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Question 44 Chapter 3 - Unimax Class 12 Part 1
44. X, Y and Z are in partnership sharing profits and losses in the ratio of 2 : 1 : 1. It is agreed that interest on Capital will be allowed @ 5% per annum and interest on drawings will be charged @ 4% per annum. (No interest will be charged/allowed on current accounts).
The following are the particulars of the Capita, Current and Drawings Accounts of partners :
| X (Rs.) | Y (Rs.) | Z (Rs.) | |
| Capital (1st January, 2021) | 75000 | 40000 | 30000 |
| Current Accounts (1st January, 2021) | 10000(Cr.) | 5000(Cr.) | 5000(Dr.) |
| Drawings | 15000 | 10000 | 10000 |
| Interest on Drawings | 500 | 250 | 350 |
The draft accounts for 2021 showed a net profit of Rs. 60000 before taking into account interest on capital and drawings and subject to following rectification of errors :
(a) Life Insurance premium of X amounting to Rs. 750 paid by the firm on 31st December, 2021 has been charged to miscellaneous expenditure account.
(b) Repairs of machinery amounting to Rs. 10000 has been debited to Plant Account and depreciation there on charged @ 20%.
(c) Travelling expenses of Rs. 3000 of Y for a pleasure trip to U.K. paid by the firm on 31st Dec., 2021 has been debited to Travelling Expenses Account.
You are required to prepare the Profit and Loss Appropriation Account for the year ended 31st December, 2021. Also show the partners current accounts.
| Rs. | |
| Net Profit for 2021 as per accounts | 60000 |
| Add : Life Insurance Premium | 750 |
| (wrongly charged to P & L A/c) | |
| Travelling Expenses for a pleasure trip | 3000 |
| (Wrongly charged to P & L A/c) | |
| 63750 | |
| Less : Repairs of Machinery | 8000 |
| (wrongly debited to Plant & Machinery A/c | |
| (10000 – 2000) | |
| Rectified profit for 2021 | 55750 |
Profit & Loss of Appropriation A/c For the year ended
| Particulars | Rs. | Particulars | Rs. | ||
|---|---|---|---|---|---|
| To Interest on Capital | By Net Profit | 55750 | |||
| X | 3750 | By Interest on Drawings A/c | |||
| Y | 2000 | X | 500 | ||
| Z | 1500 | 7250 | Y | 250 | |
| To Profit transferred to Current A/cs | Z | 350 | 1100 | ||
| X | 24800 | ||||
| Y | 12400 | ||||
| Z | 12400 | 49600 | |||
| 56850 | 56850 |
Partner’s Current Accounts
| Particulars | X | Y | Z | Particulars | X | Y | Z |
|---|---|---|---|---|---|---|---|
| To Balance b/d | 5000 | By Balance b/d | 10000 | 5000 | |||
| To Drawings | 15750 | 13000 | 10000 | By Interest on Capital | 3750 | 2000 | 1500 |
| To int. on Drawings | 500 | 250 | 350 | By Profit & Loss A/c | 24800 | 12400 | 12400 |
| To Balance c/d | 22300 | 6150 | By Balance c/d | 1450 | |||
| 38550 | 19400 | 15350 | 38550 | 19400 | 15350 |
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T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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