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cbse 12th Standard Accountancy Accounting for Partnership - Basic Concepts Important Questions And Answers Study Material - QB365

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Questions:

Generic 3

14 x 3 = 42

Give two points of difference between Profit and Loss and Profit and loss appropriation A/c.

List the items that may appear on the debit side and credit siode of a partner's fluctuating capital account.

What is the status of partnership from an accounting viewpoint?

A firm profit of Rs.10,00,000. Normal rate of return in a similar type of business is 10%.The value of total assets (excluding goodwill) and total outsider' Liabilities as on the date of goodwill are Rs.1,10,000 and rs.28,00,000 respectively.calculate value of goodwill according to capitalisation of super profit method as well as capitalisation of average profit method.

A firm earns rs.6,00,000 as its annual profits, the rate of return being 12%.Assets and liabilities of the firm amounted to rs.72,00,000 and Rs.24,00,000 respectively.calculate the value of goodwill by capitalisation method.

Calculate value of goodwill on the basis of three years' purchases of average profit of the preceding five years which were as follows

Year	2014-15	2013-14	2012-13	2011-12	2010-11
Profit(Rs)	4,00,000	7,50,000	90,00,000	2,00,000(Loss)	6,50,000

P, Q, R and S are partners in a firm sharing profits as 4 : 2 : 1 respectively.They earned a profit of Rs.1,80,000 for the year ended 31st March, 2015.As per partnership deed, They are to charge a commission @ 20% of the profit after charging such commission which they will share as 2 : 3 : 2 : 3.You are required to show appropriation of profits among the partners.

M is a partner in a firm.He withdraws the following amounts during the year 2014-15

	Amt(Rs)
1st May	4,00,000
1st August	10,00,000
30th September	4,00,000
31st january	12,00,000
1st march	4,00,000

Interest on drawings is to be charged @71/2%per annum.
Calculate the amount of Interest to be charged on M's drawings for the year 2014-15

Pappu and Munna are partners in a firm sharing profits in the ratio of 3 : 2. The partnership deed provided that Pappu was to be paid salary of Rs. 2,500 per month and Munna was to get a commission of Rs. 10,000 per annum. Interest on capital was to be allowed @ 5% per annum and interest on drawings was to charged @ 6% per annum. Interest on Pappu's drawings was Rs. 1,250 and on Munna's drawings Rs. 425. Capital of the partners were Rs. 2,00,000 and Rs. 1,50,000 respectively, and were fixed. The firm earned a profit of Rs. 90,575 for the year ended on 31.3.2004. Prepare Profit and Loss Appropriation Account of the firm.

10.

Prem, Param and Priya were partners in a firm. Their fixed capitals were Prem Rs 2,00,000; Param Rs 3,00,000 and Priya Rs 5,00,000. They were sharing profits in the ratio of their capitals. The firm was engaged in the sale of ready-to-eat food packets at three different locations in the city, each being managed by Prem, Param and Priya.
The outlet managed by Prem was doing more business than the outlets managed by Param and Priya. Prem requested Param and Priya for a higher share in the profits of the firm which Param and Priya accepted.
It was decided that the new profit sharing ratio will be 2 : 1 : 2 and its effect will be introduced retrospectively for the last four years. The profits of the last four years were Rs 2,00,000, Rs 3,50,000, Rs 4,75,000 and 5,25,000 respectively.
Showing your calculations clearly, pass a necessary adjustment entry to give effect to the new agreement between Prem, Param and Priya.

11.

J and K are partners in a firm. Their capitals are J Rs.3,00,000 and K Rs.2,00,000. Assuming that the normal rate of return is 20%, calculate the value of goodwill of the firm:
(i) By capitalisation method and
(ii) By super profit method if the goodwill is valued at 2 years' purchase of super profit.

12.

Ram and Shyam were partners in a firm. After crediting the profits of the year Rs. 2,00,000 in their Capital Accounts, the balances of their capital were Ram Rs. 4,00,000 and Shyam Rs. 3,00,000. During the year Ram withdrew Rs. 80,000 and Shyam Rs. 1,00,000. It was found that interest on Capital and Drawings @ 10% p.a. as provided in the partnership agreement had not been allowed and charged to the partners' capital accounts. Pass the necessary adjustment entry.

13.

Arun and Arora were partners in a firm sharing profits in the ratio of 5 : 3. Their fixed capitals as on 1.4.2010 were : Arun Rs. 60,000 and Arora Rs. 80,000. They agreed to allow interest on capital @ 12% p.a. and to charge on drawings @ 15% p.a. The profit of the firm for the year ended 31.3.2011 before all above adjustment were Rs. 12,600. The drawings made by Arun were Rs. 2,000 and by Arora Rs. 4,000 during the year. Prepare Profit and Loss Appropriation Account of Arun and Arora. Show your calculations clearly. The interest on capital will b allowed even if the firm incurs loss.

14.

A, B and C were partners in a firm having capitals of Rs. 60,000; Rs. 60,000 and Rs. 80,000 respectively. Their Current Account balances were A : Rs, 10,000; B : Rs 5,000 and C : Rs, 2,000 (Dr.). According to the partnership deed the partners were entitled to interest on capital @ 50% p.a. C being the working partner was also entitled to a salary of Rs. 6,000 p.a.
The profits were to be divided as follows:
(a) The first Rs. 20,000 in proportion to their capitals.
(b) Next Rs. 30,000 in the ratio of 5 : 3 : 2.
(c) Remaining profits to be shared equally.
The firm made a profit of Rs. 1,56,000 before charging any of the above items. Prepare the Profit & Loss Appropriation Account and pass necessary journal entry for appropriation of profit.

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Answers Key:

Generic 3

14 x 3 = 42

Profit & Loss A/c.	Profit & Loss Appropriation A/c
i) Profit and Loss A/c is prepared to ascertain net profit or net loss of the business for an accounting year.	i) In case of partnership firms, profit and loss appropriate/ distribute the profit of the year among partners.
ii) It is prepared by all the business firms.	ii) Only partnership firms and companies prepare profit and loss appropriation A/c.

On debit side: Drawing, interest on drawing, share of loss, closing credit balance of the capital.
On credit side: Opening credit balance of capital, additional capital introduced, share of profit, interest on capital, salary to a Partner, commission to a Partner.

From an accounting viewpoint, partnership is a separate business entity. From a legal viwepoints, however, a Partnership, like a sole proprietorship, is not separate from the owners.

Value of goodwill = Rs.18,00,000 in both cases

Goodwill = Rs.2,000

Goodwill = Rs.15,00,000

Commission payable to the partners = \(20 \over 120\)x 1,80,000 = Rs.30,000 which will be shared as:
P = Rs.6,000, Q = Rs.9,000, R = Rs.6,000 and S = Rs.15,000

Interest on drawings = Rs.1,10,000

Divisible Profit Rs. 34,750 transferred to Pappu's Currrent A/c 20,850 and Munna's Current A/c Rs. 13,900.

10.

JOURNAL
Date	Particulars		LF	Amt (Dr)	Amt (Cr)
	Param's Current A/c Priya's Current A/c To Prem's Current A/c (Being profit of last four years adjusted due to change in profit sharing ratio)	Dr Dr		1,55,000 1,55,000	3,10,000

Working Note

**Adjustment Table**
Particulars	Prem (Rs)	Param (Rs)	Priya (Rs)	Total (Rs)
I. Amount already Recorded
Profits of Past Four Years i.e.,
(2,00,000 + 3,50,000 + 4,75,000 + 5,25,000) in the ratio 2 : 3 : 5	3,10,000	4,65,000	7,75,000	15,50,000
II. Amount which should have been Recorded
Profit of Past Four Years i.e. in the Ratio 2:1:2	6,20,000	3,10,000	6,20,000	15,50,000
III. Net Effect (I-II)	3,10,000 (Cr)	1,55,000 (Dr)	1,55,000 (Dr)	Nil

11.

Captial Employed Rs.5,00,000 (i.e.,Rs.3,00,000 + Rs.2,00,000)
(a) Capitalised value of average profit Rs.7,50,000 (i.e.,Rs.7,50,000 (i.e.,Rs.1,50,000 x 100/20),value of Goodwill = Rs.2,50,000 (i.e.,Rs. 7,50,000 - Rs. 5,00,000)
(b) Normal profit Rs.1,00,000 (i.e.,Rs.5,00,000 \(\times\)20/100); Super Profit Rs.50,000 (i.e.,Rs.1,50,000 - Rs.1,00,000); value of Goodwill = Rs.50,000 x 2 = Rs.1,00,000.

12.

Opening Capital : Ram Rs.3,00,000 and Shyam Rs. 2,00,000; Interest on capital : Ram Rs. 30,000 and Shyam Rs. 20,000, Interest on Drawings: Ram Rs. 4,000 and Shyam Rs. 2,00,000; Interest on capital : Ram Rs. 30,000 and Shyam Rs. 20,000, Interest on Drawings : Ram Rs. 3,00,000 and Shyam rs. 5,000; Dr. Shyam's Capital, Cr. Ram's capital by Rs. 5,500. Another answer can be : Opening Capital : Ram Rs 3,80,000 and Shyam Rs. 30,000; Interest on capital : Ram's capital by Rs: 4,500.
[Hint : In the absence of information, profits will be shared equally and interest on drawings will be charged for 6 months.]

13.

Divsible loss Rs. 3,750 being Arun's share Rs. 2,344 and Arora's share Rs. 1,406.
(i) As interest on capital is charged against profit, so loss will be the shared by partners.
(ii) In the absence of information, interest on drawings will be calculated for 6 months.

14.

Dr. Profit and loss Appropriation Account for the year ended .... Cr.
Particulars	Amt (Rs.)	Amt (Rs.)	Particulars	Amt (Rs.)
To Interest on Capital			By Net Profit as per Profit and Loss Nc	1,56,000
A's Current A/c	3,000
B's Current A/c	3,000
C's Current A/c	4,000	10,000
To Salary
C's Current A/c		6,000
To Profit Transferred to
A's Current A/c	51,000
B's Current A/c	45,000
C's Current A/c	44,000	1,40,000
		1,56,000		1,56,000

Journal

Particulars	Amt (Dr)	Amt (Cr)
Profit and Loss Appropriation A/c Dr	1,40,000
To A's Current A/c		51,000
To B's Current A/c		45,000
To C's Current A/c		44,000
(Being profit distributed among the partners)

Working Note
1. Calculation of Interest on Capital
\(A=60,000 \times \frac{5}{100}=Rs. 3,000 ; B=60,000 \times \frac{5}{100}=Rs. 3,000 ; C=80,000 \times \frac{5}{100}=Rs. 4,000\)
2. Capital ratio of A, Band C =60,000 : 60,000 : 80,000, i.e. 3 : 3 : 4.
3.

Divisible Profit Rs. 1,40,000 viz.,	A Rs.	B Rs.	C Rs.
First Rs. 20,000 in 3 : 3 : 4	6,000	6,000	8,000
Next Rs. 30,000 in 5 : 3 : 2	15,000	9,000	6,000
Remaining profit Rs. 90,000 equally i.e. 1 : 1 : 1	30,000	30,000	30,000
	51,000	45,000	44,000