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

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)

• 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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