ಪ್ರಥಮ ಪಿ.ಯು.ಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಆಧ್ಯಾಯ -2 ನೋಟ್ಸ್, 2nd Puc Accountancy Chapter 2 Accounting For Partnership Firms – Basic Concepts Notes Pdf 2024 Karnataka Kannda Kseeb Solutions For Class 12 Accountancy Chapter 2 Notes 2nd Puc Accountancy 2nd Chapter Problems And Solutions 2nd Puc Accountancy Chapter 2 Notes Pdf 2024 Accounting For Partnership Firms : Basic Concepts Notes 2024 Accounting For Partnership Firms : basic Concepts Problems And Solutions Class 12 Accountancy Unit 2 Notes 2024
2nd Puc Accountancy Chapter 2
2nd Puc Accountancy Chapter 2
short Question Answer
Q1. Define Partnership Deed.
A: When the partnership agreement is written and signed By all the partners and is duly stamped according to the Stamp Act, it is called a “Partnership Deed”.
Q2. Explain in 50 words as to why it is considered desirable to make the partnership agreement in writing.
A: Partnership comes into existence as a result of an agreement among the partners. The agreement can be either oral or written. The Partnership Act does not require that the agreement must be in writing. But wherever it Is in writing, the document,’ which contains terms of the agreement is called ‘Partnership
Deed’. It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, the contribution of capital by each partner, the ratio in which the profits and the losses will be shared by the partners, and the entitlement of partners to interest on
capital, interest on loan, etc.
Q3. List the items which may be debited or credited in the capital accounts of the partners when:
(i) Capitals are fixed.
(ii) Capital are fluctuating.
A: a) Capitals are fixed.
b) Capital are fluctuating.
Q4. Why it is considered desirable to make the partnership agreement in writing.
According to the Partnership Act, 1932, having a Partnership deed in writing is not mandatory. However, it is a safe option to have it in writing as it helps avoid any kind of disputes that may arise between partners of a firm in future. It also helps resolution of any kind of disputes as a written partnership that is signed by all the partners is suitable for use as an evidence in the court of law
Q5. Why is Profit and Loss Adjustment Account prepared? Explain.
It is prepared for the following reasons:
1. For recording transactions, errors or omissions which may be left while preparing the final accounts.
2. To act as a account for distributing profit and loss between partners
3. To accommodate for changes in partnership deed.
Q7. Give two circumstances under which the fixed capitals of partners may change.
Following circumstances lead to change in fixed capital of partners
1. Introducing fresh capital in the firm by a partner with consent from other partners.
2. When a portion of capital is withdrawn with consent of partners.
Q8.If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?
When there is withdrawal of money on first day of each quarter. Then the corresponding interest is calculated for a period of seven and half months on the total amount that is withdrawn
Q9. In the absence of partnership deed, specify the rules relating to the following:
(i) Sharing of profits and losses.
(ii) Interest on partner’s capital.
(iii) Interest on Partner’s drawings.
(iv) Interest on Partner’s loan
(v) Salary to a partner.
1. Sharing of profits and losses: If a partnership deed is absent, then the profit sharing ratio should be equal among all partners, as per Partnership Act, 1932.
2. Interest on Partner’s capital: If partnership deed is absent, then as per Partnership Act, 1932, the partners are not entitled to interest earned on capital.
3. Interest on Partner’s drawings: If partnership deed is absent, then as per Partnership Act, 1932, in event of drawing money it shall be charged to the partners
4. Interest on Partner’s loan: If partnership deed is absent then the partner is eligible for a 6% interest on loan to the firm
5. Salary to a partner: In case of absence of partnership deed, the partners are not eligible for any salary, any salary whatsoever if paid will be as appropriation of profit (in case there is profit)
Q10. Explain why it is considered better to make a partnership agreement in writing.
According to the Partnership Act, 1932, it is not mandatory to have Partnership deed in writing. However, it is a safe option to have it in writing as there are chances that the partners may have conflicts in the future that gives rise to dispute among the partners regarding the operations of the firm. A partnership deed that is documented helps in proper functioning of the firm and assists in avoiding any kind of disputes that may arise between partners of a firm in future. It also helps resolution of any kind of disputes as, a written partnership that is signed by all the partners is suitable for use as an evidence in the court of law.
Q11. Illustrate how interest on drawings will be calculated under various situations.
A partner whenever withdraws from the firm, any amount which can be in the form of cash or other forms solely for personal use is called drawings. Interest on drawings is referred to the amount that is charged by firm as interest on the total amount taken as drawings. Interest calculation is dependent on the time and the frequency in which drawing is made. Here are some situations that can be shown where calculation is done for interest charged on drawings.
Karnataka 2nd PUC Accountancy Chapter 2 Accounting for Partnership: Basic Concepts Notes
Twelve Marks Qs
Q1. How will you deal with a change in the profit sharing ratio among existing partners? Take imaginary figures to illustrate your answer?
There is change in profit sharing only when there is addition of a new partner, retirement or death of partner or due to mutually agreed decision among the partners. Some of the factors that need to be taken into account while changing the profit-sharing ratio are: goodwill, accumulated profits and reserves, liabilities and adjustment of capitals and profit or loss on the revaluation of the assets, etc.
General reserve is essentially the accumulated profits and profit or loss that is obtained on the revaluation of assets and liabilities, adjustments in capital etc.
If one or more partners decide that it is the right time for changing profit sharing ratio, then the gaining partner shall gain and the other will lose, therefore the gainer should compensate the latter. This results in debiting gaining partner capital account and crediting the sacrificing partners’ capital account.
Gaining Partner’s Capital A/c Dr.
To Sacrificing Partner’s Capital A/c
(Adjustment entry passed)
Ram, Shyam, and Mohan are partners in a firm sharing profit and loss in 3:2:1 ratio. They decide to share profit and loss equally in future. On that date, the books of the firm shows ₹ 90,000 as general reserve, profit due to revaluation of plant and machinery ₹ 30,000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.
| Particulars | Ram | Shyam | Mohan |
| Share of profit as per 3:2:1 | 45,000 | 30,000 | 15,000 |
| Profit on revaluation of plant and machinery | 15,000 | 10,000 | 5,000 |
| 60,000 | 40,000 | 20,000 | |
| Share of profit as per 1:1:1 | 50,000 | 50,000 | 5,000 |
| Difference (Gain or Loss) | 25,000 | – | 25,000 |
| (Loss) | (Gain) | ||
Here Mohan gains while Ram loses, so Ram needs to be compensated by Mohan with an amount of ₹ 25,000. The following adjustment entry is passed.
Adjustment entry:
| Mohan’s Capital A/c Dr. | 25,000 | |
| To Ram’s Capital A/c ( Adjustment entry passed) | 25,000 |
Q2. What is partnership? What are its chief characteristics? Explain.
According to Section 4 of the Partnership Act, 1932 a partnership is defined as “an agreement between two or more persons who have mutually agreed to share profits or losses that will be carried by all or any one of them acting for all”. The individuals who setup the business jointly are called as partners and all the partners collectively are known as firm.
Following are the important characteristics of a partnership firm:
1. Number of partners: The minimum number of persons to form a partnership is 2 and the maximum is 50 as per the Companies Rules Act, 2014. Any more than the specified limit makes a partnership illegal.
2. Partnership Deed: A partnership deed is a necessary to document that contains all the terms of the partnership and the details about the contribution of each partner towards the firm. It should be in written format as it helps in resolving disputes between partners and acts as evidence in d
3. Business: One of the important characteristics of business is that it is formed in order to do legal business. So any kind of business that is deemed illegal makes the partnership illegal
4. Profit/Loss Sharing: Partners are supposed to take profit and loss as per the ratio that was agreed at the time of partnership.
5. Liability: Firm has unlimited liability and the partners of the firm need to pay from the personal asset if the firm is unable to pay to any concerned third party
6. Mutual Agency: The firm is an agency and all the partners are its agents. Every partner is an agent and binds other partners by his/her act while at the same time is bound by other partners action.
Q3. Tripathi and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2. Their capitals were ₹ 60,000 and ₹ 40,000 as on January 01, 2015. During the year they earned a profit of ₹ 30,000. According to the partnership deed both the partners are entitled to ₹ 1,000 per month as Salary and 5% interest on their capital. They are also to be charged an interest of 5% on their drawings, irrespective of the period, which is ₹ 12,000 for Tripathi, ₹ 8,000 for Chauhan. Prepare Partner’s Accounts when, capitals are fixed.
a) If interest on Capital and Partners’ salaries and interest on drawings is charged against profit, the solution will be as:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to:- | 18,000 | Profit and Loss | 30,000 |
| Tripathi’s Current Account | 18,000 | ||
| Chauhan’s Current Account | 12,000 | ||
| 30,000 | 30,000 |
Partners’ Capital Account
Dr Cr
| Particulars | Tripathi | Chauhan | Particulars | Tripathi | Chauhan |
| Balance b/d | 60,000 | 40,000 | |||
| Balance c/d | 60,000 | 40,000 | |||
| 60,000 | 40,000 | 60,000 | 40,000 |
Partners’ Current Account
Dr Cr
| Particulars | Tripathi | Chauhan | Particulars | Tripathi | Chauhan |
| Drawings | 12,000 | 8,000 | Interest on Capital | 3,000 | 2,000 |
| Interest on Drawings | 600 | 400 | Partners’ Salaries | 12,000 | 12,000 |
| Balance c/d | 20,400 | 17,600 | Profit & Loss Appropriation | 18,000 | 12,000 |
| 33,000 | 26,000 | 33,000 | 26,000 |
b) ) If interest on Capital and Partners’ salaries and interest on drawings is distributed out of profit, the solution will be as:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Partners’ Salary | Profit and Loss (Profit) | 30,000 | |
| Tripathi 1,000 × 12 =12,000 | Interest on Drawings | ||
| Chauhan 1,000 × 12 =12,000 | 24,000 | Tripathi 600 | |
| Chauhan 400 | 1,000 | ||
| Interest on Capital | |||
| Tripathi 3,000 | |||
| Chauhan 2,000 | 5,000 | ||
| Profit Transferred to | |||
| Tripathi’s Current 1,200 | |||
| Chauhan’s Current 800 | 2,000 | ||
| 31,000 | 31,000 |
Partners’ Capital Account
Dr Cr
| Particulars | Tripathi | Chauhan | Particulars | Tripathi | Chauhan |
| Balance b/d | 60,000 | 40,000 | |||
| Balance c/d | 60,000 | 40,000 | |||
| 60,000 | 40,000 | 60,000 | 40,000 |
Partners’ Current Account
Dr Cr
| Particulars | Tripathi | Chauhan | Particulars | Tripathi | Chauhan |
| Drawings | 12,000 | 8,000 | Partners’ Salaries | 12,000 | 12,000 |
| Interest on Drawings | 600 | 400 | Interest on Capital | 3,000 | 2,000 |
| Balance c/d | 3,600 | 6,400 | Profit and Loss Appropriation | 1,200 | 800 |
| 16,200 | 14,800 | 16,200 | 14,800 |
Q4. Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their capital, were ₹ 90,000 and ₹ 60,000. The profit during the year were ₹ 45,000. According to partnership deed, both partners are allowed salary, ₹ 700 per month to Anubha and ₹ 500 per month to Kajal. Interest allowed on capital @ 5% p.a. The drawings at the end of the period were ₹ 8,500 for Anubha and ₹ 6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings. Prepare partners’ capital accounts, assuming that the capital account are fluctuating.
a) Note: If Partners’ Salaries, Interest on capital and Interest on Drawing are treated as these have already adjusted in Profit and Loss Account. The Solution will be as
Profit and Loss Appropriation Account\
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit Transferred to Current A/c | Profit and Loss | 45,000 | |
| Anubha’s Capital 30,000 | |||
| Kajal’s Capital 15,000 | 45,000 | ||
| 45,000 | 45,000 |
Partners’ Capital Account
Dr Cr
| Particulars | Anubha | Kajal | Particulars | Anubha | Kajal |
| Drawings | 8,500 | 6,500 | Balance b/d | 90,000 | 60,000 |
| Interest on Drawings | 425 | 325 | Partners’ Salaries | 8,400 | 6,000 |
| Interest on Capital | 4,500 | 3,000 | |||
| Balance c/d | 1,23,975 | 77,175 | Profit and Loss Appropriation | 30,000 | 15,000 |
| 1,32,900 | 84,000 | 1,32,900 | 84,000 |
b) Alternative Note: If Partners’ salaries, interest on capital and interest on drawings adjusted in Profit and Loss Appropriation Account. The solution will be as.
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Partners’ Salaries: | Profit and Loss Account | 45,000 | |
| Anubha 8,400 | Interest on Drawings | ||
| Kajal 6,000 | 14,400 | Anubha 425 | |
| Kajal 325 | 750 | ||
| Interest on Capital: | |||
| Anubha 4,500 | |||
| Kajal 3,000 | 7,500 | ||
| Profit transferred to | |||
| Anubha’s Capital 15,900 | |||
| Kajal’s Capital 7,950 | 23,850 | ||
| 45,750 | 45,750 |
Partners’ Capital Account
Dr Cr
| Particulars | Anubha | Kajal | Particulars | Anubha | Kajal |
| Drawings | 8,500 | 6,500 | Balance b/d | 90,000 | 60,000 |
| Interest on Drawings | 425 | 325 | Partners’ Salaries | 8,400 | 6,000 |
| Interest on Capital | 4,500 | 3,000 | |||
| Balance c/d | 1,09,875 | 70,125 | Profit and Loss Appropriation | 15,900 | 7,950 |
| 1,18,800 | 76,950 | 1,18,800 | 76,950 |
Q5. Harshad and Dhiman are in partnership since April 01, 2016. No Partnership agreement was made. They contributed ₹ 4, 00,000 and 1, 00,000 respectively as capital. In addition, Harshad advanced an amount of ₹ 1, 00,000 to the firm, on October 01, 2016. Due to a long illness, Harshad could not participate in business activities from August 1, to September 30, 2017. The profits for the year ended March 31, 2017, amounted to ₹ 1, 80,000. A dispute has arisen between Harshad and Dhiman.
Harshad Claims:
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in proportion of capital;
Dhiman Claims:
(i) Profits should be distributed equally;
(ii) He should be allowed ₹ 2,000 p.m. as remuneration for the period he managed the business, in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.
You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and Loss Appropriation Account.
The solution for this question is as follows:
DISTRIBUTION OF PROFITS
Harshad Claims:
Decisions
(i) If there is no agreement on interest on partner’s capital, according to Indian partnership act 1932, no interest will be allowed to partners.
(ii) If there is no agreement on the matter of profit sharing, according to partnership act 1932, profit shall be distributed equally.
Dhiman Claims:
Decisions
(i) Dhiman’s claim is justified, according to the partnership act 1932 if there is no agreement on the matter of profit distribution, profit shall be distributed equally.
(ii) No salary will be allowed to any partner because there is no agreement on the matter of remuneration.
(iii) Dhiman’s claim is not justified on the matter of interest on capital but justified on the matter of interest on a loan. If there is no agreement on interest on the partner’s loan, Interest shall be provided at 6% p.a.
Profit and Loss Adjustment Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Partner’s Loan | Profit and Loss | 1,80,000 | |
| Harshad 1,00,000 × (6/100) × (6/12) | 3,000 | ||
| Profit and Loss Appropriation | 1,77,000 | ||
| 1,80,000 | 1,80,000 |
Profit and Loss Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss Adjustment | 1,77,000 | |
| Harshad’s Capital | 88,500 | ||
| Sharma’s Capital | 88,500 | ||
| 1,77,000 | 1,77,000 |
Q6. Aakriti and Bindu entered into a partnership for making garments on April 01, 2016 without any Partnership agreement. They introduced Capitals of ₹ 5, 00,000, and ₹ 3, 00,000 respectively on October 01, 2016. Aakriti Advanced. ₹ 20,000 by way of loan to the firm without any agreement as to interest. The profit and Loss account for the year ended March 2017 showed a profit of ₹ 43,000. Partners could not agree upon the question of interest and the basis of the division of profit. You are required to divide the profits between them giving a reason for your solution.
The solution to this question is as follows:
Profit and Loss Adjustment Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Partner’s Loan | Profit and Loss | 43,000 | |
| Aakriti 20,000 × (6/100) × (6/12) | 600 | ||
| Profit transferred to | |||
| Aakriti’s Capital 21,200 | |||
| Bindu’s Capital 21,200 | 42,400 | ||
| 43,000 | 43,000 |
Reason
a) Interest on the partner’s loan shall be allowed at 6% p.a. because there is no partnership agreement.
b) Interest on capital shall not be allowed because there is no agreement on interest on capital.
c) Profit shall be distributed equally because the profit-sharing ratio has not been given.
Q7. Rakhi and Shikha are partners in a firm, with capitals of ₹ 2, 00,000 and ₹ 3, 00,000 respectively. The profit of the firm, for the year ended 2016-17 is ₹ 23,200. As per the Partnership agreement, they share the profit in their capital ratio, after allowing a salary of ₹ 5,000 per month to Shikha and interest on the Partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew ₹ 7,000 and Shikha ₹ 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation Accounts and Partner’s Capital Accounts.
If interest on capital and Partners’ salaries will be provided even if the firm involves in the loss.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Partner’s Salaries | Profit and Loss | 23,200 | |
| Shikha | 60,000 | Loss transferred to | |
| Rakhi Capital 34,720 | |||
| Interest on Capital | Shikha’s Capital 52,080 | 86,800 | |
| Rakhi 20,000 | |||
| Shikha 30,000 | 50,000 | ||
| 1,10,000 | 1,10,000 |
Partners’ Capital Account
Dr Cr
| Particulars | Rakhi | Shikha | Particulars | Rakhi | Shikha |
| Drawings | 7,000 | 10,000 | Balance b/d | 2,00,000 | 3,00,000 |
| Profit & Loss Appropriation | 34,720 | 52,080 | Partner’s Salaries | 60,000 | |
| Balance c/d | 1,78,280 | 3,27,920 | Interest on Capital | 20,000 | 30,000 |
| 2,20,000 | 3,90,000 | 2,20,000 | 3,90,000 |
If interest on capital and salaries will be provided out of profit
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Partner’s Salaries | Profit and Loss | 23,200 | |
| Shikha {23,200 × (6/11)} | 12,655 | ||
| Interest on Capital | |||
| Rakhi {23,200 × (2/11)} | 4,218 | ||
| Shikha {23,200 × (3/11)} | 6,327 | 23,200 | |
| 23,200 | 23,200 |
If profit is less than the sum of distributable items, distribution shall be in proportion of items for distribution.
| Partners Salaries | Ratio | ||
| Shikhar (₹ 60,000) | 6 | 23,200 × (6/11) | 12,655 |
| Interest on Capital | |||
| Rakhi (₹ 20,000) | 2 | 23,200 × (2/11) | 4,218 |
| Shikhar (₹ 30,000) | 3 | 23,200 × (3/11) | 6,327 |
| 11 | 23,200 |
Partners’ Capital Account
Dr Cr
| Particulars | Rakhi | Shikha | Particulars | Rakhi | Shikha |
| Drawings | 7,000 | 10,000 | Balance b/d | 2,00,000 | 3,00,000 |
| Partner’s Salaries | 12,655 | ||||
| Balance c/d | 1,97,218 | 3,08,972 | Interest on Capital | 4,218 | 6,327 |
| 2,04,218 | 3,18,972 | 2,04,218 | 3,18,972 |
Q8. Lokesh and Azad are partners sharing profits in the ratio of 3:2, with capitals of ₹ 50,000 and ₹ 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a salary of ₹ 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but after charging Azad’s salary amounted to ₹ 12,500. A provision of 5% of profits is to be made in respect of the manager’s commission. Prepare accounts showing the allocation of profits and partner’s capital accounts.
The solution for this question is as follows:
Profit and Loss Adjustment Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Capital | By Profit and Loss (12,500 + 2,500) | 15,000 | |
| Lokesh 3,000 | |||
| Azad 1,800 | 4,800 | ||
| Partner’s Salaries | |||
| Azad | 2,500 | ||
| Provision for Manager’s Commission 15,000 × (5/100) | 750 | ||
| Profit transferred to | |||
| Lokesh Capital 4,170 | |||
| Azad Capital 2,780 | 6,950 | ||
| 15,000 | 15,000 |
Partners’ Capital Account
Dr Cr
| Particulars | Lokesh | Azad | Particulars | Lokesh | Azad |
| Balance b/d | 50,000 | 30,000 | |||
| Interest on Capital | 3,000 | 1,800 | |||
| Balance c/d | 57,170 | 37,080 | Partner’s Salaries | 2,500 | |
| Profit and Appropriation | 4,170 | 2,780 | |||
| 57,170 | 37,080 | 57,170 | 37,080 |
Q9. The partnership agreement between Maneesh and Girish provides that:
(i) Profits will be shared equally;
(ii) Maneesh will be allowed a salary of ₹ 400/month;
(iii) Girish who manages the sales department will be allowed a commission equal to 10% of the net profits, after allowing Maneesh’s salary;
(iv) 7% interest will be allowed on partner’s fixed capital;
(v) 5% interest will be charged on partner’s annual drawings;
(vi) The fixed capitals of Maneesh and Girish are ₹ 1, 00,000 and ₹ 80,000, respectively. Their annual drawings were ₹ 16,000 and 14,000, respectively. The net profit for the year ending March 31, 2015 amounted to ₹ 40,000;
Prepare firm’s Profit and Loss Appropriation Account.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Partner’s Salary | Profit and Loss | 40,000 | |
| Maneesh | 4,800 | Interest on Drawings | |
| Maneesh 800 | |||
| Partner’s commission | Girish 700 | 1,500 | |
| Girish {(40,000 – 4,800) × (10/100)} | 3,520 | ||
| Interest on Capital | |||
| Maneesh 7,000 | |||
| Girish 5,600 | 12,600 | ||
| Profit transferred to | |||
| Maneesh’s Current 10,290 | |||
| Girish’s Current 10,290 | 20,580 | ||
| 41,500 | 41,500 |
Q10. Ram, Raj and George are partners sharing profits in the ratio 5: 3: 2. According to the partnership agreement George is to get a minimum amount of ₹ 10,000 as his share of profits every year. The net profit for the year 2013 amounted to ₹ 40,000. Prepare the Profit and Loss Appropriation Account.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 40,000 | |
| Ram’s Capital (20,000 – 1,250) | 18,750 | ||
| Raj’s Capital (12,000 – 750) | 11,250 | ||
| George’s Capital (8,000 + 1,250 + 750) | 10,000 | ||
| 40,000 | 40,000 |
Q11. Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of ₹ 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2016 and March 31, 2017 were ₹ 40,000 and ₹ 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.
The solution for this question is as follows:
Profit and Loss Appropriation Account for the year ended 31st31st March 2016
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 40,000 | |
| Amann’s Capital 16,000 | 16,000 | ||
| Babita’s Capital (16,000 – 2,000) | 14,000 | ||
| Suresh’s Capital (8,000 + 2,000) | 10,000 | ||
| 40,000 | 40,000 |
Profit and Loss Appropriation Account for the year ended 31st March 2017
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 60,000 | |
| Amann’s Capital | 24,000 | ||
| Babita’s Capital | 24,000 | ||
| Suresh’s Capital | 12,000 | ||
| 60,000 | 60,000 |
Q12. Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of ₹ 1, 50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
(i) Partners capital on April 1, 2016;
Simmi, ₹ 30,000; Sonu, ₹ 60,000;
(ii) Current accounts balances on April 1, 2016;
Simmi, ₹ 30,000 (cr.); Sonu, ₹ 15,000 (cr.);
(iii) Partners drawings during the year amounted to
Simmi, ₹ 20,000; Sonu, ₹ 15,000;
(iv) Interest on capital was allowed @ 5% p.a.
(v) Interest on drawing was to be charged @ 6% p.a. at an average of six months;
(vi) Partners’ salaries: Simmi ₹ 12,000 and Sonu ₹ 9,000. Also show the partners’ current accounts.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Capital | Profit and Loss Account | 1,50,000 | |
| Simmi 1,500 | Interest on Drawings | ||
| Sonu 3,000 | 4,500 | Simmi 600 | |
| Sonu 450 | 1,050 | ||
| Partners’ Salaries | |||
| Simmi 12,000 | |||
| Sonu 9,000 | 21,000 | ||
| Profit transferred to | |||
| Simmi’s Current 94,162 | |||
| Sonu’s Current 31,388 | 1,25,550 | ||
| 1,51,050 | 1,51,050 |
Partners’ Capital Account
Dr Cr
| Particulars | Simmi | Sonu | Particulars | Simmi | Sonu |
| Balance b/d | 30,000 | 60,000 | |||
| Balance c/d | 30,000 | 60,000 | |||
| 30,000 | 60,000 | 30,000 | 60,000 |
Partners’ Current Account
Dr Cr
| Particulars | Simmi | Sonu | Particulars | Simmi | Sonu |
| Drawings | 20,000 | 15,000 | Balance b/d | 30,000 | 15,000 |
| Interest on Drawings | 600 | 450 | Interest on Capital | 1,500 | 3,000 |
| Partners’ Salaries | 12,000 | 9,000 | |||
| Balance c/d | 1,17,662 | 43,388 | Profit and Loss Appropriation | 94,162 | 31,388 |
| 1,37,662 | 58,388 | 1,37,662 | 58,388 |
Q13. Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals contributed on commencement of business which were ₹ 80,000 and ₹ 60,000 respectively. The firm started business on April 1, 2016. According to the partnership agreement, interest on capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a monthly salary of ₹ 2,000 and ₹ 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was ₹ 1, 00,300. The drawings of Ramesh and Suresh were ₹ 40,000 and ₹ 50,000, respectively. Interest on drawings amounted to ₹ 2,000 for Ramesh and ₹ 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Capital | Profit and Loss | 1,00,300 | |
| Ramesh 9,600 | Interest on Drawings | ||
| Suresh 7,200 | 16,800 | Ramesh 2,000 | |
| Suresh 2,500 | 4,500 | ||
| Partners’ Salaries | |||
| Ramesh 24,000 | |||
| Suresh 36,000 | 60,000 | ||
| Profit Transferred to | |||
| Ramesh’s Capital {28,000 × (4/7)} | 16,000 | ||
| Suresh’s Capital {28,000 × (3/7)} | 12,000 | ||
| 1,04,800 | 1,04,800 |
Partners’ Capital Account
Dr Cr
| Particulars | Ramesh | Suresh | Particulars | Ramesh | Suresh |
| Drawings | 40,000 | 50,000 | Cash | 80,000 | 60,000 |
| Interest on Drawings | 2,000 | 2,500 | Interest on Capital | 9,600 | 7,200 |
| Balance c/d | 87,600 | 62,700 | Partners’ Salaries | 24,000 | 36,000 |
| Profit & Loss Appropriation | 16,000 | 12,000 | |||
| 1,29,600 | 1,15,200 | 1,29,600 | 1,15,200 |
| Capital Ratio | = | Ramesh | : | Suresh |
| 80,000 | : | 60,000 | ||
| 4 | : | 3 |
14. Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:
(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
(ii) 5% interest is to be allowed on capital;
(iii) Vanita should be paid a monthly salary of ₹ 600.
The following balances are extracted from the books of the firm, on March 31, 2017.
| Sukesh | Verma* | |
| ₹ | ₹ | |
| Capital Accounts | 40,000 | 40,000 |
| Current Accounts | (Cr.) 7,200 | (Cr.) 2,800 |
| Drawings | 10,850 | 8,150 |
Net profit for the year, before charging interest on capital and after charging partner’s salary was ₹ 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Capital | Profit and Loss | 9,500 | |
| Sukesh 2,000 | |||
| Vanita 2,000 | 4,000 | ||
| Profit transferred to | |||
| Sukesh’s Current {5,500 × (3/5)} | 3,300 | ||
| Vanita’s Current {28,000 × (2/5)} | 2,200 | ||
| 9,500 | 9,500 |
Partner’s Capital Account
Dr Cr
| Particulars | Sukesh | Vanita | Particulars | Sukesh | Vanita |
| Balance b/d | 40,000 | 40,000 | |||
| Balance c/d | 40,000 | 40,000 | |||
| 40,000 | 40,000 | 40,000 | 40,000 |
Partner’s Current Account
Dr Cr
| Particulars | Sukesh | Vanita | Particulars | Sukesh | Vanita |
| Drawings | 10,850 | 8,150 | Balance b/d | 7,200 | 2,800 |
| Partner’s Salaries | 7,200 | ||||
| Profit and Loss Appropriation | 3,300 | 2,200 | |||
| Balance c/d | 1,650 | 6,050 | Interest on capital | 2,000 | 2,000 |
| 12,500 | 14,200 | 12,500 | 14,200 |
Q15. Sunflower and Pink Rose started partnership businesses on April 01, 2016, with capitals of ₹ 2, 50,000 and ₹ 1, 50,000, respectively. On October 01, 2016, they decided that their capital should be ₹ 2, 00,000 each. The necessary adjustments in the capital are made by introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.
The solution for this question is as follows:
Product Method
Sunflower
| 01 April 2016 to 30 September 2016 | 2,50,000 × 6 = | 15,00,000 |
| 01 October 2016 to 31 March 2017 | 2,00,000 × 6 = | 12,00,000 |
| Sum of Product | 27,00,000 |
Pink Rose
| 01 April 2016 to 30 September 2016 | 1,50,000 × 6 = | 9,00,000 |
| 01 October 2016 to 31 March 2017 | 2,00,000 × 6 = | 12,00,000 |
| Sum of Product | 21,00,000 |
Alternative Method:
Simple Interest Method
Sunflower
| April 01, 2016 to September 30, 2016 | 2,50,000 × | 10 100 | × | 6 12 | = | ₹ 12,500 |
| October 01, 2016 to March 31, 2017 | 2,00,000 × | 10 100 | × | 6 12 | = | ₹ 10,000 |
| Interest on Sunflower’s Capital | = | ₹ 22,500 |
Pink Rose
| April 01, 2016 to September 30, 2016 | 1,50,000 × | 10 100 | × | 6 12 | = | ₹ 7,500 |
| October 01, 2016 to March 31, 2017 | 2,00,000 × | 10 100 | × | 6 12 | = | ₹ 10,000 |
| Interest on Pink Rose’s Capital | = | ₹ 17,500 |
Q16. On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the books of the firm at ₹ 4, 00,000, ₹ 3, 00,000 and ₹ 2, 00,000, respectively. Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted to ₹ 1, 50,000 and the partner’s drawings had been Mountain: ₹ 20,000, Hill ₹ 15,000 and Rock ₹ 10,000. Calculate interest on capital.
The solution for this question is as follows:
Generally interest on Capital is calculated on opening balance of capital. If additional capital is not given.
| Mountain | Hill | Rock | |
| Closing Capital | 4,00,000 | 3,00,000 | 2,00,000 |
| Add: Drawings | 20,000 | 15,000 | 10,000 |
| Less: Profit (1:1:1) | (50,000) | (50,000) | (50,000) |
| Opening Capital | 3,70,000 | 2,65,000 | 1,60,000 |
Interest on Capital
| Mountain | 3,70,000 ×10 / 100= ₹ 37,000 |
| Hill | 2,65,000 × 10 / 100= ₹ 26,500 |
| Rock | 1,60,000 × 10 / 100= ₹ 16,000 |
17. Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2017:
| Balance Sheet as at March 31, 2017 | |||
| Liabilities | Amount | Assets | Amount |
| Neelkant’s Capital | 10,00,000 | Sundry Assets | 30,00,000 |
| Mahadev’s Capital | 10,00,000 | ||
| Neelkant’s Current Account | 1,00,000 | ||
| Mahadev’s Current Account | 1,00,000 | ||
| Profit and Loss Apprpriation | |||
| (March 2017) | 8,00,000 | ||
| 30,00,000 | 30,00,000 |
During the year Mahadev’s drawings were ₹ 30,000. Profits during 2017 is ₹ 10, 00,000. Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.
Interest on Capital
| Neelkant’s | 10,00,000 × 5 / 100= ₹ 50,000 |
| Mahadev’s | 10,00,000 × 5 / 100= ₹ 50,000 |
Q18. Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2018.
| May 01, 2017 | ₹ 12,000 |
| July 31, 2017 | ₹ 6,000 |
| September 30, 2017 | ₹ 9,000 |
| November 30, 2017 | ₹ 12,000 |
| January 01, 2018 | ₹ 8,000 |
| March 31, 2018 | ₹ 7,000 |
Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.
Interest is calculated as follows:
Product Method
| Drawings × Period | Product | |
| 01 May, 2017 to 31 March 2018 | 12,000 × 11 = | 1,32,000 |
| 31 July, 2017 to 31 March 2018 | 6,000 × 8 = | 48,000 |
| 30 September, 2017 to 31 March 2018 | 9,000 × 6 = | 54,000 |
| 30 Nov. 2017 to 31 March 2018 | 12,000 × 4 = | 48,000 |
| 01 Jan. 2018 to 31 March 2018 | 8,000 × 3 = | 24,000 |
| 31 March 2018 to 31 March 2018 | 7,000 × 0 = | 0 |
| Sum of Product | 3,06,000 |
Q19. The capital accounts of Moli and Golu showed balances of ₹ 40,000 and ₹ 20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10% p.a. and interest on drawings, @ 12 p.a. Golu advanced a loan of ₹ 10,000 to the firm on August 01, 2016. During the year, Moli withdrew ₹ 1,000 per month at the beginning of every month whereas Golu withdrew ₹ 1,000 per month at the end of every month. Profit for the year, before the above mentioned adjustments was ₹ 20,950. Calculate interest on drawings show distribution of profits and prepare partner’s capital accounts.
The solution for this question is as follows:
Profit and Loss Adjustment Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Interest on Capital | Profit and Loss Account | 20,950 | |
| Moli 4,000 | Interest on Drawings | ||
| Golu 2,000 | 6,000 | Moli 780 | |
| Golu 660 | 1,440 | ||
| Interest on Partner’s Loan | |||
| Golu’s {10,000 × (6/100) × (8/12)} | 400 | ||
| Profit transferred to | |||
| Moli’s Capital {15,990 × (3/5)} | 9,594 | ||
| Golu’s Capital {15,990 × (2/5)} | 6,396 | ||
| 22,390 | 22,390 |
Partners’ Capital Account
Dr Cr
| Particulars | Moli | Golu | Particulars | Moli | Golu |
| Drawings | 12,000 | 12,000 | Balance b/d | 40,000 | 20,000 |
| Interest on Drawing | 780 | 660 | Interest on Capital | 4,000 | 2,000 |
| Balance c/d | 40,814 | 15,736 | Profit and Loss Adjustment | 9,544 | 6,396 |
| 53,594 | 28,396 | 53,594 | 28,396 |
Q20. Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of ₹ 40,000 and ₹ 30,000, respectively. They withdrew from the firm the following amounts, for their personal use:
| Rakesh | Month | ₹ |
| May 31, 2016 | 600 | |
| June 30, 2016 | 500 | |
| August 31, 2016 | 1,000 | |
| November 1, 2016 | 400 | |
| December 31, 2016 | 1,500 | |
| January 31, 2017 | 300 | |
| March 01, 2017 | 700 | |
| Rohan | At the beginning of each month | 400 |
Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of accounts are closed on March 31, 2017, every year.
The solution for this question is as follows:
Rakesh’s Interest on Drawings
| Drawings × Period | Product | |
| 31 May 2016 to 31 March 2017 | 600 × 10 = | 6,000 |
| 30 June 2016 to 31 March 2017 | 500 × 9 = | 4,500 |
| 31 August 2016 to 31 March 2017 | 1,000 × 7 = | 7,000 |
| 1 November 2016 to 31 March 2017 | 400 × 5 = | 2,000 |
| 31 December 2016 to 31 March 2017 | 1,500 × 3 = | 4,500 |
| 31 January 2017 to 31 March 2017 | 300 × 2 = | 6,00 |
| 01 March 2017 to 31 March 2017 | 700 × 1 = | 700 |
| Sum of Product | 25,300 |
Q21. Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were ₹ 2, 50,000 and ₹ 1, 50,000, respectively. They share profits equally. On July 01, 2017, they decided that their capitals should be ₹ 1, 00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31, 2018.
The solution for this question is as follows:
Interest on Capital
Raj
| Capital × Period | Product | |
| 1 April 2017 to 30 June 2017 | 2,50,000 × 3 = | 7,50,000 |
| 1 July 2017 to 31 March 2018 | 1,00,000 × 9 = | 9,00,000 |
| Sum of Product | 16,50,000 |
Neeraj
| Capital × Period | Product | |
| 1 April 2017 to 30 June 2017 | 1,50,000 × 3 = | 4,50,000 |
| 1 July 2017 to 31 March 2018 | 1,00,000 × 9 = | 9,00,000 |
| Sum of Product | 13,50,000 |
Q22. Harish is a partner in a firm. He withdrew the following amounts during the year 2017:
| ₹ | |
| February 01 | 4,000 |
| May 01 | 10,000 |
| June 30 | 4,000 |
| October 31 | 12,000 |
| December 31 | 4,000 |
Interest on drawings is to be charged @ 7.5 % p.a.
Calculate the amount of interest to be charged on Harish’s drawings for the year ending December 31, 2017.
The solution for this question is as follows:
Calculation of interest on Harish’s drawings
| Drawings × Period | Product | |
| 01 Feb. 17 to 31 Dec. 17 | 4,000 × 11 = | 44,000 |
| 01 May 17 to 31 Dec. 17 | 10,000 × 8 = | 80,000 |
| 30 June 17 to 31 Dec. 17 | 4,000 × 6 = | 24,000 |
| 31 Oct. 17 to 31 Dec. 17 | 12,000× 2 = | 24,000 |
| 31 Dec. 17 to 31 Dec. 17 | 4,000 × 0 = | 0 |
| Sum of Product | 1,72,000 |
Q23. On March 31, 2017, after the close of books of accounts, the capital accounts of Ram, Shyam and Mohan showed balance of ₹ 24,000 ₹ 18,000 and ₹ 12,000, respectively. It was later discovered that interest on capital @ 5% had been omitted. The profit for the year ended March 31, 2017, amounted to ₹ 36,000 and the partner’s drawings had been Ram, ₹ 3,600; Shyam, ₹ 4,500 and Mohan, ₹ 2,700. The profit sharing ratio of Ram, Shyam and Mohan was 3:2:1. Calculate interest on capital.
The solution for this question is as follows:
| Ram | Shyam | Mohan | |
| Capital on March 31 | 24,000 | 18,000 | 12,000 |
| Add: Drawings | 3,600 | 4,500 | 2,700 |
| Less: Profit (3:2:1) | (18,000) | (12,000) | (6,000) |
| Capital April 01, 2012 | 9,600 | 10,500 | 8,700 |
Q24. Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’ share in profit has been guaranteed by Amit and Sumit to be a minimum sum of ₹ 8,000. Profits for the year ended March 31, 2017 was ₹ 36,000. Divide profit among the partners.
The solution for this question is as follows:
Guarantee of Profit to the partners
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Particulars | ||
| Profit transferred to | Profit and Loss | 36,000 | |||
| Amit’s Capital | 18,000 | ||||
| Less: Gurantee to Samiksha {2,000 × (3/5)} | (1,200) | 16,800 | |||
| Sumit’s Capital | 12,000 | ||||
| Less: Gurantee to Samiksha {2,000 × (2/5)} | (800) | 11,200 | 11,200 | ||
| Samiksha Capital | 6,000 | ||||
| Add: Amit’s Guarantee | 1,200 | ||||
| Add: Sumit’s Guarantee | 800 | 8,000 | 8,000 | ||
| 36,000 | 36,000 |
Q25. Pinki, Deepti and Kaku are partners sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than ₹ 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to ₹ 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ | |
| Profit transferred to | Profit & Loss | 40,000 | ||
| Pinki’s Capital | 20,000 | |||
| Less: Gurantee to Kaku {1,000 × (1/2)} | (500) | 19,500 | ||
| Deepti’s Capital | 16,000 | |||
| Less: Guarantee to Kaku {1,000 × (1/2)} | (500) | 15,500 | ||
| Kaku’s Capital | 4,000 | |||
| Add: Deficiency received from | ||||
| Pinki | 500 | |||
| Deepti | 500 | 5,000 | ||
| 40,000 | 40,000 |
Q26. Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of ₹ 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are ₹ 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.
The solution for this question is as follows:
Profit and Loss Appropriation Account as on March 31, 2016
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 40,000 | |
| Abhay’s Capital | 20,000 | ||
| Siddharth’s Capital 12,000 | |||
| Less: Guarantee to Kusum’s (2,000) | 10,000 | ||
| Kusum’s Capital 8,000 | |||
| Add: Deficiency received from Siddharth 2,000 | 10,000 | ||
| 40,000 | 40,000 |
Profit and Loss Appropriation Account as on March 31, 2017
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 60,000 | |
| Abhay’s Capital | 30,000 | ||
| Siddharth’s Capital | 18,000 | ||
| Kusum’s Capital | 12,000 | ||
| 60,000 | 60,000 |
Q27. Radha, Mary, and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than ₹ 5,000. The profits for the year ending March 31, 2017 amount to ₹ 35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show the distribution of profit among partners.
The solution for this question is as follows:
Profit and Loss Appropriation Account
Dr Cr
| Particulars | Amount₹ | Particulars | Amount₹ |
| Profit transferred to | Profit and Loss | 35,000 | |
| Radha’s Capital 17,500 | |||
| Less: Fatima’s Deficiency {1,500 × (3/5)} (900) | 16,600 | ||
| Mary’s Capital 14,000 | |||
| Less: Fatima’s Deficiency {1,500 × (2/5)} (600) | 13,400 | ||
| Fatima’s Capital 3,500 | |||
| Add: Deficiency born by | |||
| Radha 900 | |||
| Mary 600 | 5,000 | ||
| 35,000 | 35,000 |
| Journal | ||||
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ |
| Profit and Loss Appropriation A/c | Dr. | 35,000 | ||
| To Radha’s Capital A/c | 16,600 | |||
| To Mary’s Capital A/c | 13,400 | |||
| To Fatima’s Capital A/c | 5,000 | |||
| (Profit distributed among Partners) |
Alternative Method
| Journal | ||||
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ |
| Profit and Loss Appropriation A/c | Dr. | 35,000 | ||
| To Radha’s Capital A/c | 17,500 | |||
| To Mary’s Capital A/c | 14,000 | |||
| To Fatima’s Capital A/c | 3,500 | |||
| (Profit distributed among Partners) | ||||
| Radha’s Capital A/c | Dr. | 900 | ||
| Mary’s Capital A/c | Dr. | 600 | ||
| To Fatima’s Capital A/c | 1,500 | |||
| (Deficiency of Fatima’s Share taken from Radha and Mary) |
FAQ:
A: When the partnership agreement is written and signed By all the partners and is duly stamped according to the Stamp Act, it is called a “Partnership Deed”.
A: According to the Partnership Act, of 1932, having a Partnership deed in writing is not mandatory. However, it is a safe option to have it in writing as it helps avoid any kind of disputes that may arise between partners of a firm in the future. It also helps resolution of any kind of dispute as a written partnership that is signed by all the partners is suitable for use as evidence in a court of law
The following circumstances lead to change in the fixed capital of partners
1. Introducing fresh capital in the firm by a partner with consent from other partners.
2. When a portion of capital is withdrawn with the consent of partners.
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