of a journal entry and show the working notes.

Q27.A, B and C are partners sharing profits and losses in the ratio of 3:2:1 respectively with a minimum profit of ₹20,000 for C. The profit for the year ended 31st March 2002 amounted to ₹90,000. Pass journal entries and prepare Profit and Loss Appropriation account.

Q28. A,B and C entered into partnership on 1st Jan 2013 to share profits and losses in the ratio 5:3:2. A however, personally guaranteed that C’s share of profits, after charging interest on capital @ 5 % p.a would not less than ₹15,000 in any year. The capital was provided as follows: A ₹ 1,60,000 B ₹ 1,00,000 C ₹ 80,000 The profit for the year ended 31st Dec.2013 amounted to ₹77,000.before providing interest on capital. Show Profit and Loss appropriation account.

Q29. The partners of a firm distributed the profits for the year ended 31STMarch 2006 ₹3,00,000 equally without providing for the following adjustments:
(i) Seema and Rita were entitled to a salary of ₹ 5,000 per annum.
(ii) Nega was entitled a Commission of ₹ 5,000
(iii) Seema and Rita had guaranteed a minimum profit of ₹ 1,20,000 per annum to Nega
(iv) Profit were to be shared in the ratio of 2:2:1 Prepare necessary journal entries.

Q30. A,B and C shared the profits of ₹ 15,00,000 in the ratio of 2:2:1 without providing for interest on B’s loan . B granted a loan of ₹ 10,00,000 in the beginning of accounting year whereas the partnership deed is silent on interest on loan and the profit sharing ratio. Give necessary adjusting entries.