CA RAKESH KALRA (8447200919)

FUNDAMENTAL OF PARTNERSHIP ACCOUNTING

Compiled By: CA RAKESH KALRA
8447200919
Question 1
Raman and Nath are partners doing a dry cleaning business in Lucknow, sharing profits in the ratio
2:1 with capitals 5,00,000 and 4,00,000 respectively.
Raman withdrew the following amounts during the year to pay the hostel expenses of her son:

1 April 10,000
1 June 9,000
1 November 14,000
1 December 5,000

Nath withdrew 15,000 on the first day of April, July, October and January to pay rent for the
accommodation. of his family.
Calculate Interest on Drawings @ 6% p.a. on 31 March, 2015.

Question 2
Abhay, Bheem and Chunnu are partners in a firm. They had omitted Interest on Capital @ 10% p.a.
for three years ended 31st March, 2019. Their fixed capitals on which interest was to be calculated
were:
A 1,00,000
B 80,000
C 70,000

Give the necessary adjusting journal entry and show your working notes clearly.

Question 3
A and B are partners in the ratio of 3: 2. The firm maintains fluctuating capital accounts and the
balance of the same as on 31-03-2020 amounted to 1,60,000 and 1,40,000 for A and B respectively.
Their drawings during the year were 30,000 each.
As per partnership deed interest on capital @10% p.a. on opening capitals had been provided to
them. Calculate opening capitals of partners given that their profits were 90,000. Show your
workings clearly

Question 4
Rohit, Raman and Raina are partners in a firm. Their capital accounts on 1 April, 2019, stood at
2,00,000, 1,20,000 and 1,60,000 respectively. Each partner withdrew 15,000 during the financial year
2019-20. As per the provisions of their partnership deed:

(a) Interest on capital was to be allowed @ 5% per annum.

(b) Interest on drawings was to be charged @4% per annum.
(c) Profits and losses were to be shared in the ratio 5:4:1.

The net profit of 72,000 for the year ended 31 March, 2020, was divided equally amongst the
partners without providing for the terms of the deed.

You are required to pass a single adjustment entry to rectify the error (show working clearly).

Question 5
 CA RAKESH KALRA (8447200919)

Puneet and Akshara were partners in a firm sharing profits and losses in the ratio of 2: 3. The
following was the balance sheet of the firm as on 31 March, 2019
Liabilities Amount Assets Amount
Capital: Sundry Assets 200,000
Puneet 90,000
Akshara 1,10,000 200,000

200,000 200,000

The profits 40,000 for the year ended 31 March, 2019 were divided between the partners without
allowing interest on capital@5% p.a. and commission to Akshara @1,000 per quarter and Interest on
drawing 12%PA.

The drawings of the partners during the year were:

Puneet 2,500 per month.
Akshara 10,000 per quarter.

Showing your workings clearly, pass necessary adjustment entry in the books of the firm.

Question 6
Ajay, Binay and Chetan were partners sharing profits in the ratio of 3:3:2. The partnership deed
provided for the following:

(i) Salary of 2,000 per quarter to Ajay and Binay.

(ii) Chetan was entitled to a commission of 8,000.
(iii) Binay was guaranteed a profit of 50,000 p.a.

The profit of the firm for the year ended 31 March, 2015 was 1,50,000 which was distributed among
Ajay, Binay and Chetan in the ratio of 2:2:1, without taking into consideration the provisions of
partnership deed. Pass necessary rectifying entry for the above adjustments in the books of the firm.
Show your working clearly.

Question 7
Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of 3:3: 4. Their
partnership deed provided for the following:

(i) Interest on capital @ 5% p.a.

(ii) Interest on drawing @ 12% p.a.
(iii) Interest on partners' loan @ 6% р.а.
(iv) Moli was allowed an annual salary of ₹ 4,000; Bhola was allowed a commission of 10% of net
profit as shown by Profit and Loss Account and Raj was guaranteed a profit of 1,50,000 after making
all the adjustments as provided in the partnership agreement.

Their fixed capitals were Moli: 5,00,000; Bhola: 8,00,000 and Raj: 4,00,000. On 1 April, 2016 Bhola
extended loan of 1,00,000 to the firm. The net profit of the firm for the year ended 31 March, 2017
before interest on Bhola's loan was 3,06,000.

Prepare Profit and Loss Appropriation Account of Moli, Bhola and Raj for the year ended 31 March,
2017 and their Current Accounts assuming that Bhola withdrew ₹5,000 at the end of each month,
Moli withdrew ₹10,000 at the end of each quarter and Raj withdrew 40,000 at the end of each half
year.
 CA RAKESH KALRA (8447200919)

Question 8
A and B are partners from 1st April, 2017, without a partnership Deed and they introduced
capitals of 35,000 and 20,000 respectively. On 1st October, 2017, A advances a loan of
8,000 to the firm without any agreement as to interest. The Profit and Loss Account for the
year ended 31st March, 2018 shows a profit of 15,000 but the partners cannot agree on
payment of interest and on the basis of division of profits. You are required to divide the
profits between them giving reasons for your method.

Question 9
X and Y are partners sharing profits in the ratio of 3: 2 with capitals of 80,000 and 60,000
respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of
6,000 which has not been withdrawn. Profit for the year ended 31st March, 2018 before
interest on capital but after charging Y's salary amounted to 24,000. A provision of 5% of the
profit is to be made in respect commission to the manager. Pass journal entries showing the
allocation profits.

Question 10
X and Y are partners sharing profits in the ratio of 3:2 with capitals of 80,000 and 60,000
respectively. Interest on capital is agreed @ 5% pa. Y is to be allowed an annual salary of
6,000 which has not been withdrawn. Profit for the year ended 31st March, 2018 before
interest on capital but after charging Y's salary amounted to 24,000. A provision of 5% of the
profit is to be made in respect commission to the manager. Prepare an account showing the
allocation profits. Profit and Loss Adjustment Account

Question 11
Bat and Ball are partners sharing the profits in the ratio of 2:3 with capitals of 1,20,000 and
60,000 respectively. On 1st October, 2017, Bat and Ball granted loans of 2,40,000 and
1,20,000 respectively to the firm. Bat had allowed the firm to use his property for business
for a monthly rent of 5,000. The loss for the year ended 31st March, 2018 before rent and
interest amounted to 9,000. Show distribution of profit/loss.

Question 12
Prem and Manoj are partners in a firm sharing profits in the ratio of 3:2. The Partnership
Deed provided that Prem was to be paid salary of 2,500 per month and Manoj was to get a
commission of 10,000 per year. Interest on capital was to be allowed @ 5% pa. and interest
on drawings was to be charged @ 6% p.a. Interest on Prem's drawings was 1,250 and on
Manoj's drawings was 425. Interest on Capitals of the partners were 10,000 and 7,500
respectively. The firm earned a profit of 90,575 for the year ended 31st March, 2018.
Prepare Profit and Loss Appropriation Account of the firm.

Question 13
A, B and C sharing profits in the ratio 3:2:1 respectively. C wants that profits be shared
equally and it should be applicable retrospectively from the last three years. Other partners
have no objection to this. Profits for the last three years were 1,20,000, 94,000 and 1,10,000
respectively. Record adjustment that means of a journal entry and show the working notes.

Question 14
L, M and N were partners in firm sharing profit in the ratio of 3:4: 5. Their fixed capitals were
4,00,000, 5,00,000 and 6,00,000 respectively. The partnership deed provided for the
following:

(1) Interest on capital @ 6% p.a.

(2) Salary of 30,000 p.a. to N.
 CA RAKESH KALRA (8447200919)

(3) Interest on partner's drawings will be charged @ 12% p.a.

During the year ended 31.3.2009, the firm earned a profit of 2,70,000. L withdrew 10,000 on
1.4.2008. M withdrew 12,000 on 30.9.2008 and N withdrew 15,000 on 31.12.2008.

Prepare profit and loss appropriation account for the year ended 31.3.2009.

Question 15
Vikas and Vijay entered into partnership on 1st April, 2021 and invested 2,00,000 and
1.50,000 respectively as their capitals. On 1st October, Vikas gave loan of 50,000 to the
firm. The terms of partnership agreement are as follows:

(i) 20% of profit before charging interest on drawings but after appropriations to be
transferred to General Reserve.
(ii) Interest on capital @ 6% p.n. and interest on drawings @ 5% p.a.
(iii) Vikas to get a monthly salary of 5,000 per month.
(iv) Vijay is entitled to a commission of 2% on sales. Sales for the year were 10,00,000.
(v) Profits and losses to be shared in the ratio of their capital contribution up to 70,000 and
above 70,000 equally.
(vi) Profit for the year ended 31st March, 2022, before providing for interest was 2,50,000.
Drawings of Vikas and Vijay were 1,00,000 and 1,20,000 respectively.

Prepare Profit & Loss Appropriation Account for the year ended 31st March, 2022.

Question 16
Garima, Harish and Reena are partners sharing profits and losses in the ratio of 3:2:1. After
the final accounts have been prepared, it was noticed that interest in drawings @ 5% p.n.
has not been allowed. Drawings of the partners were:
Garima 1,50,000; Harish- 1,26,000; Reena- 1,20,000.

Pass the necessary adjusting Journal entry and show your working clearly.

Question 17
Sachin and Kapil are partners sharing profits in the ratio of 3: 2 with capitals of 4,00,000 and
3,00,000 respectively. Interest on capital is agreed at 5% p.a. Kapil is to be allowed annual
salary of 30,000 which has not been withdrawn. During 2021-22, the profit for the year prior
to calculation of interest on capital but after charging Kapil's salary amounted to 1,20,000. A
provision of 5% of this amount is to be made in respect of commission to the manager.
Prepare an account showing the allocation of profit.

Question 18 MCQ
1) Which of the following items is not dealt through Profit and Loss Appropriation Account?
(A) Interest on partner's loan
(B) Partner's salary
(C) Interest on partner's drawings
(D) Partner's commission
2) Pick the odd one out:
(A) Rent to a partner
(B) Interest on partner's loan
(C) Interest on capital
(D) Depreciation
 CA RAKESH KALRA (8447200919)

3) Rahul and Shubham are partners in a partnership. Rahul withdrew₹4,000 during the year as
drawings. Interest on drawings is charged @ 15% p.a. The amount of interest on drawings at
the end of the year will be :
(A) 300
(B) 1,200
(C) 600
(D) 150
4) Mohit and Rohit were capitals of 80,000 and firm earned a profit of partners in a firm with 40,000
respectively. The 30,000 during the year. Mohit's share in the profit will be:
(A) 20,000
(B) 10,000
(C) 15,000
(D) 18,000
5) Abin, Babin and Chavi are partners in the ratio of 5: 3: 2. Before Babin's salary of ₹34,000 firm's
profit is 1,84,000. How much in total Babin will receive from the firm?
(A) 55,200
(B) 79,000
(C) 89,200
(D) 45,000
6) Assertion (A): The Profit and Loss Appropriation Account is an extension of the Profit and Loss
Account.
Reason (R): Profit and Loss Appropriation Account starts with the Net Profit as found in the Profit
and Loss Account.
7) Assertion (A): Profit and Loss Appropriation Account is only prepared when there are certain
adjustments related to partnership.
Reason (R): Profit and Loss Appropriation Account is prepared to ascertain the profit earned by the
firm and distribution among the partners.