Assignment on Fundamentals of Partnership Firm

CLASS : XII SUB : Accounts

st
Q1. Following is the Balance Sheet of A, B and C as at 1 April, 2013 :
Liabilities Rs. Assets Rs.
A’s Capital 70,000 Machinery 1,70,000
B’s Capital 60,000 Furniture 35,000
C’s Capital 70,000 2,00,000 Inventories 42,000
General Reserve 40,000 Sundry Debtors 15,000
Contingency Reserve 15,000 Bank Balance 62,000
Sundry Creditors 75,000 Profit and Loss A/c 6,000
3,30,000 3,30,000
You are required to prepare the Profit and Loss Appropriation Account for the year
ended 31st March, 2014, after taking into account the following:
(i) Profits and Losses are to be shared in the ratio of 3 : 2 : 1 respectively.
(ii) Partners are entitled to interest on capital, which will be allocated in the ratio
of their capitals.
(iii) Partners are also entitled to salaries, which will be allocated in the ratio of
time they devoted to firm’s business. A devotes half time, B one third time and
C one sixth time.
(iv) The contingency in respect of which the reserve was built-up was no longer
required, hence is to be written back.
(v) The debit balance of Profit and Loss Account is to be adjusted against current
year’s income.
(vi) The following amounts shall be distributed to the partners:
(a) Rs. 30,000 as interest on capital; (b) Rs. 39,000 as partners’ salary
(vii) For the year ended 31st March 2014, before taking into account the above, the
firm earned Rs. 1,25,000.
It was decided that only Rs. 60,000 shall be distributed to partners as share of
profits and any excess to be transferred to General Reserve. However,
deficiency, if any, shall be adjusted from existing reserve.

Q2. Aalu, Bablu and Chalu are partners sharing profits and losses in the ratio of 3 : 2 : 1.
As per terms of the partnership deed any amount of shortfall in the profits of Chalu
shall be given by A and B in the ratio of 3 : 2. Compute the missing figures from the
following Profit & Loss Appropriation of Aalu, Balu and Chalu.

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 PROFIT & LOSS APPROPRIATION ACCOUNT
for the year ended 31st March 2014
Particulars Rs. Particulars Rs.
To Aalu’s Capital A/c … By Profit & Loss 30,000
Less: Given to Chalu … …
To Balu’s Capital A/c …
Less: Given to Chalu … …
To Chalu’s Capital A/c …
Add : From Aalu’s …
Add : From Balu’s … 10,000
30,000 30,000

Q3. A, B and C were enter into partnership without any partnership deed. They each
contribute Rs. 2,00,000 in respect of their share of capitals. In addition to this, B has
also given loan of Rs. 3,50,000 on 1.4.2012. After the accounts for the year 2012-13
have been closed, it was noticed that profits of Rs. 6,00,000 has been divided in the
ratio of 3 : 2 : 1. Interest on B’s loan has also not been provided. Pass the necessary
journal entry to rectify the error.

Q4. A, B and C are partners. After the closure of the accounts for the year 2012 – 13, it
was discovered that Interest on Capital at the rate of 10% p.a. and Interest on
Drawings at the rate of 5% p.a. were omitted. Their closing capitals were A – Rs.
3,00,000; B – Rs. 2,00,000; and C – Rs. 5,00,000. Profits for the year 2013 – 13 were
Rs. 1,80,000 which was divided in the ratio of 3 : 2 : 1 instead of 2 : 1 : 1. Their
drawings were A – Rs. 50,000 (on 1.4.2012); B – Rs. 1,00,000 (on 1.10.2012) and C –
Rs. 3,00,000 (on 31.03.2013). Pass an adjusting entry to rectify the above.

Q5. A, B and C are partners sharing profits in ratio of 3 : 2 : 1. After closing the accounts
for the year 2012 – 13, it was discovered that interest on capital @ 10% p.a. and
interest on drawing @ 10% p.a. were omitted.
Their fixed capitals were Rs. 60,000 which was divided in the ratio of 3 : 2 : 1. Each
partner has drawn Rs. 1,000 per month :
(i) A – in the beginning of every month.

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 (ii) B – in the middle of every month.
(iii) C – at the end of every month.
Pass a single adjusting entry at the beginning of the year, so that accounts of the
previous year can be rectified.

Q6. A, B and C are partners. The firm had been in existence for many years. On 1.1.2014
it was discovered that the profits/losses for the years 2012 and 2013 were distributed
in the ratio of 3 : 2 : 1 and 2 : 2 : 1 respectively instead of 2 : 2 : 1 and 3 : 2 : 1. During
the year 2012, the firm earned Rs. 60,000. However, during the year 2013, they
suffered a loss of Rs. 30,000. Pass the necessary adjustment entry.

Q7. The partners of a firm distributed the profits for the year ended 31st March 2013, Rs.
90,000 in the ratio of 3 : 2 : 1 without providing for the following adjustments :
(i) A & B were entitled to a salary of Rs. 1,500 each p.a.
(ii) B was entitled to a commission of Rs. 4,500.
(iii) B & C had guaranteed a minimum profit of Rs. 35,000 p.a. to A.
(iv) Profits were to be shared in the ratio of 3 : 3 : 2.
Pass the necessary journal entry for the above adjustments in the books of the firm.

Q8. A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. On 1-1-1999 i.e. after
distribution of profits/losses for the last four year, they discovered that interest on
capitals @ 10% p.a. was not given in any of the years and also profits/losses were
shared in the ratio of 2 : 2 : 1. The profits (losses) during the last four years were:
1995 - Rs. 12,000
1996 - Rs. 14,000
1997 - Rs. 19,000
1998 - Rs. (15,000)
Their fixed capitals were Rs. 30,000; Rs. 20,000; and Rs. 10,000 respectively. Interest
on Capitals was considered as an appropriation against profits. Show the adjustments
of profits and losses for last four years by passing an adjusting entry.

Q9. Ramesh and Rakesh are partners with profit sharing ratio of 3 : 2. They decided to
admit Suresh, their manager as a partner with effect from 1-4-2012 giving 1/4th share
of profit. Suresh as a manger was earning a salary of Rs. 54,000 p.a. and a
commission of 10% of the net profit after charging such salary and commission. It
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 was decided that any excess amount, which Suresh will be entitled to receive as a
partner over amount which would have been due to him if he continued to be the
manger, would have to be borne by Ramesh personally. Show the Profit and Loss
Appropriation Account for the year ended 31.3.2013 in each of the following cases.
(i) Profit is Rs. 4,50,000
(ii) Profit amounted to Rs. 4,40,000 after charging Salary.
(iii) Profit amounted to Rs. 4,30,000 after Suresh’s remuneration as a manager.

Q10. A and B are partners sharing profits and losses in the ratio of 3 : 2. On 1.4.2013, they
decided to take their manger C into partnership w.e.f. 1.4.2010. A Manager, C was
getting annual salary of Rs. 36,000. He had also advanced Rs. 50,000 to the irm by
way of loan on which he gets interest @ 10% p.a. During the lass three years, firm’s
profits after all adjustments were as follows:
31.03.2011 Rs. 1,60,000
31.03.2012 Rs. (10,000) Loss
31.03.2013 Rs. 1,20,000
As per new agreement, C will be allowed an annual salary of Rs. 18,000 and 1/5 th
share of the profits. C will bring Rs. 10,000 as his share of goodwill. C’s loan shall be
treated as his capital from the beginning and similar to other partners will carry
interest @ 8% p.a. Salary and Interest on capitals are appropriation against the profits.
Record the journal entry to record the effect of the above adjustments.

Q11. Hari and Mohan were partners of sharing profits in the ratio 4 : 1. On 31st March
2012, they decided to admit Krishan (their clerk) into firm. It was also decided that he
should be treated as a partner from 1.4.2009. While serving as a clerk, Krishan had
given a loan of Rs. 50,000 to the firm on which he was getting an interest @ 12% p.a.
also he was getting a salary of Rs. 50,000 p.a.
According to the new agreement, Krishan was to be given an annual salary of Rs.
30,000 and 1/8th share in the profits of the firm. His loan was converted as his capital
on which he was eligible to receive an interest @ 6% p.a. Krishan could not bring Rs.
5,000 as his share of goodwill. Profits for the years ended 31st March 2009-10, 2010-
11 and 2011-12 were Rs. 1,50,000; Rs. 1,45,000; and Rs. 1,15,000 respectively.
Record the necessary journal entries to give effect to these arrangements.

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Q12. Satnam and Qureshi after doing their MBA decided to start a partnership firm to
manufacturer ISI marked low priced electric goods for economically weaker section
of the society. Satnam also expressed his willingness to admit Juliee as a partner
without capital who is specially abled but a very creative and intelligent friend of him.
Qureshi agreed to this. They formed a partnership on 1st April, 2012 on the following
terms:
(i) Satanam will contribute Rs. 4,00,000 and Qureshi will contribute Rs. 2,00,000
as capitals.
(ii) Satnam, Qureshi and Juliee will share profits in the ratio of 2 : 2 : 1.
(iii) Interest on capital will be allowed @ 6% p.a.
Due to shortage of capital Satnam contributed Rs. 50,000 on 30th September, 2012
and Qureshi contributed Rs. 20,000 on 1st January, 2013 as additional capitals. The
profit of the firm for the year ended 31st March, 2013 was Rs. 3,37,800.
(a) Identify any two values which the firm wants to communicate to the society.
(b) Prepare Profit & Loss Appropriation Account for the year ending 31st March,
2013.

Q13. Mona, Nisha and Priyanka are partners in a firm. They contributed Rs. 50,000 each as
capital three years ago. At that time Priyanka agreed to look after the business as
Mona and Nisha were busy. The profits for the past three years were Rs. 15,000; Rs.
25,000 and Rs. 50,000 respectively. While going through he books of accounts Mona
noticed that the profit had been distributed in the ratio of 1 : 2 : 2. When she enquired
from Priyanka about this, Priyanka answered that since she looked after the business
she should get more profit. Mona disagreed and it was decided to distribute profit
equally retrospectively for the last three years.
(a) You are required to make necessary corrections in the books of accounts of Mona,
Nisha and Priyanka by passing an adjustment entry.
(b) Identify the value which was not practiced by Priyana while distributing profits.

Q14. Nanak, rishabh and Mayank are partners in a firm. They contributed Rs. 90,000 each
as capital three years ago. At that time Mayank agreed to look after the business, as
Nanak and Rishab were busy. The profits for the past three years were Rs. 60,000; Rs.
1,00,000 and Rs. 1,10,000 respectively. While going through the books of accounts
Nanak noticed that the profit had been distributed in 1 : 1 : 2 ratio. When he enquired
from Mayank about this, Mayank answered that since he looked after the business he
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 should get more profit. Nanak did not agree and it was decided to distribute equally
retrospectively for the last three years.
(a) You are required to make necessary corrections in the books of accounts of the
firm by passing an adjustment entry.
(b) Identify the value which is not being practiced by Mayank at the time of division
of profits.

Q15. Abdul, Kadir and Kasim were partners in a firm supplying food items. They were
sharing profits in the ratio of 5 : 3 : 2. Their capitals on 1st April, 2012 were Rs.
1,00,000; Rs. 1,50,000; and Rs. 3,00,000 respectively. After the foods in Uttaranchal,
all partners decide to personally help the flood victims. For this Abdul withdrew Rs.
20,000 from the firm on 1st September, 2012, Kadir instead of withdrawing cash from
the firm took some food items amounting to Rs. 24,000 from the firm and distributed
to the flood victims. On the other hand, Kasim withdrew Rs. 1,00,000 from his capital
on 1st January, 2013 and provided a Mobile Medical Van for medical facilities in the
flood affected area.
The partnership deed provides for charging interest on drawings @ 6% p.a. After the
Final Accounts were prepared, it was discovered that interest on drawings had not
been charged.
Give the necessary adjusting journal entry and show the working notes clearly. Also
state any two values that the partners wanted to communicate to the society.

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