T.S. Grewal Class 12 Chapter 1 Q.53 - Accounting for Partnership Firm Fundamentals

Question 53

Ali and Bahadur are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1st April, 2024 stand as Ali ₹2,50,000 and Bahadur ₹2,00,000. The partners are allowed interest on capital @ 5% p.a. Drawings of the partners during the year ended 31st March, 2025 amounted to ₹35,000 and ₹25,000 respectively. Profit for the year, before charging interest on capital and the annual salary of Bahadur @ ₹30,000, amounted to ₹4,00,000. 10% of the divisible profit is to be transferred to Reserve. Show the Partners’ Capital Accounts and Current Accounts.

Solution

Profit & Loss Appropriation Account (for the year ended 31st March, 2025)

Particulars (Dr.)	₹	Particulars (Cr.)	₹
To Interest on Capital (Ali 12,500; Bahadur 10,000)	22,500	By Profit & Loss A/c (Net Profit)	4,00,000
To Bahadur’s Salary	30,000
To Reserve (10% of 3,47,500)	34,750
To Profit transferred (Ali 2,18,925; Bahadur 93,825)	3,12,750
Total	4,00,000	Total	4,00,000

Partners’ Current Accounts

Particulars (Dr.)	Ali	Bahadur	Particulars (Cr.)	Ali	Bahadur
To Drawings A/c	35,000	25,000	By Interest on Capital A/c	12,500	10,000
To Balance c/d	1,96,425	1,08,825	By Salary A/c	–	30,000
			By P & L Appropriation A/c	2,18,925	93,825
Total	2,31,425	1,33,825	Total	2,31,425	1,33,825

Capital Accounts remain unchanged at Ali ₹2,50,000 and Bahadur ₹2,00,000 (capitals are fixed; all adjustments pass through the Current Accounts).

Working Note: Reserve = 10% of (₹4,00,000 – ₹22,500 – ₹30,000) = 10% of ₹3,47,500 = ₹34,750. Profit for distribution = ₹3,47,500 – ₹34,750 = ₹3,12,750, shared 70 : 30 → Ali ₹2,18,925; Bahadur ₹93,825.