Question 75 Chapter 2 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 75 Chapter 2 of +2-A

Question 75 Chapter 2 of +2-A

75. X and Y are partners sharing profits and losses in the ratio of 3: 2. They employed Z as their  Manager to whom they paid a salary of 7,500 per month. Z had deposited 2,00,000 on which interest was payable 9% p.a. At the end off the accounting year i. e. , 31st March 2018 2017-18 after the division of the year′s profits, it was decided that Z should be treated as a partner
with effect from 1st April 2014 with 1/6th share of profits, his deposit being considered as capital carrying interest @ 6% p.a. like capitals of other partners. The firm’s profits and losses after allowing interest on capitals were –
2014-15: Profit 5,90,000; 2015-16: Profit 6,26,000; 2016-17: Loss 40,000 and 2017-18: Profit 7,80,000.
Record necessary journal entries to give effect to the above.

The solution of Question 75 Chapter 2 of +2-A

:

Date Particulars
L.F. Debit Credit
  Z’s Loan A/c Dr   2,00,000  
  To Z’s Capital A/c       2,00,000
  (Being balance of Z’s Loan account transferred to his capital account)        
  X’s Capital A/c Dr   3,600  
  Y’s Capital A/c Dr   2,400  
  To Z’s Capital A/c       6,000
  (Being the excess amount of interest credited to Z’s )        

 


Working Note: –

#1 Profit before Z’s Salary and Interest on Z’s Loan.

Particulars 2012-13
2013-14 2014-15 2015-16

Total

Profit/Loss for the year 5,90,000 6,26,000 (-) 40,000 7,80,000 19,56,000
Add: Z’s Salary
Add: Interest on Z’s loan
90,000 90,000 90,000 90,000 3,60,000
Add: Drawings During the year 18,000 18,000 18,000 18,000 72,000
Profit before Z’s Salary and Interest on Z’s Loan 6,98,000 7,34,000 68,000 8,88,000 23,88,000

*2 Calculation of Actual Amount of Interest on Z’s Capital
Interest on Capital = Opening Capital X Rate of Interest

Interest on Z’s Capital 2,00,000 X 5
100

Interest on Z’s Capital = 12,000/- per year

Interest on Z’s Capital for 4 year 12,000X 4
  = 48,000/-

*3 Calculation of Z’s Share of Profit as a Partner

Profit after Interest on Z’s Capital = Profit before Interest on Z’s Capital l − Interest on Z’s Capital
  = 23,88,000 – 48,000
Profit after Interest on Z’s Capital = 23,40,000/-

Z’s Profit Share as a Partner for 4 years

Interest on Z’s Capital for 4 year = 23,40,000X 1
6
  = 3,90,000/-  

Z’s Share of Interest on Capital and Profit Share as a Partner

  = 48,000 +3,90,000
  = 4,38,000/-

Z’s Salary and Interest on Loan as Manager

  = 72,000+3,60,000
  = 4,32,000/-
Adjustment of Z’s share of Profit = Z’s Share as a Partner + Z’s share as Manager
  = 4,38,000 + 4, 32, 000
  = 6,000/-    

Profit to be transferred by X and Y in favour of Z

X’s Capital = 6,000 X 3 = 3,600/-
5

 

Y’s Capital = 6,000 X 2 = 2,400/-
5

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

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 1 min - Question 75 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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