Question 86 Chapter 2 of +2-A
86. Asgar, Chaman and Dholu are partners in a firm. Their Capital Accounts stood at 6,00,000; 5,00,000 and 4,00,000 respectively on 1st April, 2017. They shared Profits and Losses in the proportion of 4: 2 : 3. Partners are entitled to interest on capital @ 8% per annum and salary to Chaman and Dholu @ 7,000 per month and 10,000 per quarter respectively as per the provision of the Partnership Deed. Shola’s share of profit excluding interest on capital but including salary is guaranteed at a minimum of 1,10,000 p.a. Any deficiency arising on that account shall be met by Asgar. The profit for the year ended 31st March 2018 amounted to 4,24,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March 2018.
The solution of Question 86 Chapter 2 of +2-A:
| Balance Sheet (for the year ended 31st March 2019) |
|||||
| Liabilities |
Amount | Assets |
Amount | ||
| To Interest on Capital*1 | By Profit and Loss A/c | 4,24,000 | |||
| Asgar’s Capital A/c | 48,000 | ||||
| Chaman’s Capital A/c | 40,000 | ||||
| Dholu’s Capital A/c | 32,000 | 1,20,000 | |||
| To Salary to Chaman | 7,000 ×12 | 84,000 | |||
| To Salary to Dholu | 10,000 ×4 | 40,000 | |||
| To Profit Transferred to *2 | |||||
| Asgar’s Capital A/c | 70,000 | ||||
| Chaman’s Capital A/c | 40,000 | ||||
| Dholu’s Capital A/c | 70,000 | 1,80,000 | |||
| 4,24,000 | 4,24,000 | ||||
Working Note: –
*1 Calculation of Actual Amount of Interest on Asgar’s, Chaman’s, & Dholu’s Capital
Interest on Capital = Opening Capital X Rate of Interest
| Interest on Asgar’s Capital = | 6,00,000 | X | 8 |
| 100 |
Interest on Asgar’s Capital = 48,000/-
| Interest on Chaman’s Capital = | 5,00,000 | X | 8 |
| 100 |
Interest on Chaman’s Capital = 40,000/-
| Interest on Dholu’s Capital = | 4,00,000 | X | 8 |
| 100 |
Interest on Dholu’s Capital =32,000/-
*2 Calculation of distribution of Profits for the among the partners
Profit available for distribution= 1,80,000
| Interest on Asgar’s Capital = | 1,80,000 | X | 4 |
| 9 |
Asgar’s Share of Profit= 80,000
| Chaman’s Share of Profit= | 1,80,000 | X | 2 |
| 9 |
Chaman’s Share of Profit = 40,000
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| Dholu’s Share of Profit= | 1,80,000 | X | 3 |
| 9 |
Dholu’s Share of Profit= 60,000
Dholu’s Minimum Guaranteed Profit = Rs 1,10,000 (excluding interest on capital but including salary)
Dholu’s Minimum Guaranteed Profit (excluding salary)= 1,10,000 – 40,000= Rs 70,000
Dholu’s Actual Profit Share i.e. 60,000 is less than his Minimum Guaranteed Profit i.e. 70,000
Deficiency in Dholu’s Profit Share= 70,000 − 60,000= Rs 10,000
This deficiency of Rs 10,000 is to be borne by Asgar’s
Now, Final distributed among the partners
| Asgar’s Share of Profit | = | 80,000 | – | 10,000 | =70,000 |
| Chaman’s Share of Profit | = | 40,000 | – | 0 | =40,000 |
| Dholu’s Share of Profit | = | 60,000 | + | 10,000 | =70,000 |
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
