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Question 43 Chapter 2 of +2-Part-1
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43. (Profit and loss adjustment a/c) On April 1, 2018 John and Robert commenced business as partners with an initial capital of Rs.20,000 and Rs.30,000 in their respective accounts. The partnership deed provided inter alia that
Profit/Loss shall be shared in the ratio of 2:3 as between John and Robert.
Partners shall be entitled to interest on capital at the commencement of each year at 6% p.a. and
Interest on drawings shall be charged at 8% p.a.
During the year ended 31-3-2019, the firm made a profit of Rs.19,280 before adjustment of interest on capital and drawings. The partners withdrew during the year Rs.3,000 each at the end of every quarter commencing from 30-6-2018.
You are required to open a profit and loss adjustment account.
The solution of Question 43 Chapter 2 of +2 Part-1: –
Profit and Loss Account A/c | |||||
Particulars | Amount | Particulars | Amount | ||
To Interest on capital – John | 1,200 | By Profit b/d | 19,280 | ||
-Robert | 1,800 | 3,000 | By interest on drawings: | ||
-John | 360 | ||||
-Robert | 360 | 720 | |||
To Net profit transferred to Capital a/cs | |||||
-John | 6,800 | ||||
-Robert | 10,200 | 17,000 | |||
20,000 | 20,000 |
(a)If capitals are fluctuating :
Profit and Loss Account A/c | |||||||
Particulars | John | Robert | Particulars | John | Robert | ||
To Drawings A/c | 12,000 | 12,000 | By Profit b/d | 20,000 | 30,000 | ||
To Interest on Drawings A/c | 360 | 360 | By Interest on Capital A/c | 1,200 | 1,800 | ||
By P&L Adjustment A/c | 6,800 | 10,200 | |||||
To Balance c/d | 15,640 | 29,640 | |||||
28,000 | 42,000 | 28,000 | 42,000 |
Working Note: –
Calculation of Interest on A’s Drawings:
We will do it with the product method because of partner withdrawal a different amount every time.
Date | Amount (A) | Period Left after(B) | Product (C=A*B) |
30-6-18 | 3,000 | 9 | 27,000 |
30-9-18 | 3,000 | 6 | 18,000 |
31-1218 | 3,000 | 3 | 9,000 |
31-3-19 | 3,000 | 0 | 0 |
Sum of Product | 54,000 |
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Interest on Drawing | = | 54,000 | X | 8 | X | 1 |
100 | 12 | |||||
Interest on Drawing | = | 360/- |
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Also, Check out the solved question of previous Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
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Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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