Q.No.22 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 22 Chapter 2 of +2-A

22. On 1st April, 2013, Jay and Vijay entered into partnership for supplying laboratory equipment to government schools situated in remote and backward areas. They contributed capitals of 80,000 and 50,000 respectively and agreed to share the profits in the ratio of 3 : 2. The partnership Deed provided that interest on capital shall be allowed at 9% per annum. During the year the firm earned a profit of 7,800. Showing your calculations clearly, prepare 'Profit and Loss Appropriation Account' of Jay and Vijay for the year ended 31st March, 2014.

The solution of Question 22 Chapter 2 of +2-A: 

Date	Particulars		L.F.	Debit	Credit
April 1	Profit and Loss Appropriation A/c	Dr		82,500
	To Naresh’s Capital A/c				42,500
	To Sukesh's Capital A/c				40,000
	(Being interest on capital credited to partners capital account)
	Profit and Loss Appropriation A/c	Dr		1,17,500
	To Naresh’s Capital A/c				58,750
	To Sukesh's Capital A/c				58,750
	(Profit share transferred among partners)

 

Profit and Loss Appropriation Account A/c for the year ended 31st March 2019

Particulars		Amount	Particulars			Amount
To Interest on Capital A/c *1			By Profit and Loss Adjustment A/c			7,800
Jay's Capital A/c	4,800
Vijay's Capital A/c	3,000	7,800
		7,800				7,800

Working Note:

*1: -Calculation of Interest on Jay's Capital, and Vijay's Capital
Interest on Capital = Capital X Rate of Interest X Period
Rate of Interest = 9%
Period = Whole year(So we don’t need to add period in the formula)
Jay's Capital = 80,000
Vijay's Capital = 50,000
= 80,000 X 9/100
Total Interest on Jay's Capital = 7,200/-
= 50,000 X 9/100
Total Interest on Vijay's Capital = 4,500/-
But the firm has an only a profit of Rs 7,800. So that’s why we have to calculate the propionate interest on capital up to the extend of profit.

Propionate Interest on any single partner’s Capital	=Amount of Profit X	Interest on Capital single partner
		Total interest due to all partners

 

Propionate Interest on any single partner’s Capital	=7,800 X	7,200
		11,700

 

Propionate Interest on Jay's Capital

=7,800/-

 

Propionate Interest on Vijay's Capital	=7,800 X	4,500
		11,700

Propionate Interest on Vijay's Capital

=3,000/-

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Also, Check out the solved question of previous Chapters: -

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

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