Q.No.45 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 45 Chapter 2 of +2-A

45. Sajal and Kajal are partners sharing profits and losses in the ratio of 2: 1. On 1st April 2018
their Capitals were: Sajal – 50,000 and Kajal – 40,000.
Prepare Profit and Loss Appropriation Account and the Partners' Capital Accounts at the end of the year after considering the following items:
Interest on Capital is to be allowed @ 5% p.a.
Interest on the loan advanced by Kajal for the whole year, the amount of loan is 30,000.
Interest on partners' drawings @ 6% p.a. Drawings: Sajal 10,000 and Kajal 8,000.
10% of the divisible profit is to be transferred to Reserve.

Net profit for the year ended 31st March 2019 is 68,460.
Note: Net profit means net profit after the debit of interest on the loan by the partner.

The solution of Question 45 Chapter 2 of +2-A

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

Particulars	Amount	Particulars		Amount
To Interest on Kajal’s loan@ 6% p.a	1,800	By Net Profit before interest A/c		70,260
To Profit and Loss Appropriation A/c	68,460
	70,260			70,260

 

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

Expenditure		Amount	Income			Amount
To Interest on Capital A/c *1			By Profit and Loss A/c			68,460
Sajal's Capital A/c	2,500		To Interest on Capital A/c *2
Kajal’s Capital A/c	2,000	4,500	Sajal's Capital A/c		300
To Reserve A/c *3		6,450	Kajal’s Capital A/c		240	540
To Profit Transferred to *4
Sajal's Capital A/c	38,700
Kajal’s Capital A/c	19,350	58,050
		69,000				69,000

 

 

Partners’ Capital Accounts for the year ended 31st March 2019

Particulars	Sajal	Kajal	Particulars	Sajal	Kajal
To Drawings A/c	10,000	8,000	By Balance B/d	50,000	40,000
To Interest on Drawings A/c	300	240	By Interest on Capital A/c *1	2,500	2,000
			By P&L Appropriation A/c	38,700	19,350
To Balance c/d	80,900	53,110
	91,200	61,350		91,200	61,350

 

Working Note: -

*1 Calculation of Interest on Sajal’s & Kajal’s Capital by Simple Method
Interest on Capital= Opening Capital X Rate of Interest

Interest on Sajal’s Capital	=	50,000	X	5
				100

Interest on Sajal’s Capital = 2,500/-

Interest on Kajal’s Capital	=	20,000	X	5
				100

Interest on Kajal’s Capital = 2,000/-

*2 Calculation of Interest on Sajal’s & Kajal’s Drawing

Interest on Drawing = Drawing X Rate of Interest X Period

Interest on Drawing	=	10,000	X	6	=	6
				100		12

Interest on Sajal’s Drawing = 300/-

Interest on Drawing	=	8,000	X	5	=	6
				100		12

Interest on Kajal’s Drawing = 2,400/-

Note: - No period is given we assume it during the year as per provision of chapter

 

*3 Calculation of Amount to be transferred to Reserve

Amount for Reserve	=	10% of Divisible Profit
Divisible Profit	=	Profit + Interest on Drawings − Interest on Capital
	=	68,460 + 540 − 4,500 = Rs 64,500

Amount of Reserve	=	64,500	X	10
				100

Amount of Reserve = 6,450/-

Interest on Kajal’s Drawing	=	8,000	X	5	=	6
				100		12

 

Interest on Kajal’s Drawing  = 2,400/-

*4: -Calculation of share of profit of Sajal’s & Kajal’s

Profit-Sharing Ratio = 2: 1
Net Profit after interest & Salary = 58,050

Profit share of Sajal	=	58,050 X 2/3
Profit share of Sajal	=	38,700/-

 

Profit share of Kajal	=	58,050 X 1/3
Profit share of Kajal	=	19,350/-

Comment if you have any questions.

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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication