12th Standard Accountancy Chapter 3 Accounts of Partnership Firms - Fundamentals Important Question Paper | QB365

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12th Standard Accountancy Chapter 3 Accounts of Partnership Firms - Fundamentals Important Question Paper

Published on: 26/07/2019

Accounts of Partnership Firms-Fundamentals

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Questions:

Generic 5

4 x 5 = 20

Durga and Preethi entered into a partnership agreement on 1st April 2018, Durga contributing Rs.50,000 and Preethi Rs.60,000 as capital. The agreement provided that:
(a) Profits and losses to be shared in the ratio 3:2 as between Durga and Preethi.
(b) Partners to be entitled to interest on capital @ 5% p.a.
(c) Interest on drawings to be charged Durga Rs.600 Velan Rs.900
(d) Durga to receive a salary Rs.10,000 for the year and
(e) Preethi to receive a commission of Rs.4,000 During the year, the firm made a profit of Rs.40,000 before adjustment of interest, salary and commission prepare the profit and loss appropriation account.

From the following information, prepare capital accounts of partners Manoj and Seran, when their capitals are fluctuating

Particulars	Manoj Rs.	Seran Rs.
Capital on 1^st January 2018 ( Cr. balance)	1,00,000	87,500
Drawings during 2018	20,000	17,500
Interest on drawings	500	250
Share of profit for 2018	10,500	8,250
Interest on capital	6,000	5,250
Salary	9,000	Nil
Commission	Nil	1250

Arulappan and Nallasamy are partners in a firm sharing profits and losses in the ratio of 4:1. On 1st January 2018, their capitals were Rs. 20,000 and Rs. 10,000 respectively. The partnership deed specifies the following:
(a) Interest on capital is to be allowed at 5% per annum.
(b) Interest on drawings charged to Arulappan and Nallasamy are Rs. 200 and Rs. 300 respectively.
(c) The net profit of the firm before considering interest on capital and interest on drawings amounted to Rs. 18,000.
Give necessary journal entries and prepare Profit and loss appropriation account for the year ending 31st December 2018. Assume that the capitals are fluctuating.

From the following information, prepare capital accounts of partners Shanthi and Sumathi, when their capitals are fixed.

Particulars	Shanthi Rs.	Sumathi Rs.
Capital on 1^st January 2	1,00,000	80,000
Current account on 1^st January 2018 (Cr.)	5,000	3,000
Additional capital introduced on 1^st June 2018	10,000	20,000
Drawings during 2018	20,000	13,000
Interest on drawings	500	300
Share of profit for 20	10,000	8,000
Interest on capital	6,300	5,400
Salary	9,000	Nil
Commission	Nil	1,200

Generic 2

4 x 2 = 8

How is interest on drawings calculated, if the drawings are made at regular intervals as on the first day of each month?

Interest on partner's capital and interest on drawings are recorded through profit and loss appropriation account instead of profit and loss account. Why?

A and B are partners in a firm without a partnership deed. A is an active partner and claims a salary of Rs. 18,000 per month. State with reasons whether the claim is valid or not

Mannan and Ramesh share profits and losses in the ratio of 3:1. The capital on 1^stApril 2017 was Rs. 80,000 for Mannan and Rs. 60,000 for Ramesh and their current accounts show a credit balance of Rs. 10,000 and Rs. 5,000 respectively. Calculate interest on capital at 5% p.a. for the year ending 31^st March 2018 and show the journal entries.

Generic 3

6 x 3 = 18

The firm of A and B earned a profit of Rs.2,75,000 during the year ending on 31st March, 2015. They have decided to donate 10% of this profit to an NGO working for senior citizens. Pass necessary journal entry for the distribution of profits. Identify the values shown by the firm in donating a part of profit of NGO.

10.

What is Fluctuating capital method?

11.

Explain the procedure for preparation of final accounts of a partnership firm.

12.

Murali and Sethu are partners in a firm. Murali is to get a commission of 10% of net profit before charging any commission. Sethu is to get a commission of 10% on net profit after charging all commission. Net profit for the year ended 31st March 2019 before charging any commission was Rs. 1,10,000. Find the amount of commission due to Murali and Sethu.

13.

Arul is a partner in a partnership firm. As per the partnership deed, interest on drawings is charged at 12% p.a. During the year ended 31st December 2018 he drew as follows:

Date	Rs.
March 1	3,000
June 1	3,000
September 1	3,000
December 1	3,000

Calculate the amount of interest on drawings.

14.

From the following balance sheets of Brindha and Praveena who share profits and losses in the ratio of 3:4, calculate interest on capital at 6% p.a. for the year ending 31^st December 2017.

Balance sheet as on 31st December 2017
Liabilities	Rs.	Assets	Rs.
Capital accoun		Sundry assets	80,000
Brindha	30,000
Praveena	40,000
Profit and loss appropriation A/c	10,000
	80,000		80,000

On 1^st July 2017, Brindha introduced an additional capital of Rs. 6,000 and on 1st October 2017, Praveena introduced Rs. 10,000. Drawings of Brindha and Praveena during the year were Rs. 5,000 and Rs. 7,000 respectively. Profit earned during the year was Rs. 31,000.

Multiple Choice Question

5 x 1 = 5

15.

In sole proprietorship, the profit or loss in the profit and loss account is transferred directly to the sole proprietor's ___________

(a)

drawings account

(b)

capital account

(c)

loan account

(d)

salary account

16.

The maximum number of partners in a partnership firm is ________

(a)

(b)

(c)

(d)

17.

In the absence of an agreement, partners are entitled to

(a)

Salary

(b)

Commission

(c)

Interest on loan

(d)

Interest on capital

18.

In the absence of an agreement among the partners, interest on capital is

(a)

Not allowed

(b)

Allowed at bank rate

(c)

Allowed @ 5% per annum

(d)

Allowed @ 6% per annum

19.

In the absence of a partnership deed, profits of the firm will be shared by the partners in

(a)

Equal ratio

(b)

Capital ratio

(c)

Both (a) and (b)

(d)

None of these

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Answers Key:

Generic 5

4 x 5 = 20

Profit and loss appropriation accounts for the year ended 31^st March 2019

Dr Cr
Particulars	Rs.	Rs.	Particulars	Rs.
To Interest on capital AI c			By Profit and loss AI c	40,000
Durga (50,000 x 5/100)		2,500	By Interest on drawings A/c
Preethi (60,000 x 5/100)		3,000
To Salary Durga		10,000	Durga	600
To Commission to Preethi A/c		4,000	Preethi	900
To Partner's capital A/c
To Partner's capital A/c (Profit transferred)
Durga (22,000 x 3/5)	13,200
Preethi (22,000 x 2/5)	8,800	22,000
		41,500		41,500

Dr Partner's capital Account Cr
Particulars	Manoj Rs.	Seran Rs.	Particulars	Manoj Rs.	Seran Rs.
To Drawing A/c	20,000	17,500	By Balance b/d	1,00,000	87,500
To Interest on drawings A/c	500	250	By Profit and loss appropriation A/c	10,500	8,250
To Balance c/d (Balancing figure)	1,05,000	84,500	By Interest on capital A/c	6,000	5,250
			By Salary A/c	9,000	-
			By Commission A/c	-	1,250

	1,25,500	1,02,250		1,02,250	1,02,250

			By balance b/d	1,05,000	84,500

**Journal entries**
Date	Particulars		Dr. Rs.	Cr. Rs
2018	Interest on capital A/c	Dr.	1,500
Dec. 31	To Arulappan’s capital A/c			1,000
	To Nallasamy’s capital A/c (Interest on capital @ 5% provided)			500
"	Profit and loss appropriation A/c	Dr.	1,500
	To Interest on capital A/c (Interest on capital account closed)			1,500
'	Arulappan’s capital A/c	Dr.	200
	Nallasamy’s capital A/c	Dr.	300
	To Interest on drawings A/c (Interest on drawings charged)			500
"	Interest on drawings A/c	Dr.	500
	To Profit and loss appropriation A/c (Interest on drawings account closed)			500
"	Profit and loss appropriation A/c Dr.		17,000
	To Arulappan’s capital A/c			13,600
	To Nallasamy’s capital A/c (Profit transferred)			3,400

**Dr. Profit and loss appropriation account for the year ended 31st December 2018 Cr.**
Particulars	Rs.	Rs.	Particulars	Rs.
To Interest on capital			By Profit and loss A/c	18,000
Arulappan		1,000	By Interest on drawings A/c
Nallasamy		500	Arulappan	200
To Partners’ capital A/c (profit)			Nallasamy	300
Arulappan (4/5)	13,600	17,000
Nallasamy (1/5)	3,400	18,500		18,500

**Dr. Partners’ Capital Account Cr.**
Date	Particulars	Shanthi Rs.	Sumathi Rs.	Date	Particulars	Shanthi Rs.	Sumathi Rs.
2018				2018
				Jan 1	By Balance b/d	1,00,000	80,000
Dec 31	To Balance c/d	1,10,000	1,00,000	June 1	By Bank (Additional capital)	10,000	20,000
		1,10,000	1,00,000			1,10,000	1,00,000
				2019
				Jan 1	By Balance b/d	1,10,000	1,00,000

**Dr. Partners’ Current Account Cr.**
Particulars	Shanthi Rs.	Sumathi Rs.	Particulars	Shanthi Rs.	Sumathi Rs.
To Drawings	20,000	13,000	By Balance b/d	5,000	3,000
To Interest on			By Profit and loss
	500	300
drawings			appropriation A/c	10,000	8,000
To Balance c/d	9,800	4,300	(share of profit)
			By Interest on capital	6,300	5,400
			By Salary	9,000	-
			By Commission	-	1,200
	30,300	17,600		30,300	17,600
			By Balance b/d	9,800	4,300

Generic 2

4 x 2 = 8

If the drawings are made regularly on the first day of each month, the interest on drawings will be
calculated for 6\(\frac12\) months i.e
Interest on drawings = Total drawings x \(\frac{Rate}{100}\) x \(\frac{6.5}{12}\)

Interest on partner's capital and interest on drawings are an appropriation of profit and not a charge on profit and hence is recorded through profit and loss appropriation account instead of profit and loss account

According to Indian partnership Act, 1932, no salary is allowed to partners in the absence of partnership deed so the claim of A for salary of Rs.18,000 per month is not valid.

Calculation of interest on capital:
Interest on capital = Amount of capital \(\times\) Rate of interest
Interest on Mannan’s capital = 80,000 \(\times\) 5/100 = Rs. 4,000
Interest on Ramesh’s capital = 60,000 \(\times\) 5/100 = Rs. 3,000
Note: Balance of current account will not be considered for calculation of interest on capital.

Date	Particulars		Debit Rs.	Credit Rs.
2018	Interest on capital A/c	Dr.	7,000
March 31	To Mannan’s current A/c			4,000
	To Ramesh’s current A/c (Interest on capital provided)			3,000
"	Profit and loss appropriation A/c	Dr.	7,000
	To Interest on capital A/c (Interest on capital closed)			7,000

Generic 3

6 x 3 = 18

Journal entry
Particulars	Debit Rs.	Credit Rs.
Profit and loss appropriation A/c Dr	2,47,500
To A's capital A/c		1,23,750
To A's capital A/c (Being profit transferred to capital account)		1,23,750

Values shown by the firm are
i. Responsibility :
Firm has shown responsibility towards senior citizens by giving them their dues.
ii. Compassion:
Partners have shown compassion towards senior citizens by fulfilling their duties towards senior citizens .

10.

(i) Under this method, only one capital account is maintained for each partner.
(ii) The capital is changing from period to period.
(iii) This capital account shows always a credit balance
(iv) All adjustment relating to partners are recorded directly in the capital account.

11.

(i) In sole proprietorship, the profit or loss in the profit and loss account is transferred directly to the sole proprietor's capital account. In partnership, profit and loss appropriation account is prepared to which net profit or loss from profit and to which net profit or loss from profit and loss account is transferred.
(ii) In the profit and loss appropriation account, adjustments for interest on capital, interest on drawings, salary and other remuneration due to the partners are shown. Finally, the balance in the appropriation account is transferred to the partner's capital account in the profit sharing ratio.
(iii) Capital account balance of the sole proprietor alone is shown in the balance sheet of sole proprietorship. The balance sheet of a partnership concern shows the balances in the individual capital accounts (an current accounts) of the partners.

12.

Calculation of commission:
Commission to Murali:
= Net profit before commission \(\times\) % of commission/100
= 1,10,000 \(\times\) \(\frac { 10 }{ 100 } \) = Rs. 11,000
Commission to Sethu:
Net profit after Murali’s commission = 1,10,000 –11,000 = Rs. 99,000
Sethu’s commission = Net profit after Murali’s commission \(\times\) % of commission/(100+%of commission)
= 99,000 \(\times\) \(\frac { 10 }{ (100+10) } \) = Rs. 9,000

13.

Interest on drawings = Amount of drawings × Rate of interest × Period of interest

Withdrawal on March 1	Rs. 3,000 \(\times\) \( \frac { 12 }{ 100 } \times \frac { 10 }{ 12 }\)	Rs. 300
Withdrawal on June 1	Rs. 3,000 \(\times\) \( \frac { 12 }{ 100 } \times \frac { 7 }{ 12 }\)	Rs. 210
Withdrawal on September 1	Rs. 3,000 \(\times\) \( \frac { 12 }{ 100 } \times \frac { 4 }{ 12 }\)	Rs. 200
Withdrawal on December 1	Rs. 3,000 \(\times\) \( \frac { 12 }{ 100 } \times \frac { 1 }{ 12 }\)	Rs. 30
Total interest on drawings		Rs. 660

14.

Particulars	Brindha		Praveena
Particulars	Rs.	Rs.	Rs.	Rs.
Capital on 31st December 20		30,000		40,000
Add: Drawings		5,000		7,000
		35,000		47,000
Less:
Additional capital	6,000		10,000
Profit already credited*	9,000	15,000	12,000	22,000
Capital on 1^st January		20,000		25,000

Profit credited = Profit earned Rs. 31,000 – Balance profit as per balance sheet Rs. 10,000 = Rs. 21,000. This amount is distributed in their profit sharing ratio of 3:4.

Calculation of interest on capital:
Brindha:

On opening capital for 1 year	20,000 \(\times\) \(\frac{6}{100}\)	Rs. 1,200
On additional capital for 6 months	6,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{6}{12}\)	Rs. 180
Total Interest on capital		Rs. 1,380

Praveena:

On opening capital for 1 year	25,000 \(\times\) \(\frac{6}{100}\)	Rs. 1,500
On additional capital for 3 months	10,000 \(\times\) \(\frac{6}{100}\) \(\times\) \(\frac{3}{12}\)	Rs. 150
Total interest on capital		Rs. 1.650