Question 56 Chapter 2 of +2-A
56. X and Y entered into a partnership on 1st April 2017. Their capitals as on 1st April, 2018 were 2,00,000 and 1,50,000 respectively. On 1st October 2018, X gave 50,000 as a loan to the firm. As per the provisions of the partnership deed:
- 20% of Profits before charging interest on Drawings but after making appropriations to be transferred to General Reserve.
- Interest on capital at 12% p.a. and Interest on Drawings @ 10% p.a.
X to get a monthly salary of 5,000 and Y to get the salary of 22,500 per quarter. - X is entitled to a commission of 5% on sales. Sales for the year were 3,50,000.
- Profit to be shared in the ratio of their capitals up to 1,75,000 and balance equally.
- Profit for the year ended 31st March 2019 before allowing or charging interest was 4,61,000. The drawings of X and Y were 1,00,000 and 1,25,000 respectively.
The solution of Question 56 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 *1 | By Profit and Loss A/c | 4,59,500 | ||||
| X’s Capital A/c | 24,000 | |||||
| Y’s Capital A/c | 18,000 | 42,000 | ||||
| To Commission to Y A/c *2 | 17,500 | |||||
| To X’s Salary A/ c (5,000 ×12) | 60,000 | |||||
| To Y’s Salary A/c (5,000 ×12) | 90,000 | |||||
| To Reserve A/c *3 | 50,000 | |||||
| To Profit Transferred to *4 | ||||||
| X’s Current A/c | 1,18,125 | |||||
| Y’s Current A/c | 93,125 | 2,11,250 | ||||
| 4,59,500 | 4,59,500 | |||||
| Partners’ Capital Accounts for the year ended 31st March 2019 |
|||||
| Particulars | X | Y |
Particulars |
X | Y |
| To Drawings A/c | 1,00,000 | 1,25,000 | By Balance B/d | 2,00,000 | 1,50,000 |
| To Interest on Drawings A/c | 5,000 | 6,250 | By Interest on Capital A/c *1 | 24,000 | 18,000 |
| By Salaries A/c | 60,000 | 90,000 | |||
| By Commission A/c *2 | 17,500 | – | |||
| By P&L Appropriation A/c*4 | 1,18,125 | 93,125 | |||
| To Balance c/d | 3,14,625 |
2,19,875 |
|||
| 4,19,625 |
3,51,125 |
4,19,625 |
3,51,125 |
||
Working Note: –
*1 Calculation of Interest on X’s, Y’s, & Cherry’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on X’s Capital | = | 2,00,000 | X | 5 |
| 100 |
Interest on X’s Capital = 24,000/-
| Interest on Y’s Capital | = | 1,50,000 | X | 5 |
| 100 |
Interest on Y’s Capital = 18,000/-
*2 Calculation of Commission to X
| Commission to X | = | 5% on Sales |
| Sales | = | 3,50,000 |
| Commission to X | = | Sales | X | Rate |
| 100 |
| Commission to X | = | 3,50,000 | X | 5 |
| 100 |
Commission to X = 17,500/-
*3 Calculation of Amount to be transferred to Reserve
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| Amount for Reserve | = | 10% of Divisible Profit |
| Divisible Profit | = | Profit – Interest on Capital – Partners’ Commission – Partners’ Salary |
| = | 4,59,500 − 42,000 −17,500 − 60,000 − 90,000= Rs = 2,50,000 |
| Amount of Reserve | = | 2,50,000 | X | 20 |
| 100 |
Amount of Reserve = 50,000/-
*4 Calculation of Interest on X’s, Y’s, & Cherry’s Drawing
Interest on Drawing = Total Drawing X Rate of Interest X Period
| Interest on X’s Drawing | = | 1,00,000 | X | 10 | X | 6 |
| 100 | 12 |
Interest on X’s Drawing = 5,000/-
| Interest on Y’s Drawing | = | 1,25,000 | X | 10 | X | 6 |
| 100 | 12 |
Interest on Y’s Drawing = 6,250/-
*5: -Calculation of share of profit of X’s & Y’s
Net Profit after interest & Salary = 2,11,250
Distribution of first Rs 1,75,000 in the Capital Ratio 2,00,000 : 1,50,000 i.e. 4 : 3
| Profit share of X | = | 1,75,000 X 4/7 |
| Profit share of X | = | 1,00,000/- |
| Profit share of Y | = | 1,75,000 X 3/7 |
| Profit share of Y | = | 75,000/- |
Distribution of remaining profit in the ratio of 1:1
Remaining Profit available for distribution = Rs 2,11,250 − 1,75,000 = Rs 36,250
| Profit share of X | = | 36,250 X 1/2 |
| Profit share of X | = | 18,125/- |
| Profit share of Y | = | 36,250 X 1/2 |
| Profit share of Y | = | 18,125/- |
Total Profit Share of X = 1,00,000 + 18,125 = Rs 1,18,125
Total Profit Share of Y = 75,000 + 18,125 = Rs 93,125
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
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