Question 18 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 18 Chapter 2 of +2-A

Question 18 Chapter 2 of +2-A

18. Simran and Reema are partners sharing profits in the ratio of 3: 2. Their capitals as on 31st March 2018 were ₹ 2,00,000 each whereas Current Accounts had balances of ₹ 50,000 and ₹ 25,000 respectively interest is to be allowed @ 5% p.a. on balances in Capital Accounts. The firm earned a net profit of ₹ 3,00,000 for the year ended 31st March 2019.
Pass the Journal entries for interest on capital and distribution of profit. Also, prepare Profit and Loss Appropriation Account for the year

The solution of Question 18 Chapter 2 of +2-A

Date Particulars
L.F. Debit Credit
April 1 Profit and Loss Appropriation A/c Dr   20,000  
  To Simran’s Current A/c       10,000
  To Reema’s Current A/c       10,000
  (Being interest on capital credited to partners capital account)        
  Profit and Loss Appropriation A/c Dr   2,80,000  
  To Simran’s Current A/c       1,68,000
  To Reema’s Current A/c       1,12,000
  (Profit share transferred among partners)        

 

Profit and Loss Appropriation Account A/c
for the year ended 31st March 2019
Particulars
Amount Particulars
Amount
To Interest on Capital A/c *1     By Profit and Loss Adjustment A/c   3,00,000
Simran’s Current A/c 10,000        
Reema’s Current A/c 10,000 20,000      
           
To Profit Transferred to *2   2,50,000      
Simran’s Current A/c 1,68,000        
Reema’s Current A/c 1,12,000 2,80,000      
    3,00,000       3,00,000

Working Note:
*1: -Calculation of Total Interest on Simran’s Capital, and Reema’s Capital
Interest on Capital = Capital X Rate of Interest X Period
Simran’s Capital = 2,00,000
Rate of Interest = 5%
Period = Whole year(So we don’t need to add period in the formula)
= 2,00,000 X 5/100
Total Interest on Simran’s Capital = 10,000/-
Reema’s Capital = 2,00,000
Rate of Interest = 5%
Period = Whole year(So we don’t need to add period in the formula)
= 2,00,000 X 5/100
Total Interest on Reema’s Capital = 10,000/-
*2: -Calculation of share of profit of Simran’s and Reema’s
Profit Sharing Ratio = 3: 2
Net Profit after interest = 2,80,000
= 2,80,000 X 3/5
Profit share of Simran’s = 1,68,000/-
= 2,80,000 X 2/5
Profit share of Reema’s = 1,12,000/-




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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)

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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2 Book 1 min - Question 18 Chapter 2 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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