Question 43 Chapter 2 of +2 Part-1 – USHA Publication 12 Class Part – 1

Question 43 Chapter 2 of +2- Part-

Question 43 Chapter 2 of +2-Part-1

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

 

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

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

 

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2 Book 1 min - Question 43 Chapter 2 of +2 Part-1 - USHA Publication  12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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