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Published on: 24/07/2019
Accounting for Partnership Firms - Fundamentals
Download CBSE Class 12th Standard CBSE Accountancy question papers, sample papers, important questions, and previous year solved papers in PDF format. Get free study materials, NCERT solutions, and exam preparation resources for Class 12th Standard CBSE Accountancy
Questions + Answers key
Take MCQ Accountancy Test
1.
What is the status of partnership from an accounting viewpoint?
2.
A partnership firm earned the following net profits during the last three years.
2013 - Rs.34,000, 2014 - Rs.40,000, 2015 - Rs.46,000
The capital investment in the firm throughout the above mentioned period has been Rs.1,60,000. having regard to the risk involved, 15% is considered to be fair return on the capital.calculate value of goodwill on the basis of two year's purchases of average super profit earned during the above mentioned three years.
3.
X, Y and Z are partners.Their fixed capitals as at 31st March, 2015 were: X Rs.50,000, Y Rs.1,00,000 and Z Rs.1,50,000.Profit for the year 2014-2015 amounting to Rs.60,000 were distributed.Interest on capital was credited @10% per annum Though there was no such provision in the partnership deed.Pass the necessary adjusting entry.
4.
L, M and N are partners.Their fixed capitals as at 31st March, 2014 were: L Rs.50,000, M Rs.1,00,000 and N Rs.1,50,000.Profit for the year 2014-2015 amounting to Rs.60,000 were distributed.Interest on capital was credited @10% per annum instead of 12% per annum.pass the necessary adjusting entry.
5.
X and Y are partners sharing profits and losses in the ratio of 2:3 with capitals of Rs.2,00,000 and Rs.3,00,000 respectively. On 1st October 2014 X and Y granted loans of Rs.80,000 and Rs.40,000 respectively to the firm. Show the distribution of profits/losses for the year ended 31st March 2015 in each of the following alternatives.
Case.1 if the profits before any interest for the year amounted to Rs.21,000.
Case 2 if the profits before any interest for the year amounted to Rs.3,000
Case 3 if the profits before any interest for the year amounted to Rs.5,000
6.
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.
7.
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.
8.
D, E and F were partners in a firm sharing profits in the ratio of 5 : 7 : 8. Their fixed capitals were D Rs. 5,00,000, E Rs. 7,00,000. and F Rs. 8,00,000. Their partnership deed provided for the following :
(i) Interest on capital @ 10% p.a
(ii) Salary of Rs, 10,000 per month of F.
(iii) Interest on drawings @ 12% p.a.
D withdrew Rs. 40,000 on 31st January, 2009; E withdrew Rs. 50,000 on 31st March, 2009 and F withdrew Rs. 30,000 on 31st December, 2009.
During the year ended on 31st December, 2009 the firm earned a profit of Rs. 3,50,000.
Prepare the Profit and Loss Appropriation Account for the year ended 31st December, 2009.
9.
Sharma and Verma were partners in a firm sharing profits in the ratio of 4 : 1. Their capitals on 01- 04 -2006 were Sharma Rs. 5,00,000 and Verma Rs. 1,00,000. The partnership deed provided that Sharma will get a commission of 10% on the profit after allowing a salary Rs. 5,000 per month to Verma. The profit of the firm for the year ended 31st March, 2007 was Rs. 2,80,000.
Prepare Profit and Loss Appropriation Account of Sharma and Verma for the year ended 31.03.2007.
10.
K and P were partners in a firm sharing profits in 4 : 3 ratio. Their capitals on 1.4.2009 were : K Rs. 80,000 and P Rs. 60,000. The partnership deed provided as follows :
(i) Interest on capital and drawing will be allowed and charged @ 12% p.a. and 10% p.a. respectively.
(ii) K and P will be entitled to get monthly salary of Rs. 2,00 and Rs 3,000 respectively.
The profits for the year ended 31.3.2010 were Rs. 1,00,300. The drawings of K and P were Rs. 40,000 and Rs. 50,000 respectively. Interest on K's drawings was Rs. 2,000 and on P's drawings Rs. 2,500.
Prepare Profit and Loss Appropriation Account of K and P for the year ended 31.3.2010 assuming that the capitals of the partners were fluctuating.
11.
What is meant by ' average profit ' ?
12.
What are super profits ?
13.
How does the factor " efficiency of management" affect the goodwill of the firm ?
14.
How does the factor 'location' after the goodwill of a firm ?
15.
What is normal profit ?
16.
Why is "Goodwill" considered an 'intangible Asset' but not 'Fictitious Asset'?
17.
Ram and Mohan are partners in a firm without any partnership deed. Their capitals are Ram Rs. 8,00,000 and Mohan Rs. 6,00,000. Ram is an active partner and looks after the business. Ram wants that profit should be shared in proportion of capitals. State with reason whether his claim is valid or not.
18.
Dinesh, Yasmine and Faria are partners in a firm, sharing profits and losses in 11 : 7 : 2 respectively. The Balance Sheet of the firm as on 31st Dec. 2001 was as follows:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Sundry Creditors | 800 | Factory | 7,350 |
| Public Deposits | 1,190 | Plant & Machinery | 1,800 |
| Reserve fund | 900 | Furniture | 2,600 |
| Capital A/c | stock | 1,450 | |
| Dinesh | 5,100 | Debtors Rs.1,500 | |
| Yasmine | 3,000 | Less: bad debits Rs. | 1,200 |
| 300 provisions | |||
| Faria | 5,000 | Cash in hand | 1,590 |
| 15,900 | 15,900 |
On the same date, Annie is admitted as a partner for on-sixth share in the profits with Capital of Rs.4,500 and necessary amount for his share of goodwill on the following items:-
a. Furniture of Rs.2,400 were to be taken over by Dinesh, Yashmine and Faria equally.
b. A Liability of Rs.1,670 be created against Bills discounted.
c. Goodwill of the firm is to be valued at 2.5 years purchase of average profits of 2 years. The profits are as under.
2000 - Rs.2,000 and 2001 - Rs.6,000
d. Drawings of Dinesh, Yasmine, and Faria were Rs.2,750; Rs.1,750; and Rs.500 Respectively.
e. Machinery and Public Deposits are revalued to Rs.2,000 and Rs.1,000 respectively
Prepare Revaluation Account, Partners Capital Accounts and Balance Sheet of the new firm.
19.
Calculate the interest on drawings of Mr Vishal Bhardwaj @10% per annum in each of the following alternatives cases.
Case 1 if he withdrew rs.5,000 per month in the beginning of every day
Case 2 if he withdrew rs.5,000 per month at the end of the every month
Case 3 if he withdrew rs.5,000 per month in the middle of the every month
Case 4 if he withdrew rs.5,000 in the beginning of the every month for 6 month
Case 5 if he withdrew rs.5,000 at the middle of every month for 6 month
Case 6 if he withdrew rs.5,000 at the end of every month for 6 months
Case 7 if he withdrew rs.5,000 in the beginning of the every month for 9 months
Case 8 if he withdrew rs.5,000 at the end of every month for 9 months
Case 9 if he withdrew rs.5,000 in the middle of every month for 9 months
Case 10 if he withdrew rs.5,000 in the beginning of the each quarter
Case 11 if he withdrew rs.5,000 at the end of each quarter
Case 12 if he withdrew rs.5,000 at the middle of each quarter
20.
A and C are partners with fixed capitals of the Rs.2,00,000, Rs. 1,50,000 and Rs.1,00,000 respectively. THe balance of current accounts on 1st January, 2004 were A Rs.10,000 (Cr.) and B Rs.4,000 (Cr.) and C Rs.3,000 (Dr.). A gave a loan to the firm of Rs.25,000 on 1st July, 2004. THe Partnership deed provided for the following:-
(i) Interest on Capital at 6%.
(ii) Interest on drawings at 9%. Each partner drew Rs.12,000 on 1st July, 2004.
(iii) Rs.25,000 is to be transferred in a Reserve Account.
(iv) Profit sharing ratio is 5 : 3 : 2 upto Rs.80,000 and above Rs.80,000 equally. Net Profit of the firm before above adjustment was Rs.1,98,360.
From the above information prepare Profit and Loss Appropriation Account, Capital and Current Accounts of the partners.
21.
Calculate interest on drawings of Mr.Ghai @ 10% per annum for the year ended 31st March 2018, in each of the following alternative cases
Case I If he Withdrew Rs.15,000 in the beginning of each quarter.
Case II If he Withdrew Rs.15,000 at the end of each quarter.
Case III If he Withdrew Rs.15,000 during the middle of each quarter.
22.
Raj and Sameer are partners sharing profits equally.Raj withdrew regularly Rs 8000 at the end of every month for six months ended 30th September 2017. Calculate interest on drawings @ 5% per annum.
23.
L and M are partners sharing profits equally, L withdrew regularly Rs 8,000 in the beginning of every month for six months ended 30th September 2017. Calculate interest on drawings @5% per annum
1.
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.
2.
Goodwill = rs.32,000
3.
Debit Z and Credit X = Rs.5,000
4.
Debit L and Credit N = Rs.1,000
5.
(Interest on X's Loan = Rs.2,400, Interest on Y's loan = Rs.1,200)
Case 1 Profit: X = Rs.6,960, Y = Rs.10,440
Case 2 Loss: X = Rs.240, Y = Rs.360
Case 3 Profit X = Rs.560, Y = Rs.840
6.
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
7.
| 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
| Date | Particulars | LF | 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 |
8.
Interest on Drawing D Rs. 4,400, E Rs 4,500 and F Nil; Divisible Profit Rs. 38,900 transferred to D's current A/c Rs 9,725, E's Current A/c Rs 13,615 and F's Current A/c Rs 15,560.
9.
Divisible Profit Rs.1,98,000 transferred to Sharma's Capital Rs.1.58,400 and Verma's Capital Rs.39,600.
10.
Divisible Profit Rs. 28,000 transferred to K's Capital Rs. 16,000 and P's Capital Rs. 12,000.
11.
( )
Average profit is the average of the profits of past few years.
12.
( )
The term super profit means the profit over and above the normal or average profit earned by similar firms.
13.
( )
The efficiency of management enjoys the advantages of high productivity and cost efficiency. This leads to higher profits and therefore, has more goodwill
14.
( )
Favourable location of a business will attract more customers, result in higher sales and therefore, has leads to higher profits and therefore, has more value of goodwill.
15.
( )
Normal profit = Capital Employed \(\times \frac {Rate of Return}{100}\)
16.
( )
Goodwill cannot be seen and touched but it can be felt. It is invisible, hence it is treated as an intangible asset and it is not a fictitious asset because it can be purchased or sold with another asset.
17.
( )
As in the absence of partnership deed, if any partner apart from his share of capital advances money to the firm as a loan, he is entitled to interest on such loans @ 6% p.a., so Chander's claim is not valid.
18.
| Particulars | Rs. | Assets | Rs. | |
|---|---|---|---|---|
| To Bills Discounted A/c | 1670 | By Public deposits A/c | 190 | |
| By Machinary A/c | 200 | |||
| By Loss transfered to | ||||
| Dinesh's capital A/c | 704 | |||
| Yasmine's Capital A/c | 448 | |||
| Faria's Capital A/c | 128 | 1280 | ||
| 1670 | 1670 |
| Particulars | Dinesh Rs. |
Yasmine Rs. |
Faria Rs. |
Annie Rs. |
Particulars | Dinesh Rs. |
Yashmine Rs. |
Faria Rs. |
Annie Rs. |
|---|---|---|---|---|---|---|---|---|---|
| To Revaluation | By Balance b/d | 5100 | 3000 | 5000 | - | ||||
| A/c (Loss) | 704 | 448 | 128 | - | By Reserve F A/c | 495 | 315 | 90 | - |
| To Furniture A/c | 800 | 800 | 800 | - | By cash A/c | - | - | - | 4500 |
| To Drawing | 2750 | 1750 | 500 | - | By Premium A/c | 917 | 583 | 167 | - |
| A/c | |||||||||
| To Balance c/d | 2258 | 900 | 3829 | 4500 | |||||
| 6512 | 3898 | 5257 | 4500 | ||||||
| By Balance b/d | 2258 | 900 | 3829 | 4500 |
| Particulars | Rs. | Assets | Rs | ||
|---|---|---|---|---|---|
| Sundry Creditors | 800 | Cash in Hand | 2757 | ||
| Public Deposits | 1000 | Factory Buildings | 7350 | ||
| Capitals: Dinesh | 2258 | Machinary | 2000 | ||
| Furniture | 200 | ||||
| Yashmine | 900 | Stock | 1450 | ||
| Faria | 3829 | Debtors | 1500 | ||
| Annie | 4500 | 11487 | Less: Provision | 300 | 1200 |
| Bill Discounted | 1670 | ||||
| 14957 | 14957 |
19.
Interest on drawings = Annual drawings\(\times \frac { Rate }{ 100 } \times \frac { Average\ period }{ 12 } \)
case 1 Intrest on drawings = (5,000 x 12)\(\times \frac { 10 }{ 100 } \times \frac { 6.5 }{ 12 } =\) Rs 3,250
case 2 Intrest on drawings = (5,000 x 12)\(\times \frac { 10 }{ 100 } \times \frac { 5.5 }{ 12 } =\) Rs 2,750
case 3 Intrest on drawings = (5,000 x 12)\(\times \frac { 10 }{ 100 } \times \frac { 6 }{ 12 } =\) Rs 3,000
case 4 Intrest on drawings = (5,000 x 6)\(\times \frac { 10 }{ 100 } \times \frac { 3.5 }{ 12 } =\) Rs 875
case 5 Intrest on drawings = (5,000 x 6)\(\times \frac { 10 }{ 100 } \times \frac { 3 }{ 12 } =\) Rs 750
case 6 Intrest on drawings = (5,000 x 6)\(\times \frac { 10 }{ 100 } \times \frac { 2.5 }{ 12 } =\) Rs 625
case 7 Intrest on drawings = (5,000 x 9)\(\times \frac { 10 }{ 100 } \times \frac { 5 }{ 12 } =\) Rs 1875
case 8 Intrest on drawings = (5,000 x 9)\(\times \frac { 10 }{ 100 } \times \frac { 4}{ 12 } =\) Rs 1,500
case 9 Intrest on drawings = (5,000 x 9)\(\times \frac { 10 }{ 100 } \times \frac { 4.5 }{ 12 } =\) Rs 1,687.5
case 10 Intrest on drawings = (5,000 x 10)\(\times \frac { 10 }{ 100 } \times \frac { 7.5 }{ 12 } =\) Rs 1,250
case 11 Intrest on drawings = (5,000 x 4)\(\times \frac { 10 }{ 100 } \times \frac { 4.5 }{ 12 } =\) Rs 750
case 12 Intrest on drawings = (5,000 x 4)\(\times \frac { 10 }{ 100 } \times \frac { 6 }{ 12 } =\) Rs 1,000
20.
| Particulars | Amount | Particulars | Amount | ||
|---|---|---|---|---|---|
| To interest on Capital at 6% | By profit and Loss A/c (being profit) | ||||
| 198360 | A | 12000 | |||
| Less: interest on A's Loan @ 6% p.a. | |||||
| on Rs.25,000 for six months | 750 | 197610 | |||
| B | 9000 | By interest on drawings @9% p.a. | |||
| for months on Rs.12,000 | |||||
| C | 6000 | 27000 | A | 540 | |
| To reserve A/c | 25000 | B | 540 | ||
| To profit | C | 540 | 1620 | ||
| A's current A/c | 62410 | ||||
| B's current A/c | 46410 | ||||
| C's current A/c | 38410 | 147230 | |||
| 199230 | 199230 |
| Particulars | A | B | C | Particular | A | B | C |
|---|---|---|---|---|---|---|---|
| To balance b/d | 2,00,000 | 1,50,000 | 1,00,000 | By balance c/d | 2,00,000 | 1,50,000 | 1,00,000 |
| Particulars | A | B | C | Particulars | A | B | C |
|---|---|---|---|---|---|---|---|
| To balance b/d | - | - | 3000 | By balance b/d | 10000 | 4000 | - |
| To drawings | 12000 | 12000 | 12000 | By interest on capi | 1200 | 9000 | 6000 |
| To interest on | 540 | 540 | 540 | By P&L A/c | 62410 | 46410 | 38410 |
| drawings | |||||||
| To balance c/d | 71870 | 46870 | 28870 | ||||
| 84,410 | 59,410 | 44,410 | 84,410 | 59,410 | 44,410 |
21.
Case I = Rs.3,750,Case II = Rs 2,250, Case III = Rs.3,000
22.
Interest on drawings = Rs 500
23.
Interest on drawings = Rs 700
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