Question 51 Chapter 2 of +2-A
51. Ali the Bahadur are partners in firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1st April 2018 stand as Ali 25,000 and Bahadur 20,000. The partners are allowed interest on capitals @ 5% p.a. Drawings of the partners during the year ended 31st March 2019 amounted to 3,500 and 2,500 respectively. Profit for the year, before charging interest on capital and annual salary of Bahadur @ 3,000, amounted to 40,000, 10% of divisible profit is to be transferred to Reserve.
You are asked to show Partners’ Current Account and Capital Accounts recording the above transactions.
The solution of Question 51 Chapter 2 of +2-A:
| Profit and Loss Appropriation Account for the year ended 31st March 2019 |
||||||
| Expenditure |
Amount | Income |
Amount | |||
| To Interest on Capital A/c *2 | By Profit and Loss A/c | 40,000 | ||||
| Ali’s Capital A/c | 1,250 | |||||
| Bahadur’s Capital A/c | 1,000 | 2,250 | ||||
| To Reserve A/c *3 | 3,475 | |||||
| To Bahadur’s Salary A/c | 3,000 | |||||
| To Profit Transferred to *4 | ||||||
| Ali’s Current A/c | 21,892 | |||||
| Bahadur’s Current A/c | 9,383 | 31,275 | ||||
| 40,000 | 40,000 | |||||
| Partners’ Capital Accounts for the year ended 31st March 2019 |
|||||
| Particulars | Ali | Bahadur | Particulars |
Ali | Bahadur |
| By Balance B/d | 25,000 | 20,000 | |||
| To Balance c/d | 25,000 | 20,000 | |||
| 25,000 | 20,000 | 25,000 | 20,000 | ||
| Partners’ Capital Accounts for the year ended 31st March 2019 |
|||||
| Particulars | Ali | Bahadur | Particulars |
Ali | Bahadur |
| To Drawing a/c | 3,500 | 2,500 | By Interest on Capital A/c *1 | 1,250 | 1,000 |
| By Salaries A/c | – | 3,000 | |||
| By P&L Appropriation A/c*2 | 21,892 | 9,383 | |||
| To Balance c/d | 19,642 | 10,883 |
|||
| 23,142 | 13,383 |
23,142 | 13,383 |
||
Working Note: –
*2 Calculation of Interest on Ali’s, Bahadur’s, & C’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Ali’s Capital | = | 25,000 | X | 5 |
| 100 |
Interest on Ali’s Capital = 1,250/-
| Interest on Bahadur’s Capital | = | 20,000 | X | 5 |
| 100 |
Interest on Bahadur’s Capital = 1,000/-
*3 Calculation of Amount to be transferred to Reserve
Net Profit after interest & Salary = 30,000
Distribution of profit in the ratio of 5:3:2
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| Amount for Reserve | = | 10% of Divisible Profit |
| Divisible Profit | = | Profit − Interest on Capital – C’s Salary |
| = | 40,000 – 2,250 -3,000 = Rs 34,750 |
,
| Amount of Reserve | = | 34,750 | X | 10 |
| 100 |
Amount of Reserve = 3,475/-
*4: -Calculation of share of profit of Ali’s & Bahadur’s
Net Profit after interest & Salary = 31,275
Distribution of profit in the ratio of 70:30
| Profit share of Ali | = | 31,275 X 70/100 |
| Profit share of Ali | = | 21,892/- |
| Profit share of Bahadur | = | 31,275 X 70/100 |
| Profit share of Bahadur | = | 9,383/- |
Comment if you have any questions.
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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
