T.S. Grewal Class 12 Chapter 1 Q.50 - Accounting for Partnership Firm Fundamentals

Question 50

Yadu, Vidu and Radhu were partners in a firm sharing profits in the ratio of 4 : 3 : 3. Their fixed capitals on 1st April, 2018 were ₹9,00,000, ₹5,00,000 and ₹4,00,000 respectively. On 1st November, 2018, Yadu gave a loan of ₹80,000 to the firm as per the partnership agreement. (i) The partners were entitled to interest on capital @ 6% p.a.; (ii) Interest on partners’ drawings was to be charged @ 8% p.a. The firm earned a profit of ₹2,53,000 (after interest on Yadu’s loan) during the year 2018-19. Partners’ drawings for the year were: Yadu ₹80,000, Vidu ₹70,000 and Radhu ₹50,000. Prepare the Profit & Loss Appropriation Account for the year ending 31st March, 2019.

Solution

Profit & Loss Appropriation Account (for the year ended 31st March, 2019)

Particulars (Dr.)	₹	Particulars (Cr.)	₹
To Interest on Capital:		By Profit & Loss A/c (Net Profit)	2,53,000
Yadu’s Capital A/c	54,000	By Interest on Drawings:
Vidu’s Capital A/c	30,000	Yadu’s Capital A/c	3,200
Radhu’s Capital A/c	24,000	Vidu’s Capital A/c	2,800
To Profit transferred to Capital A/cs:		Radhu’s Capital A/c	2,000
Yadu (1,53,000 × 4/10)	61,200
Vidu (1,53,000 × 3/10)	45,900
Radhu (1,53,000 × 3/10)	45,900
Total	2,61,000	Total	2,61,000

Working Notes:
Interest on capital @ 6%: Yadu ₹54,000; Vidu ₹30,000; Radhu ₹24,000.
Interest on drawings @ 8% (average 6 months): Yadu = ₹80,000 × 8% × 6/12 = ₹3,200; Vidu = ₹2,800; Radhu = ₹2,000.
Divisible profit = ₹2,53,000 + ₹8,000 – ₹1,08,000 = ₹1,53,000, shared in 4 : 3 : 3. (Interest on Yadu’s loan is already deducted in arriving at ₹2,53,000.)