Ch.2 Partnership Basic Concepts
- The written agreement of partnership is called ______.
(a) Articles of Association (b) Memorandum of Association (c) Partnership Deed (d) None of these
Ans : partnership deed - _______ account shows how profit is distributed among partners.
(a) Partners’ Current Account
(b) Profit and Loss Appropriation Account
(c) Partners’ Capital Account
(d) Profit and Loss Account
Ans : (b) Profit and Loss Appropriation Account - A Partnership firm incurs a loss of Rs. 28,000 during the year 2018-19. Which among the following is admissible to Partners at the end of this year ?
(a) Interest on Partners Loan
(b) Interest on Partners Capital
(c) Commission to Partners
(d) Salary to Partners
Ans : (a) Interest on Partners Loan - Identify the name of the account which is prepared to show, how the profits are distributed among partners.
(a) Income & Expenditure A/c.
(b) Profit & Loss A/c.
(c) Profit & Loss Appropriation A/c.
(d) None of these
Ans : (c) Profit & Loss Appropriation A/c. - Under fixed capital method of maintaining capital accounts, yearly adjustment are transferred to partner’s ______.
(a) Capital Account (b) Current Account
(c) Loan Account (d) Cash Account
Ans : Current Account - Partners are entitled to get _____ in the absence of an agreement.
(a) Salary (b) Share of Profit in capital ratio (c) Interest on Partners loan @ 6% p.a. (d) Commission
Ans : Interest on Partners loan @ 6% p.a - Under fixed capital method, the interest on drawings is :
(a) credited to capital account (b) debited to capital account (c) credited to current account (d) debited to current account
Ans : (d) debited to current account
- A Partnership firm incurs a loss of Rs. 28,000 during the year 2018-19. Which among the following is admissible to Partners at the end of this year ?(a) Interest on Partners Loan
(b) Interest on Partners Capital
(c) Commission to Partners
(d) Salary to Partners
Ans : (a) Interest on Partners Loan - Siva is a partner in United Tours and Travels. He withdrawsRs. 4,000 per month regularly in the middle of every month during the year 2019. The rate of interest on drawings is 8%. Calculate Interest on drawings for the year 2019. (2 score)
Ans: Total drawings = 4000*12=48,000
Interest on drawing = 48000*8/100*6/12 = 1920 - Rejth is a partner in a firm. On 1st January 2017, his capital account balance was Rs:2,20,000. As per partnership agreement a partner is entitled to 6% interest per annum on his capital. Rejith introduced additional capital Rs. 80,000 on 01-07-2017 and withdrew Rs: 50,000 on 1-10-2017. Calculate the interest on capital for the year ending 31st December 2017. (3 score)
Ans : Interest on capital
For 220000×6/100×6/12 = 6600 (220000 for 6 month, 1-1-17 to 1-7-17)
300000×6/100×3/12 = 4500 (300000 for 3 months ,1-7-17 to 1-10-17)
250000×6/100×3/12 = 3750 (250000 for 3 months ,1-10-17 to 31-12-17)
Interest on capital 14,850
To watch video : Click here - Madhu, a partner withdrewRs. 1,100 per month for his personal use during the year ending 31st December, 2017. Calculate interest on his drawings at 10% p.a. when the amount is withdrawn on the first day of every month.
Ans : Total drawings =1100*12=13200
Interest on drawings = 13200*10/100*6.5/12=715.00 - Chaithanya and Sandra are partners in a firm, sharing profits and losses equally. During the financial year 2017-18, Sandra withdrew Rs.20,000 quarterly at the beginning of each quarter. Find out the interest on drawings @ 8% p.a.
Ans : Total Drawings = 20000*4 =80,000
Interest on drawings = 80000*8/100*7.5/12 =4000 - Rajan and Gopan are partners in a firm. If they do not have any partnership agreement, what should be done in the following cases ?
(a) Rajan demands a salary of Rs.2,000 per month for his service in business.
(b) Gopan wants that profit should be distributed in the ratio of Capitals, but Rajan wants that it should be distributed equally. - How will you treat the following items in partnership accounts in the absence of partnership deed ? (2 Marks)
(a) Profit Sharing Ratio(b) Interest on Drawings
Ans :Rules applicable in the absence of partnership deed
1. Profit sharing ratio – equally
2. Interest on capital – not entitled
3. Interest on drawings – not entitled
4. Remuneration to partners – not entitled
5. Interest on loan –@ 6% - Write any 4 differences between fixed capital and fluctuating capital methods. (3Marks)
- What are the two methods of maintaining Capital Accounts of partners ? Give any four differences between these two methods.Ans : Fixed capital method and Fluctuating capital method
Difference between Fixed capital method and Fluctuating capital methodFixed Capital Method Fluctuating Capital Method 1-Number of Accounts Two accounts,Capital a/c and current a/c One account- Capital a/c(all items included in capital a/c itself) 2-Nature Remain un altered Fluctuates 3-Adjustments Made in Current a/c Adjustment made in current a/c 4-Appearance in the B/S Both Capital and Current a/c Only capital a/c 5-Specifically mentioned in Partnership deed It should be mentioned in the Partnership Deed Not necessary - Calculate interest on drawings from the following :
Month & Year Amount Rs. Jan.-1, 2018 12,000 Feb.- 28, 2018 6,000 April -1, 2018 8,000 Aug.-1, 2018 6,000 Nov.-30, 2018 4,000 Dec.-31, 2018 2,000 Accounting year closes on Dec. 31st every year and interest on drawings charged at 6% p.a.
Ans:
Date Amount Period (Months) Product Jan 1,2018
Feb 28,2018
April 1,2018
Aug 1,2018
Nov 30,2018
Dec 31,2018
12,000 6,000
8,000
6,000
40,000
2,000
12 10
9
5
1
0
14,400
60,000
72,000
30,000
4000
___0___
3,10,000
Interest on Drawings = 3,10,000×6/100×1/12 = Rs.1550 (5 Marks)
To watch video : Click here - Prya is a partner in a firm, her capital at the end of the financial year 2016-17 was 2,00,000. During the year she had withdrawn Rs.30,000. Her share of profit before charging interest on capital for the year wasRs. 8,000. Calculate interest on capital @ 10% p.a.
Ans :
Closing capital Balance – 200,000
Add : Drawings – 30000
2,30,000
Less : Share of profit 8000
Opening capital 2,22,000
Interest on capital = 2,22,000×10/100=22,200 - List out any four items to be credited to a Partner’s current account ,when capitals are fixed. (2 marks)
- Mr. Rajeev, a partner in a firm withdrew Rs .2,000 each every month from the firm. Calculate the amount of interest on drawings @ 8% per annum, assuming that he withdraws the amount :
(a) at the beginning of each month.
(b) at the end of each month. - Jeeja and Rekha are partners in a firm. Their capital balances as on 01-04-2020 were Jeeja Rs. 1,50,000 and Rekha Rs. 2,00,000. On 1-10-2020 Jeeja introduced additional capital ofRs. 50,000. Calculate the interest on capital @ 10% per annum assuming that they close their books of account on 31st March every year.
- A & B are partners in a firm sharing profits and losses in the ratio of 2:1. They admit C as a partner for 1/4 share in profit with a guaranteed minimum profit of Rs.10,000. The net profit of the firm after C’s admission isRs. 30,000. C will get a profit of _______.
(a)Rs. 7,500 (b)Rs. 10,000 (c)Rs. 5,000 (d)Rs. 15,000
Ans :10,000 -
- Akhil, a partner in a firm, withdrew the following amounts during the year ended March 31, 2021 for his personal use. Date of Withdrawal Amount
April 30, 2020 – 7,000
Sept. 30, 2020 – 4,000
Dec. 1, 2020 – 5,000Calculate the amount of interest on drawings to be charged from Akhil, if the rate of interest is at 8% p.a.
Ans : Product method ,806.66 or 807 - Santhosh and Suresh are partners in a firm. Their capital accounts showed a balance ofRs. 50,000 andRs. 40,000 as on 01/04/2020. Santhosh introduced an additional capital ofRs. 10,000 on 01/07/2020 and SureshRs. 5,000 on 01/01/2021. Calculate partners interest on capital @ 6% p.a. for the year ended 31/03/2021.
Ans : Santhosh – 3450, Suresh – 2475 - Reena and Rehna are partners in a firm sharing profits and losses in the ratio of 3 : 2 with capitals ofRs. 5,00,000 andRs. 4,00,000 respectively. The profit of the firm for the year ended March 31, 2021 wasRs. 1,00,000. Interest on capital is to be allowed at 5% p.a. Reena is to be paid a salary ofRs. 2,500 per month. Prepare the Profit and Loss Appropriation Account to show the distribution of profit among the partners.
Ans : Profit Reena – 15000, Rehna – 10000 - Complete the following table with regard to the provisions applicable in the absence of partnership deed on the basis of the hint given :
Hint : Interest on capital No. (a) Sharing of Profits and Losses …………………….. (b) Interest on drawings ……………………. (c) Interest on loan from a partner ……………………… (d) Remuneration to partner ………………….. - Mohan is a partner in a firm. On 1st April, 2017 his capital account showed a balance of 5,00,000. He had withdrawn 50,000 from his capital on 1st July,2017. Calculate the amount of interest on capital @ 6%p.a. for the year ending 31 st March, 2018.
Ans:27750
- Roy and Sara are partners sharing profits and losses in the ratio of 2:1.The following details also available.
Roy Sara Capital Salary (Per month)
Interest on capital
Drawings
Interest on drawings
1,00,000 800
8%
8000
500
70,000 700
8%
4500
350
Profit during the year amounts to Rs.60,000
Prepare partners capital accounts, assuming that capitals are fluctuating.
Ans : Roy – 149100, Sara – 99150. -
- Gireesh and Ramees are equal partners in firm and their capitals as on 01-04-2016 were Rs.80,000 and Rs 60,000 respectively. As per the partnership deed Gireesh is entitled to a monthly salary of Rs.3000.Ramees gets a commission of 10% on the Net profit of the business, before charging such commission .They are also eligible for interest on capital at 8% p.a. Interest on drawings is charged as 6%.p.a. Gireesh withdrew Rs.2000 at the beginning of every month for his personal purpose.Total drawings of Ramees during 2016-17 was Rs .20000.
Prepare Profit and Loss Appropriation Account to show the distribution of profit among partners.The net profit of the business for the year ended 31-03-2017 was rs.124000(before charging above items)
Ans :
Profit – 65780
Cammissio – 12400
Interest on drawings
Gireesh – 24000 x 6/100 x 6.5/12 = 780
Ramees – 20000 x 6/100 x 6/12 = 600 - Gireesh and Ramees are equal partners in firm and their capitals as on 01-04-2016 were Rs.80,000 and Rs 60,000 respectively. As per the partnership deed Gireesh is entitled to a monthly salary of Rs.3000.Ramees gets a commission of 10% on the Net profit of the business, before charging such commission .They are also eligible for interest on capital at 8% p.a. Interest on drawings is charged as 6%.p.a. Gireesh withdrew Rs.2000 at the beginning of every month for his personal purpose.Total drawings of Ramees during 2016-17 was Rs .20000.
- Under the fixed capital method, all adjustments relating to partners capital are shown in________.
(a) Current A/c (b) Capital A/c (c) Profit & Loss Appropriation A/c (d) Profit & Loss A/c (Mar23)
- List out any four items appearing in the credit side of Partners Capital Account, when capitals are fluctuating. (Mar 23 – 2 Score)
Ans : Balance bId or Bank, Interest on capital, Partners salary, Partners Commission, Share of profit, General reserve etc - Rajan and Sajan are partners in a firm sharing profits and losses in the ratio of 2 : 1. Their capital balance as on 01-04-2022 was ` 4,00,000 and ` 3,00,000 respectively. The partnership deed provides that Rajan is to be paid a salary of ` 2,000 per month and Sajan is to get a commission of ` 10,000 for the year. Interest on capital is to be allowed at 8% p.a.
The drawings of Rajan and Sajan for the year were ` 30,000 and ` 10,000 respectively. Interest on Rajan’s drawings was ` 750 and on Sajan’s drawings, ` 250. The Net Profit of the firm before making these adjustments was ` 1,82,000.
Prepare Profit and Loss Appropriation Account. (Mar.23 5 Score)
Ans : Raj an – 62,000,Sajan – 31,000 (Balance – 93,000) - contn….