Q.No.79 | Chapter 2 – Accounting for Partnership Firms: Fundamentals | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

Question 79 Chapter 2 of +2-A

79. X, Y and Z entered into a partnership on 1st October 2018 to share profits in the ratio of 4 : 3 : 3.
X, personally guaranteed that Z's share of profit after charging interest on capital @ 10%p.a. would not be less than 80,000 in any year. Capital contributions were: X – 3,00,000, Y – 2,00,000 and Z – 1,50,000.
Profit for the year ended 31st March 2019 was 1,60,000. Prepare Profit and Loss Appropriation Account.

The solution of Question 79 Chapter 2 of +2-A:

Balance Sheet (for the year ended 31st March 2019)

Liabilities		Amount	Assets		Amount
To Interest on Capital			By Profit and Loss A/c		1,60,000
X’s Capital A/c	15,000
Y's Capital A/c	10,000
Z's Capital A/c	7,500	32,500
To Profit Transferred to *2
X’s Capital A/c	49,250
Y's Capital A/c	38,250
Z's Capital A/c	40,000	1,27,500
		1,60,000			1,60,000

Working Note: -

Calculation of Actual Amount of Interest on X’s, Y's, & Z's Capital
Interest on Capital= Opening Capital X Rate of Interest

Interest on X's Capital	=	3,00,000	X	10
				100

Interest on X's Capital = 30,000/-

Interest on Y's Capital	=	2,00,000	X	10
				100

Interest on Y's Capital = 20,000/-

Interest on Z's Capital	=	1,50,000	X	10	X	6
				100		12

Since Z is admitted on 1st October 2018 and Profit is ascertained on March 31, 2019, therefore, interest on capital is calculated for 6 months

Interest on Z's Capital = 7,500 /-

Calculation of distribution of profits among the partners

X's Share of Profit	=	1,27,500	X	4
				10

X's Share of Profit  = 51,000

Y's Share of Profit	=	1,27,500	X	3
				10

Y's Share of Profit= 38,250

Z's Share of Profit	=	1,27,500	X	3
				10

Z's Share of Profit = 38,250

Z's Actual Profit Share i.e. Rs 38,250 is less than his Minimum Guaranteed Profit i. e. Rs 40,000 (for 6 months only Since Z is admitted on 1st October 2018)
Deficiency in C's Profit Share= 40,000 − 38,250= Rs 1,750
This deficiency is to be borne by X because he personally guaranteed it.

Now, Final distributed among the partners

X's Share of Profit	=	51,000	-	1,750	=49,250
Y's Share of Profit	=	38,250	-	0	=38,250
C's Share of Profit	=	38,250	+	1,750	=40,000

 

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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