G . S.

College of Commerce, Wardha

FINAL ACCOUNTS OF PARTNERSHIP FIRM
XII (C)

Account of Partnership final Account :

Generally in the final accounts we have to prepare following Accounts & Statements.
(1) Trading Account (2) Profit and Loss Account (3) Balance sheet.
In the Book’s of Partnership Firm.
Trading A/c
At the Year ending 31 March 2020
Debit Side Credit Side
Particuler Amount Particuler Amount
To Opoening Stock XXX By Sales XXX
To Purchase XXX (-) Sales Return XXX
(-) Purchase Return XXX (Return Inward ) XXX
(Return outward) XXX (+) Unrecorded Sale * XXX
(+) Unrecorded Purchase * XXX XXX
XXX By Good Lost by theft * XXX
To Carriage Exp.on Purchase XXX By Goods distributed as free sample * XXX
To Carriage Inward XXX By Goods Lost in Accident * XXX
To Foright, carriage & Transporting Exp. XXX By Goods Withdrawn by Partners for
To Dock Charges XXX Personal use * XXX
To Custom Duty/Excise duty XXX By Goods Lost by fire * XXX
To Import duty/Tax XXX By Goods free distributed
To Poroduction/ Local Tax XXX for Advertisement * XXX
To Octari / Entry Tax XXX
To Wages XXX By Closing stock * XXX
To Wages & Salary XXX
To Poroductive / factory Wages XXX
To direct Wages XXX
To Fuel, Power, Coal, Coke, gas, water XXX
oil, Heating & Lighting (Factory )
To Steam, Motive, Elet. Power XXX
To factory Rent / Exp / Rate XXX
To Royalty on Purchase XXX
To factory Insurance XXX Gross Loss --> XXX
To Works Manager Salary XXX ( Transfer to Profit & Loss A/c )
To Primary Packing charges XXX
To Gross Profit --> XXX
(Transfer to P & L. A/c )
XXX XXX

Profit & Loss Account

At the year ending 31 March 2020
Debit Credit
Particuler Amount Particuler Amount
Gross Loss --- XXX Gross Profit --- XXX
( Transfer from Trading A/c ) ( Transfer from Trading A/c )
To Salaries XXX By Commission Received XXX
To Salaries & Wages XXX By Discount Received / earned XXX
To Indirect / unforductive Wages XXX By Interest Received XXX
To Rent & Rates XXX By Dividend Received XXX
To Electricity / Lighting XXX By Rent Received XXX
 ....2....
Particuler Amount Particuler Amount
To Telephone Bill XXX By Sundry / Miscellaneous Receipts XXX
To Printing & Stationery XXX By Profit on Sale of Assets XXX
To Travelling Expense XXX By Interest on Bank Deposite * XXX
To Deprecitation on Assets * XXX By Interest on Investment XXX
To Loading Charges XXX By Interest on Cash Drawing XXX
To Audit fees XXX By Partners *
To Entertainment Exp. XXX By Received Interest on given Loan * XXX
To Repair / Renewals / Maintenance XXX By Sundry Income XXX
To Interest on taken Loan XXX By Provission for Received discount Reserve XXX
To Sundry / Miscellaneous Exp. XXX
To Conveyance Allowance XXX
To Loss by fire * XXX
To Loss by Theft * XXX
To Loss in Accident * XXX
To Goods distributed as free Sample * XXX
To Commission Allowed / given XXX
To Discount Allowed XXX
To Allowances XXX
To Advertisement XXX
To Carriage outward XXX
( Carrage Exp. on sale )
To Sale Charges XXX
To Export Tax / Sales Tax XXX
To General Expenses XXX
To Trade Expenses XXX
To Legal Charges XXX
To Professional Charges XXX
To Bank Charges XXX
To Solicitor Fees XXX
To Secondary Packing Charges XXX
To Loss on Sale of fixed Assets * XXX
To Interest on Taken Loan * XXX
To Contribution kto Employee Povidend fund XXX
To Insurance Premium XXX
To Commission Salesing Agent XXX
To Director Fee XXX
To Office /Addminstration / Management Exp XXX
To Postage & Telegram XXX
To Interest on Partner Capital * XXX
To Salary & Commission to Partner * XXX
To Reserve for Payable discount * XXX
To New Bad Debt * XXX
+ New Bad Debt Res. * XXX
+ Old Bad Debt XXX
XXX
-- New Bad Debt Res. XXX
XXX
Net Profit XXX Net Loss XXX
( Transfer to Capital A/c ) ( Transfer to Capital A/c )
XXX XXX
 ....3....
Balancesheet
As on 31 March 2020
Liability Amount Assets Amount
Partner Name :- Goodwill XXX
Opening capital XXX Plant Machinery XXX
+ Interest on Capital * XXX Furniture & Fixtures XXX
+ Salary to Partner * XXX Equipment XXX
+ Commission to Partner * XXX Delivery / Motor Van XXX
+ Net Profit XXX Leashold / freehold Premises XXX
XXX Patents XXX
-- Cash Drawing XXX Loose Lools XXX
Goods Drawing XXX Investment XXX
Interest on Cash Drawing XXX Stores & Spare Part XXX
Net Loss XXX Insurance claim Receivable * XXX
XXX Loans and Advances XXX
XXX Receivable Bills XXX
Reserve fund / XXX Cash in Hand XXX
Profit & Loss Account XXX Cash with Bank XXX
Loan taken on Mortgage XXX Fixed Deposit XXX
Loan from Bank XXX Partners Current A/c (Dr.Bal) XXX
Loan from Partner XXX Building XXX
Bills Payable XXX Land XXX
Bank overdraft XXX Land & Building XXX
Any unpaid Expenses * XXX Trade Mark XXX
Any Prereceived Income * XXX Preliminary Expenses XXX
Any Reserve / Fund XXX Differed Expenses * XXX
Employee Providend fund XXX Govt. Securites XXX
Interest on Providend fund Investment in Employee
Investment XXX Providend fund XXX
XXX Any unrceived Income * XXX
Creditor XXX Any Prepaid Expences * XXX
+ Unrecorded Purchase * XXX Debtor XXX
+ Dishounered of Payable Bills * XXX + Unrecorded Sale * XXX
XXX + Dishounered of Rec. Bills * XXX
Receivable discount Reserve * XXX XXX
XXX (--) Sales or Relturn * XXX
(--) Goods Drawing by Partner * XXX
(--) Bad Debt * XXX
(--) Bad Debt Reserve * XXX
XXX
-- Reserve Payable Discount * XXX
XXX
Closing Stock XXX
XXX XXX
Note :- Star ( * ) Marking item will be given in Adjustment.
Important Points :-
(1) Problem will be given in two parts. The first part will be alled as a Trial Balance and second part will be
called as adjustment.
(2) If any item given in the Trail Balance there will be only one entry of that item.
(3) If any item given in adjustment there will be minimum two entries.
(4) In some entry will be more than two.
 ....4....
(5) STOCK
Opening Stock Closing Stock
( Balance goods at the beginning of the year ) (Balance goods at the end of the year )
Opening stock will be given in the Trial Balance Closing stock will be given in the adjustments and
and there will be only one entry of opening stock there will be following two entries of closing stock
as under.
(1) Trading account debit. (1) Trading account credit . and
(2) On Assets side.

(6) DRAWING
Cash Drawing Drawing of goods
Cash drawing will be given in Trial Balance Drawing of goods will be given in the adjustment
and there will be only one entry of cash and there will be two entries as under.
drawing as under.
(1) On Liability side deduct from capital (1) Trading account credit.
(2) On Liability side deduct from capital.
(7) INTEREST
Interest on Capital Interest on Drawing
Interest on captal always calculated for a Interest on drawing will be calculated for six month
year and there will be two entries as under and there will be two entries as under .
(1) Profit and Loss adjustment Accounts Debit. (1) Profit and lose adjustment accounts credit.
(2) On Liability side deduct from Capital.

À
(8) (a) Wages
(b) Wages and Salary
(c) Productive Wages Trading account debit
(d) Direct Wages
(e) Manufacturing Wages

(9)
(f)
(g)
(h)
(i)

(a)
Salary
Salary and Wages
Unproductive Wages
Indirect Wages À Profit and Loss Account debit.

Employees provident fund ----------------------------------- On Liability side.

(b) Employees provident Fund investment ------------------------ On Assets side.
(c) Employees provident Fund contricution ----------------------- Profit & Loss A/c. debit.
(d) Interest on employees provident fund investment -------------- On Liability side.

(10) BAD DEBT & BAD DEBT RESERVE

If bad debt and fbad debt Reserve given in Trial If bad debt and debt reserve given in
Balance it will be called old and there will be only adjustment jit will be called new and there
one entry as under. will be only two entry as under.
(1) Pofit and loss Account debit. (1) On assets side &
(2) Profit and Loss Account debit.

(11) If market price and cost price of closing stock is given in that case we have to consider lower price, don’t
take any entry of higher price.

(12) If General expense & Trading expenses will be given in the Problem to the same time. Trading expences
will be down in trading A/c & General Expenses write down in Profit & Loss A/c ( If general Exp. will not
given in the problem & Tradidng A/c given. Trading expenses will be down in Profit & Loss A/c. )

(13) Effect of items in Trial Balance

Trial Balance
Particuler Debit Item Credit Item

XXX XXX

i) Trading A/c -------- Dr. i) Trading A/c ---- Cr.

ii) Profit & Loss A/c ------ Dr ii) Profit & Loss A/c .... Cr.
iii) On Assets side iii) On Liability side.
 ....5....

(14) ITEMS TO BE FIND OUT :- TRIAL BALANCE

Sr.No. Particular Debit side Credit side
1. Purchase /Sale 50,000 (Purchase 50,000 (Sale )
2. Returns goods 600 ( Sales Return ) 500 ( Purchase Return )
( Return inward ) ( Return outward )
3. Debtors / Creditors 1,000 ( debtors ) 2,000 ( Creditors )
4. Bills 1,000 ( bills receivable ) 2,000 ( bills payable )
5. Interest, Rent 500 ( Paid up ) 600 ( Received )
Profit and Loss account debit (Profit and Loss A/c Credit )
6. Loan, debenture, Bonds 5,000 ( this loan given to other 6,000 ( this loan taken from others
write down on assets side ) therefore write down on Liability

(15) Effect of items in Trial Balance

Sr.No. Particular Debit side Credit side

1. Any unpaid Expenses On debit side of Trading or Profit On Liability side
(unpaid wages, unpaid & Loss account add in respective
rent, unpaid salary ) item.

2. Any prepaid expoenses On debit side of Trading or Profit On Assets side

(prepaid wages, prepaid & Loss Account deduct from
rent, prepaid salary ) respective items.

3. Any unreceived income On credit side of Profit & Loss On Assets side
( Unreceived rent, unreceived Account add in respective items.
rent, unreceived discount )

4. Any prereceived income On Cdredit side of Profit and Loss On Liability side.
( Prereceived interest, Account deduct from respective
prereceived rent ) items.

(16) If following items given in trial balance there will be following only one entry will be made.

Sr.No. Particular Entry

1. Any unpaid expenses ( unpaid wages, unpaid rent On Liability side
and unpaid salary )

2. Any Prepaid expenses. ( Prepaid wages, prepaid rent On Assets side

and prepaid salary )

3. Any Unreceived income ( unreceived interest, unreceived On Assets side.

rent, and unreceived discount. )

4. Any Prereceived Income ( prereceived interest, prereceived On Liability side.

rent )

(17) When an estimated life of assets is sgiven in the problem then depreciation on such assets should be change
by using following formula :-

Cost of Assets + Installation changes -- Scrap value

Annual Depreciation =
Estimated life of Assets

[ Note : Callculated depreciation is for one year i.e.for 12 months. ]

(18) If the market price dof closing stock is given in the problem and also to calulate cost price of closing stock
then it should be calculate by using following formula :-
Market Price X 100
Cost Price =
100 + Rate
 ....6....
(19) EFFECTS OF ADJUSTMENTS :-
Sr.No. Adjustment 1st Entry 2nd Entry
1. Closing stock On credit side of Trading On Assets side
Accounts
2. Goods distributed freely for On credit side of On the debit side of
Advertisement as a sample Tradidng account Profit & Loss Account
3. Goods withdrawn by partner On credit side of On the Liability side
for personal use but not Trading Account deduct from capital.
recorded in Account.
4. Goods withdrawn by partner Deduct from debtors Deduct from capital
but by mistake transaction on assets side.
added in debtors.
5. Uninsured goodsd of Rs. On the credit side On the debit side of
10,000 destroyed by fire of trading A/c Rs. 10,000 Profit & Loss Rs.10,000
6. Goods of Rs. 10,000 destroyed On the credit side of trading 1. On the assets side
by fire but insurance company Rs. 10,000. Rs. 6,000.
expeeted the claim of Rs. 6,000 2. On the debit side of
P & L A/c. Rs.4,000
7. New bad ddebts and new bad On the assets side deduct On the debit side of
debts reserve. from debtors. profit & Loss Account.
8. Payable reserve On assets side deduct from On the debit side of
debtors after deducting Profit and Loss A/c
N.B.D. & N.B.D.R.
9. Discount receivable On the Liability side On the debit side of
reserve. deduct from creditors. Profit & Loss Account.
10. At the end of year goods In the debit side of Trading Add in creditors in the
purchase but not recorded Account add in purchase. Liability side.
in purchase book. ( means
unrecorded purchase ).
11. Goods sold out at the end of On the credit side of Trading On the assets side add
the year but not recorded in Account add in sale. in debtors.
sales book ( unrecorded sale).
12. Bills receivable dishonour. Deduct from bills payable on Add in creditors asset
the Liability side. side.
13. Bills payable ddishonour. Deduct from bills payable on Add in creditors on
the Liability side. Liability side.
14. If private asset of partners Deduct from related asset on Deduct from Capital
included in the asset of the asset side. on the Liability side.
partnership.
15. Salary, Commission and On the debit side of profit Add in capital on the
allowances of partner if it and Loss. Liability side.
given in the adjustment.
16. If private Journey expenses Deduct from traveling expenses Deduct from capital
if it is included in travelling on the debit sides of profit and on the liability side.
expenses of patnership. Loss account.
17. If machinery transporting Deduct from carriage expenses Add in machinery on
expenses it is included in on the debit side of trading the asset side.
carriage expenses. account
18. Deposite with electricity Deduct from Lighting expenses / On the asset side.
board included in lighting bill on the debit side of profit and
expenses/ bill. Loss account.
19. In the amout of Telephone On the debit side of Profit and Loss On Assets side.
bill Telephone deposit account deducd from telephone
included. bill.
20. Closing stock of stationery Deduct from stationery on the debit On Assets side.
at the end of the year. side of Profit and Loss Account.
 ....7....
21. Machine sold out but by Deduct from sale Deduct from Machinery
mistake included in sale.
22. Machine purchase But by Deduct from prchase. Add in Machinery.
mistake included in purchase.
23. Goods sold out on car In Trading A/c deducted In add side ddeduct
bused crecosed in the from closing stock. from closing stock.
sale ledger but goods
not delivered to custmer.
24. Goods purchased & entry Deduct from purchase. Deduct from creditors.
taken in purchase book but,
goods not received.
25. Written off any assets Profit and Loss A/c On assets side
deduct from assets.
26. If Depreciation will be Profit and loss On Assets side deduct
change on any assets. from assets.
27. ‘Sale or Return’ Goods A. Deduct from sale A. Deduct from debtor
Sold on this Rights but (Trading Debit ) on Assets (Sales value).
Customer not take a B. Trading A/c on B. On Assets, Add in
decision. audit add in closing closing stock (By cost
(By cost prize ) prize )
28. If Interest charge on Profit & Loss A/c - - - - Dr. On Liability (+) in Capital
Partners Capital. OR
Capital/Current A/c - Cr.
29. If Interes charge on Profit & Loss A/c - - - Cr On Liability (-) from Capital
cash Drawing by Partners. OR
Capital Clurrent A/c -- - Dr.
30. Un Paid Interest on Profit & Loss A/c - - Dr. On Liability side (+) in Loan
taken Loan Amount.
31. Unreceived Interest Profit & Loss A/c - -- Cr. On Assets side (+) in
on given Loan or Loan or Investmsent
Investment
32. Deferred Expenses Profit & Loss A/c- - - Dr. On Assets Side.
Examp :- Insurance / Advertise (-) from Same item
paid for 3 Year.
33. If Revenue Income is included Trading A/c - - - - Cr On Assets side
in capitalise Income (Goods (+) in sale Amount (-) from Machine.
Sales is included in Machine)
34. Commission on Gross Profit Pofit & Loss A.c - - - Dr. On Liability (+) in capital
or salesd paid to Partners OR
Capital/ current A/c - - Dr
(20) Hidden Adjustment Given in Trial Balance take Two Entry.
No. Hidden Adjustment 1st Entry IInd Entry.
1. Salary / Rent paid Profit & Loss A/c - - - Dr. On Liability side.
(for 10 Months) (+) in same item.
( unpaid Rent for 2 month )
2. Insurance is paid for the year Profit & Loss A/c - - - Dr. On Assets side.
ending 30 June 2020 (-) from insurance item.
( Prepaid Insurance for 3 month )
3. Advertisement paid for 4 year. Profit & Loss A/c - - Dr. On Assets side
( Prepaid for 3 Year ) (-) from Advertisment
4. Received Rent for 15 Month Profit & Loss A/c - - - Cr. On Liability side.
( Prereceived Rent for 3 month ) (-) from Rent.
5. 10% Bank Loan ( Taken on Profit & Loss A/c - - - Dr On Liability side
1 Jan 20 ) (+) in Bank Loan.
( unpaid Interest for 3 Month )
6. 10% Investment / Govt. Bond. Profit & Loss A/c - - - Cr. On Assets Side
( Unrceived Interest on given (+) in Investment /Govt
Loan ) Bonds.
 ....8....
(21) If Commission is Payable to Manager or Partners on Net Profit :-
(A) If it is on Net Profit before charging such Commission :-

Net Profit X Rate of Commission

Commission Amount =
100

(B) If it is on Net Profit after charging such Commission :-

Net Profit X Rate of Commission

Commission Amount =
100 + Rate of Commission

(22) Problem will be given by Fixed capital Method :- ( Capital Account will be Prepaired ) ( Altrnative
Method :-
When Current Account will not given in Problem we called fixed Capital Method than capital Account will
be Prepared in Problem.
Partner’s Capital Account
Particuler A B Particuler A B
To Cash Drawing XXX XXX Opening Balance (Capital ) XXX XXX
To Goods Drawing XXX XXX Interest on Partners Capital XXX XXX
To Interest on Cash XXX XXX By Salary to Partner XXX XXX
Drawing.
Net Loss XXX XXX By Commission to Partner XXX XXX
(from P & L A/c ) Net Profit ( from P & L A/c) XXX XXX
Balance XXX XXX
(Tran.to Liability
XXX XXX XXX XXX

(23) If Problem will be given by variable Capital Method :- If Patners Capital & current A/c will be given in
Problem Tlhan we called variable Capital Method. In that Problem current A/c will be Prepared seprately ( Partners
Capital written down direct Liability side )

Partner’s Current Account

Particuler A. B. Particuler A. B.
Opening Balance (Dr.Bal) Opening Balance
Current A/c XXX XXX ( Current A/c Cr. Bal ) XXX XXX
To Cash Drawing XXX XXX To Interest on Capital XXX XXX
To Goods Drawing XXX XXX To Commission to Partner XXX XXX
To Interest charge To Salary to Partner XXX XXX
On Cash Drawing XXX XXX Net Profit XXX XXX
Net Loss (Transfer from XXX XXX ( from Profit & Loss A/c)
from P. & L. A/c )
Balance :- Balance :-
(Transfer to Liab.Site ) (Transfer to Assets side )
Total XXX XXX Total XXX XXX