Question 79 Chapter 2 of +2-A
79. X, Y and Z entered into a partnership on 1st October 2018 to share profits in the ratio of 4 : 3 : 3.
X, personally guaranteed that Z’s share of profit after charging interest on capital @ 10%p.a. would not be less than 80,000 in any year. Capital contributions were: X – 3,00,000, Y – 2,00,000 and Z – 1,50,000.
Profit for the year ended 31st March 2019 was 1,60,000. Prepare Profit and Loss Appropriation Account.
The solution of Question 79 Chapter 2 of +2-A:
| Balance Sheet (for the year ended 31st March 2019) |
|||||
| Liabilities |
Amount | Assets |
Amount | ||
| To Interest on Capital | By Profit and Loss A/c | 1,60,000 | |||
| X’s Capital A/c | 15,000 | ||||
| Y’s Capital A/c | 10,000 | ||||
| Z’s Capital A/c | 7,500 | 32,500 | |||
| To Profit Transferred to *2 | |||||
| X’s Capital A/c | 49,250 | ||||
| Y’s Capital A/c | 38,250 | ||||
| Z’s Capital A/c | 40,000 | 1,27,500 | |||
| 1,60,000 | 1,60,000 | ||||
Working Note: –
Calculation of Actual Amount of Interest on X’s, Y’s, & Z’s Capital
Interest on Capital= Opening Capital X Rate of Interest
| Interest on X’s Capital | = | 3,00,000 | X | 10 |
| 100 |
Interest on X’s Capital = 30,000/-
| Interest on Y’s Capital | = | 2,00,000 | X | 10 |
| 100 |
Interest on Y’s Capital = 20,000/-
| Interest on Z’s Capital | = | 1,50,000 | X | 10 | X | 6 |
| 100 | 12 |
Since Z is admitted on 1st October 2018 and Profit is ascertained on March 31, 2019, therefore, interest on capital is calculated for 6 months
Interest on Z’s Capital = 7,500 /-
Calculation of distribution of profits among the partners
| X’s Share of Profit | = | 1,27,500 | X | 4 |
| 10 |
X’s Share of Profit = 51,000
| Y’s Share of Profit | = | 1,27,500 | X | 3 |
| 10 |
Y’s Share of Profit= 38,250
| Z’s Share of Profit | = | 1,27,500 | X | 3 |
| 10 |
Z’s Share of Profit = 38,250
Z’s Actual Profit Share i.e. Rs 38,250 is less than his Minimum Guaranteed Profit i. e. Rs 40,000 (for 6 months only Since Z is admitted on 1st October 2018)
Deficiency in C’s Profit Share= 40,000 − 38,250= Rs 1,750
This deficiency is to be borne by X because he personally guaranteed it.
Now, Final distributed among the partners
| X’s Share of Profit | = | 51,000 | – | 1,750 | =49,250 |
| Y’s Share of Profit | = | 38,250 | – | 0 | =38,250 |
| C’s Share of Profit | = | 38,250 | + | 1,750 | =40,000 |
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
