Q.No.52 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 52 Chapter 2 of +2-A

52. Amal, Bimal and Kamal are three partners. On 1st April, 2018, their Capitals stood as: Amal
40,000, Bimal 30,000 and Kamal 25,000. It was decided that:
a they would receive interest on Capital @ 5% p.a.,
b Amal would get a salary of 250 per month,
c Bimal would receive commission @ 4% on net profit after deducting commission, interest on capital and salary, and
d After deducting all of these 10% of the profit should be transferred to the General Reserve. Before the above items were taken into account, net profit for the year ended 31st March, 2019 was 33,360. Prepare Profit and Loss Appropriation Account and the Capital Accounts of
the Partners.

The solution of Question 52 Chapter 2 of +2-A:

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		33,360
Amal's Capital A/c	2,000
Bimal's Capital A/c	1,500
Kamal's Capital A/c	1,250	4,750
To Amal's Salary A/c		3,000
To Commission to Bimal A/c *2		985
To General Reserve A/c *3		2,462
To Profit Transferred to *4
Amal's Current A/c	7,388
Bimal's Current A/c	7,388
Kamal's Current A/c	7,387	22,163
		33,360			33,360

 

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

Particulars	Amal	Bimal	Kamal	Particulars	Amal	Bimal	Kamal
				By Balance B/d	40,000	30,000	25,000
				By Interest on Capital A/c *1	2,000	1,500	1,250
				By Salaries A/c	3,000	-	-
				By Commission A/c *2	-	985	-
				By P&L Appropriation A/c*4	7,388	7,388	7,387
To Balance c/d	52,388	39,873	33,637
	52,388	39,873	33,637		52,388	39,873	33,637

Working Note: -

*1 Calculation of Interest on Amal's, Bimal's, & Kamal's Capital
Interest on Capital = Opening Capital X Rate of Interest

Interest on Amal's Capital	=	40,000	X	5
				100

Interest on Amal's Capital = 2,000/-

Interest on Bimal's Capital	=	30,000	X	5
				100

Interest on Bimal's Capital = 1,500/-

Interest on Kamal's Capital	=	25,000	X	5
				100

Interest on Kamal's Capital = 1,250 /

*2 Calculation of Commission to Bimal
Net Profit after interest & Salary = 30,000
Distribution of profit in the ratio of 5:3:2

Commission to Bimal	=	4% on Net Profits after Commission
Profit after expenses	=	Profit - Interest on Capital – Salaries to Partners
	=	33,360 - 4,750 - 3,000 = Rs 25,610

Amount of Reserve	=	Profit after expenses	X	Rate
				100 + Rate

Amount of Reserve	=	25,610	X	4
				104

Amount of Reserve = 985/-

*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
	=	33,360 - 4,750 - 3,000 – 985 = Rs 24,625

 

Amount of Reserve	=	24,625	X	10
				100

Amount of Reserve = 24,62/-

*4: -Calculation of share of profit of Amal's, Bimal's, & Kamal's
Net Profit after interest & Salary = 22,163
Distribution of remaining profit in the ratio of 1:1:1

Profit share of Amal	=	22,163 X 1/3
Profit share of Amal	=	7,388/-
Profit share of Bimal	=	22,163 X 1/3
Profit share of Bimal	=	7,388/-
Profit share of Kamal	=	22,163 X 1/3
Profit share of Kamal	=	7,387/-

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

 

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