Q.No.53 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 53 Chapter 2 of +2-A

53. Amit, Binita and Charu are three partners. On 1st April 2018, their Capitals stood as: Amit
1,00,000, Binita 2,00,000 and Charu 3,00,000. It was decided that:
a they would receive interest on Capital @ 5% p.a.,
b Amit would get a salary of 10,000 per month,
c Binita would receive commission @ 5% of net profit after deduction of commission, and
d 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March 2019 was 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

The solution of Question 53 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		5,00,000
Amit's Capital A/c	5,000
Binita's Capital A/c	10,000
Charu's Capital A/c	15,000	30,000
To Amit's Salary A/c          (10, 000 ×12)		1,20,000
To Commission to Binita A/c *2		23,810
To General Reserve A/c *3		50,000
To Profit Transferred to *4
Amit's Current A/c	92,063
Binita's Current A/c	92,063
Charu's Current A/c	92,064	2,76,190
		5,00,000			5,00,000

 

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

Particu lars	Amit	Binita	Charu	Particu lars	Amit	Binita	Charu
				By Balance B/d	1,00,000	2,00,000	3,00,000
				By Interest on Capital A/c *1	5,000	10,000	15,000
				By Salaries A/c	1,20,000	-	-
				By Commission A/c *2	-	23,810	-
				By P&L Appropriation A/c*4	92,063	92,063	92,064
To Balance c/d	3,17,063	3,25,873	4,07,064
	3,17,063	3,25,873	4,07,064		3,17,063	3,25,873	4,07,064

 

Working Note: -

*1 Calculation of Interest on Amit's, Binita's, & Charu's Capital
Interest on Capital = Opening Capital X Rate of Interest

Interest on Amit's Capital	=	1,00,000	X	5
				100

Interest on Amit's Capital = 5,000/-

Interest on Binita's Capital	=	2,00,000	X	5
				100

Interest on Binita's Capital = 10,000/-

Interest on Charu's Capital	=	3,00,000	X	5
				100

Interest on Charu's Capital = 15,000 /-

*2 Calculation of Commission to Binita

Commission to Binita	=	5% on Net Profits after Commission
Net Profit	=	5,00,000

Amount of Reserve	=	Net Profit	X	Rate
				100 + Rate

Amount of Reserve	=	5,00,000	X	5
				100+5

Amount of Reserve = 23,810/-

*3 Calculation of Amount to be transferred to General Reserve

Amount for Reserve	=	10% of Net Profit
Net Profit	=	5,00,000

 

Amount of Reserve	=	5,00,000	X	10
				100

Amount of Reserve = 50,000/-

*4: -Calculation of share of profit of Amit's, Binita's, & Charu's
Net Profit after interest & Salary = 2,76,190
Distribution of remaining profit in the ratio of 1:1:1

Profit share of Amit	=	2,76,190 X 1/3
Profit share of Amit	=	92, 063/-
Profit share of Binita	=	2,76,190 X 1/3
Profit share of Binita	=	92, 063/-
Profit share of Charu	=	2,76,190 X 1/3
Profit share of Charu	=	92, 064/-

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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