Partnership Questions- General Aspects

PARTNERSHIP - GENERAL

Q1. A & B are partners sharing Profit & losses in the ratio of 3:2. Their capitals at the end of year 31.3.2001 were Rs. 1,00,000 and Rs. 90,000 respectively. The profit earned during the year was Rs. 60,000. Their drawings during the year were Rs. 25,000 and Rs. 30,000 respectively. Partners have omitted to charge interest on capital @ 12% p.a. Calculate the Interest on capital and also prepare capital account of the partners.

Q2.  A & B are partners sharing Profit & losses in the ratio of 3:2 having fixed capital of Rs. 40,000 and Rs. 20,000 respectively. They are entitled to interest on capital at the rate of 10% p.a., the profit earned during the year is Rs. 3000. Calculate the interest on capital in the following situations: -

a)      When deed is silent about the treatment of interest on capital.

b)      When Interest is to be treated as charge against profit.

Q3. X and Y started business on 1.1.1999 in partnership and decided to maintain fixed capital system. During the year ended on 31.12.99, they earned a profit of Rs. 40,000. Their fixed capital account as on 31.12.199 was as follow:- X- Rs. 1,00,000 and Y – Rs. 60,000. X had introduced additional capital on 1.7.1999 – Rs. 30,000. The drawings of B in lieu of profits are Rs. 10,000. Calculate interest on capital @ 12% p.a.

Q4 A and B started partnership business on 1.4.2003 and decided to adopt calendar year as their accounting year. Their capital as at 31.12.2003 and other transactions were as under:-

A                                             B

Capital as at 31.12.2003                     Rs. 2,00,000                            Rs. 3,00,000

Additional capital on 1.7.2003                                                           Rs. 1,00,000

Withdrawal against

Capital on 1.10.2003                           Rs.  50,000

Drawings                                             Rs. 20000                                Rs. 50000

Profit earned during the year was Rs. 1,00,000 and distributed between the partners in 3:2.

Calculate Interest on Capital @ 12% p.a in the following cases:-

a)      if Capital accounts are fixed.

b)      If Capital accounts are fluctuating.

Q5.

Profit & loss Appropriation Account

Particulars	Amount	Particulars	Amount
To Salary A B C To Interest on Capital A B C To Net Profit A B C	15,000 15,000 15,000 10,000 10,000 10,000 40,000 40,000 20,000 -------------------------- 1,75,000	By Profit & loss A/c By Interest on Drawings A B C	1,70,000 1,000 2,000 2,000 -------------------------- 1,75,000

The closing Bal. of  Partners capital Account, who are following fluctuating sysytem, after above appropriations are Rs. 1,50,000 , 1,70,000 & Rs. 1,50,000 respectively. Partners are entitled to interest on capital @10% p.a and are to be charged Interest on Drawings @ 10% p.a. Partners are entitled to salary of Rs. 1000 p.m each. The above appropriation account was wrongly prepared with regard to Interest on Capital and Salary. Partners are sharing Profit & losses in the ratio 2:2:1.

Prepare Correct Profit & loss account

Q6. A & B are partners sharing Profit & Losses in the ratio of 3:2. After the end of the year on 31.12.2002, they discover that Interest on Capital @12% p.a has been omitted. The relevant data are as under:-

A                                             B

Closing Capital                       5,00,000                                  3,00,000

Profit earned During

the year – Rs. 2,50,000

Drawings against Capital        Rs. 10000

                                                Per month at the end

                                                of every month

Drawing against Profit            Rs. 20000                                Rs. 5000 at the end of every
                                                            month for whole year

Calculate Interest on Capital @ 12% p.a

Q7. Calculate Interest on drawings at the rate of 12% p.a.

            A – Rs. 2000 each at the beginning of ever y quarter.

            B – Rs. 2000 each at the end of every quarter.

Q8.Calculate Interest on Drawings @ 12% pa.

a)      X withdraws Rs. 2000 per month, at the beginning of every month for first 3 months of the year and Rs. 3000 per month at the end of every month for last 3 months of the year.

b)      Y withdraws Rs. 3000 per month at the end of every month for first six months of the year and Rs. 2000 per month at the beginning of every month for last 3 months of the year.

Q9. Calculate Interest on Drawings @ 12% p.a:-

a)      A withdraw Rs. 2000 per month (Beginning of the month) for the first 6 months of the year.

b)      B withdraws Rs. 3000 per month (End of the Month) for last 6 months of the year.

Q10. A & B are partners sharing profit & losses in the ratio of 3:2 with capitals of Rs. 40,000 and Rs. 30,000 respectively. Interest on capital is to be allowed @ 5%. B is to be allowed an annual salary of Rs. 6000, which has not been drawn. During 1999, the profits for the prior to calculation of interest on capital but after charging B’s salary amounted to Rs. 12,000. 5% of this amount to  be transferred to General reserve. Prepare an account showing allocation of Profits.

Q11.  X and Y are partners who withdraw for private use during the year – Rs. 10,000 and Rs. 12,000 respectively. Calculate Interest on drawings @ 12% p.a.

Q12. A, B and C are in partnership with capitals of Rs. 20,000, 15,000 and 10,000 respectively. B and C are entitled to annual salaries of Rs. 1000 and 1500 respectively payable before division of profits. Interest on capital is allowed at 5% p.a. but interest is not charged on drawings. Of the First Rs. 6,000 divisible as profit in any year, A is entitled to 50%, B to 30% and C to 20%. Annual profits in excess of Rs. 6,000 are divisible equally. The profit for the year ended 31.12.1999 was Rs. 10,050 after debiting partner’s salaries but before charging interest on capital.

Prepare Profit & loss Appropriation Account.

           

Q13. On 1.7.99 A, B and C commence a business in partnership. A introduced Rs. 60,000 but withdraws Rs. 20,000 at the end of 6 months. B introduced Rs. 50,000 and increase it to Rs. 60,000 at the and of 4 months, but withdraws Rs. 20,000 at the end of 8 months. C brings in Rs. 50,000 first but increases it by Rs. 40,000 at the end of 7 months.

Calculate capital ratio.

Q14. A, B and C are partners sharing Profit & losses in the ratio 3:2:1. They are entitled to Interest on capital @ 6% p.a. After the preparations of annual accounts but before signing it by partners, it was discovered that interest on capital has been wrongly provided at 5% p.a. Prepare again the Profit & loss appropriation account and partners capital account from the following data:-

                                    A                                 B                                             C

Capital at the end

Of year                        1,15,00                        1,15,000                                  1,15,000

Interest @ 5%             5,000                           5,000                                       5,000

Drawings                     17,500                         10,000                                     2,500

Q15. X and Y are equal partners with equal capital as on 31.3.2000. Their books of accounts showed the following position:

PARTICULARS	31.3.2000	31.3.2001
Fixed assets Debtors Cash at bank Other Current Assets Current liabilities	8,00,000 80,000 4,35,000 1,50,000 65,000	10,00,000 60,000 6,43,000 1,40,000 43,000

Their partnership deed provide the following clauses:-

a)      Partners are entitled to get interest on capitals @ 1% p.a

b)      Interest on drawings are to be charged @ 5% p.a.

c)      X and Y are entitled a salary of Rs. 3,000 per month and Rs. 2,000 per month respectively.

Other Information

1.      During the year X and Y withdrew Rs. 10,000 and Rs. 12,000 respectively.

2.      Depreciation is to be provided on fixed assets @ 10% p.a.

3.      Further bad debts Rs. 5,000 and provision for bad debts is to be created @ 5% on the debtors

4.      Transfer Rs. 50,800 to General Reserve.

Prepare Profit & loss Appropriation Account and Capital account of the partners.

Q16. From the following Balance Sheet, calculate the interest on capital @ 5% p.a. for
         the Year ended on  March 2000:

BALANCE SHEET as at 31.3.2000

LIABILITIES	AMOUNT	ASSETS	AMOUNT
X’s capital Y’s capital Profit & loss appropriation account	10,000 8,000 4,000 -------------------- 22,000	Sundry assets Drawings X	21,000 1,000 ------------------- 22,000

During the year X’s drawings was Rs. 1,000 and Y’s drawings Rs. 3,000. Profit during the year was Rs. 6,000.

Q17. From the balance sheet, calculate the interest on capital for the year ended 31.3.1999

BALANCE SHHET as at 31.3.1999

LIABILTIES	AMOUNT	ASSETS	AMOUNT
Capital Accounts X Y Z Profit & loss appropriation account	10,000 10,000 10,000 6,000 ------------------- 36,000	Sundry assets Drawings X                            1,000 Y                            1,000	34,000 2,000 ------------------ 36,000

 Z was introduced during the mid of the year and he bought a capital of Rs.8,000. At the time of his admission following arrangement was agreed upon:

1.      Profit should be distributed as follow:

a)      Profit upto Z admission                      X:Y - 1:1        

b)      Profit after Z admission                      X:Y:Z – 1:1:1

Drawings of Y during the year was Rs. 2,000

Drawings of X during the year was Rs. 1,000

Drawings of Z during the year was Rs. 1,000

It is assumed that profit in the last six months of the year was same as that was earned in the first six months of the year.

Calculate Interest on capital @ 6% p.a

Q18. A & B started business on 1.1.99 with a capital of Rs. 40,000 and Rs. 60,000
     respectively. They decided to share profit in the capital ratio. Calculate the capital
     ratio from the following details

Date of transaction     Capital Introduced                  Capital withdrawn

                                    A                     B                     A                     B

1.4.99                          -                      5,000               10,000

1.7.99                          10,000             -                      -                      5,000

1.9.99                          -                      6,000               -                       -

1.10.99                        -                      8,000               2,000               -

1.11.99                        3,000               -                      -                      1,500

Q 19. S and H started a partnership business on 1.4.99. They contributed Rs. 80,000 and
         Rs. 60,000 respectively as their capitals. The terms of the partnership agreement are
         as follow:

a)      Interest on capital and drawings @ 10% p.a.

b)      S and H are entitled to get a monthly salary of Rs. 3000 and 4000 respectively

c)      Profit and losses will be shared in capital ratio ( normal drawings are not to be considered for calculating capital ratio)

The profit for the year ended 31.3.2000 was Rs. 1,10,000 (before making any appropriation)

S introduced additional capital of Rs. 20,000 on 1.2.2000. The drawings of S and H are as follow:

            S          -Rs. 2000 per month

            H         -Rs. 5000 at the end of each quarter

Prepare profit and loss appropriation account and partners capital account.

Q 20. A and B are partners in a business with fixed capital of Rs. 50,000 and Rs. 30,000
         respectively. They are entitled to interest on the fixed capital at 5% p.a. but not on
         current account. A is entitled to salary of Rs. 100 per month, which is yet not  
         drawn. Separate current account is maintained for each partner. Drawings are 
         permitted interest free to the extent of opening credit balance in the current account.
         Drawings in excess of the above limit are subject to interest at a flat rate of 8%
         irrespective of date of withdrawals.

         The opening balances in the current accounts of A and B are Rs. 1500 and Rs. 2000   
         respectively. Drawings of each partner are Rs. 3000

         The profit for the year before making the above adjustment is Rs. 15,000. Of the net   
         divisible profit, A is entitled to 60% and B 40% on the first Rs. 4,000. Above that
         amount profit is shared equally.

Prepare profit & loss appropriation account and the partner’s current account.

Q21. A& B are partners sharing Profit & losses in the Capital ratio. At the end of the year
       capital balances of  A & B are as follow:

A-    Rs. 90,000

B-    Rs. 90,000

The Capital ratio during the year was 3: 4. The profits during the year were Rs. 70,000. There was no transaction in the capital account during the year except the distribution of profit at the end of the year. However A has introduced additional capital during the mid of the year. Calculate the Interest on Capital @ 6% P.a.

Q22. A,B,C are partner sharing profit & losses in the ratio of 3:2:1. The profit earned during the year ended was Rs.90000.After the distribution of profit among the partners their Balance sheet is as follows:

BALANCE SHEET

Liabilities Capital A                55000 B                40000 C                25000 Profit & loss Appropriation Account	Amount 1,20,000                          30,000	Assets Tangible Assets Drawings – A	Amount                 1,45,000                      5,000
	1,50,000		1,50,000

Interest on Drawings @ 10% were as follow:

A-    Rs. 600, Regular amount being withdrawn at the mid of the month.

B-    Rs. 650, Regular amount being withdrawn at the beginning of the month.

C-    Rs 550, Regular amount being withdrawn at the end of the month.

Calculate Interest on Capital @ 12% .

Q23. X,Y, Z started a partnership business on 1/10/99 with capital of Rs. 20,000 each.
        Their Provisional Balance sheet ( after distribution of the profit earned during the 
         year) as on 31-03-2000 stand as follow:

Liabilities	Amount	Assets	Amount
Capital Accounts X            42,500 Y            31,500 Z             26,000 Creditors	1,00,000                  20,000                1,20,000	Assets	1,20,000             1,20,000

The profit sharing ratio among the partner are 5:3:2 . The drawings of the partners were Rs. 5,000 each. Prepare profit & loss appropriation account and final Balance sheet after taking into account the following:

1.      Salary

X- Rs. 10,000 p.a, Y-Rs. 500 per month , Z – Rs. 500 per month

2.      Interest on capital @ 10% .

3.      Commission

X @ 10% of Net Profit (i.e Profit before any appropriation)

Z @ 10% of the profits after all appropriation.

Q24.  X,Y and Z are partners sharing profit & losses in the following manner:

            Upto Rs. 1,00,000                               2:2:1

            After Rs. 1,00,000                              5:3:2

Partners are also entitled to the following:

                        Salary              Interest on capital                               Commission

A                     48,000 p.a       10%                                         10% of the profit

B                     3,000 p.m        10%                                                     -

C                     36,000 p.a       10%                             10% of the profit after charging     
                                                                                    commission of A & C

            The fixed capital of the partners is Rs. 1,00,000 each. The profit as shown by the profit & loss account is 11,11,000. Prepare profit & loss appropriation account and partner’s current account assuming that opening balances of the current accounts is as follow:

            A         Rs. 5,000 ( Cr)

            B         Rs. 5,000 ( Dr)

            C         Rs. 4,000 ( Dr.)

Note: profit for the purpose of commission means profit as per profit & loss account

Q25.  After including the profits for the year ended March 1999 and dealing with the drawings the capital balances of partners are as follow:

          X – Rs. 40,000

          Y- Rs.  30,000

          Z- Rs.   20,000

          Subsequently, the following omissions were noticed and it was decided to bring
          them into account :

(1)   Interest on capital @ 10% p.a

(2)   Interest on drawings X- Rs. 250 Y- Rs. 190 Z- Rs. 130.

(3)   Commission to the manager at 5% of the net profit after charging such commission.

 The profits for the year in arriving at the above figures of the capital accounts amounted to Rs.  60,000 and their drawings had been X- Rs. 10,000 Y- Rs. 7,500 Z- Rs. 4,500. They shared profit & losses in the ratio 3:2:1 .Give the closing balances of the capital accounts after all adjustments.

PAST ADJUSTMENTS

Q26 : On 31.3.99 after closing of the accounts, the capital accounts of the partners A,B and C stood as at Rs. 40,000, rs. 30,000 and Rs.20,000 respectively. Subsequent it was discovered that interest on capital @ 5%p.a had been omitted. The profit of the year ended 31.3.99 amounted to Rs. 70,000 and partners drawings were as follow: A – Rs. 10,000, B- Rs. 7,500 and C- Rs. 4,500. The profit sharing ratio was 3:2:2.Give the necessary journal entry to rectify the mistake.

Q27  : A,B and C are partners. They have omitted interest on capital @10%p.a for 3 years-ended 31.3.99. Their  fixed capital on which interest was to be calculated were Rs. 10,000, Rs. 12,000 and Rs. 8,000 respectively. Profit sharing ratio were as follow: 1996-97 1:2:2, 1997-98 5:4:3 and 1998-99 2:2:1. Give necessary adjusting journal entry.

Q28.  : X and Y agree to share profit as follow:

First Rs. 8000 to X and balance in 2:1. The profits of  the year are Rs. 11,600, their capitals being X- Rs. 40,000 and Y- Rs. 36,000. Interest on capital @5%p.a had been omitted.

Q 29 : A,B and C are partners in a firm. After finalisation of accounts it was discovered that interest on capital had been wrongly provided @10% p.a. which is not authorised by the deed. The capitals of the partner’s were Rs. 10,000, Rs. 20,000 and Rs. 15,000 respectively. Give necessary adjusting entry to rectify the afore-said error.

Q 30.  X,Y and Z sharing profit & losses equally having capitals of Rs. 60,000, Rs. 45,000 and Rs. 30,000 respectively. For the year ended 1999 interest on capital was provided @ 15%p.a instead of 10%p.a. Give necessary adjusting entry.

Q31.  A,B,C are partners sharing profits equally and having fixed capital of Rs. 10,000 each. During the year ended March 99, they have provided interest on capital @ 12% p.a instead of 10%  p.a. Pass the necessary journal entry without altering the accounts.

Q.32. A,B,C are partners sharing profits equally. Their drawings during the year ended were as follow;

A-    Rs. 2000 p.m (at the beginning of the month)

B-    Rs  1500 p.m

C-    Rs. 2000 p.m ( at the end of the month

      Interest on drawings has been wrongly charged @ 12% p.a instead of 10% p.a . Pass the necessary adjustment entry.

Q33.  A,B and C are partners sharing profit & losses in the ratio of 2:2:1. After the close
           of the year it was discovered that interest @ 10% p.a on drawings has been charged   from the partners instead of 12% p.a. Interest on drawings @ 10% p.a was as follow:

           A          Rs.130.( same amount has been regularly withdrawn at the beginning of
                                      the month.)

            B         Rs. 120 ( same amount has been regularly withdrawn every month.)

            C         Rs. 165 ( same amount has been regularly withdrawn at the end of the 
                                       month.)

It was decided to pass necessary journal entries without re-opening the accounts.

Q34. A, B and C are partners sharing profit & losses in the ratio of 3:2:1 . Their capital accounts balances at the  beginning of year is as follow:

       A Rs. 20,000

       B Rs. 15,000

       C Rs. 12,000

       Their drawings during the year are as follow:

A-     Rs. 2,400 p.a (regular amount being withdrawn at the beginning of the month)

B-    Rs. 2,400 p.a (regular amount being withdrawn at the mid of the month)

C-    Rs. 2,400 p.a (regular amount being withdrawn at the end of the month)

Interest  on drawings has been wrongly charged @ 10% p.a  instead of providing interest on capital @ 10%. P.a Pass necessary journal entry to rectify the mistake.

Q35 : A and B are partners in a firm. Their respective capital contributions are Rs. 3,00,000 and Rs. 1,50,000 and their profit sharing ratio is 3:2. Immediately after the allocation of Rs. 90,000 as profit for the year it was discovered that that in arriving at the profits for the year the following two items had been omitted:

¨      Outstanding expenses of Rs. 7,000

¨      Accrued interest on Investment of Rs. 4,000.

Give necessary journal entry to rectify the said omission.

Q36.  X and Y are partners sharing profit & losses in the ratio of 3:2 having fixed capital of Rs. 20,000 each .Z is working as a manager in the firm getting a salary of Rs. 750 p.m. and interest @ 9%p.a on his deposit of Rs. 20,000. At the end of the year March, 2000 it was decided that Z should be treated as partner in a firm since 1.4.1996 with 1/6^th share of profit, his deposit being treated as capital carrying interest @ 6%p.a like capitals of other partners. The firm profits and losses (after all appropriations but before distribution of profits in Profit Sharing ratio) were – 1997: Rs. 61,400,  1998: Rs. 65,000, 1999: Rs. Nil and 2000: Rs. 76,400. Give necessary journal entry to give effect to the above rearrangement.

Q37. A & B are partners sharing Profit & losses in the ratio of 3:2 and are entitled to interest on capital @ 5% p.a. On 1/7/2002 they admit C as a new partner & ratio becomes               5:3:2 and interest on capital changed to 10% pa., for profits earned after 1.7.2002.

During the year ended 31-12-2002, firm earned the profit of Rs. 2,00,000. This profit was divided in the ratio of 5:3:2 after providing interest on capital @ 5% p.a. The fixed capital of A & B are Rs. 50,000 each. On 1/7/2002 c had introduced the capital of Rs. 1,00,000. Pass the journal entry in the year 2003 to rectify the above error assuming that profits during the first six months was as earned in the last six months of the year.

Q38. A & B are partners sharing Profit & losses in the ratio of 2:3. They have fixed        
       capital of Rs. 2,00,000 and Rs. 1,00,000 each. Their agreement provides for the Interest on capital @ 10% p.a . During the year ended 31.3.2003 they earned a profit of Rs. 27,000 which was distributed on the assumption that agreement provides for Interest on Capital even if it involves the firm in loss. They discover the error in subsequent year and wants to rectify the error. Pass the journal entry to rectify the error.

Q39. A and B are partners sharing Profit & losses in the ratio of  3:2.. Their Opening Capital as on 1.4.2002 was Rs. 2,00,000 and Rs,. 1,00,000 respectively.

During the year ended they earned a profit of Rs. 5,50,000. They omitted to provide the following:-

a)      Interest on Capital @ 12% p.a

b)      Commission to Manager @ 10% after charging his commission

Pass the necessary journal entry to rectify the afore-said error.

Q40.  X, Y and Z are partners sharing profit & losses in the ratio of 3:2:1. X & Y are entitled to commission on the following basis:

X – 10% of profit after charging his commission

Y – 10% of profit before charging his commission.

After the close of the accounting year the following errors were noticed:

X’s capital is credited with Rs. 2,200 being commission on profit before charging his commission

Y’s capital account is credited with commission on profit after charging his commission.

It is decided to pass necessary journal entry to rectify above mistake without altering the accounts of closed accounting year.

Q41 A,B and C are partners sharing profit & losses in the ratio of 3:2:1. A is entitled to commission @ 10% of the profit after charging such commission. However A’s account is credited with Rs. 1,100 being commission @ 10% of profit before charging such commission. Pass the necessary journal entry to rectify above mistake.

 

Q42. A, B and C are partners sharing profit or losses in the Capital ratio. After the close of accounting year 1999-2000, they discovered that Interest on capital @ 10% p.a  which is as follow:

A – Rs. 2,500

B – Rs. 2,250

C – Rs. 1,200

has been omitted to be provided. During the accounting year 1999-2000 following partners have brought an additional capital during the mid of the year as follow:

A – Rs. 10,000

B – Rs. 15,000

Pass the necessary journal entry to rectify the effect of omission.

Q43. A, B and C started partnership business on 1.4.2000 with capitals of Rs. 1,00,000, Rs. 80,000 and Rs. 80,000 respectively. A withdrew from his capital Rs. 20,000 on 1.7.2000 and B & C introduced additional capital of Rs. 20,000 each on 1.10.2000. The interest on capital @ 12% p.a was provided on the opening balances without taking into consideration the adjustment in the capital during the year. Pass the necessary journal entry to rectify the above mistake assuming that accounting year of the firm ends on 31.12.2000.

Guarantee of Profit

Q 44. A, B and C are partners. They admit D as a new partner and guarantee that his share of profit shall not be less than Rs. 20,000 p.a. Profits are to be shared in the ratio of 4:3:3:2 respectively. If the total profits were Rs. 96,000, prepare a statement showing distribution under the following circumstances:

If a guarantee is given by

1.      A alone

2.      A and B equally

3.      A, B and C in the ratio of 3:2:1

Q 45 : A and B are partners sharing profit and losses in the ratio of 5:3. C was to receive a salary of Rs. 1800 p.a plus a commission of 5% on the profits after charging such salary and commission or 1/5^th of the profits of the firm whichever is large. Any excess of the latter over the former is to be borne by A. Prepare the profit & loss Appropriation account under the following circumstances:

1.      profits of the year  - Rs. 24,900

2.      Profits of the year – Rs. 10,710 after charging C’s salary.

3.      Profits of the year – Rs. 12,000 after charging C’s salary and commission.

Q46. 3 Chartered Accountant X,Y and Z form a partnership, profits being divisible in the ratio of 3:2:1, subject to the following :

a.       Z’s share of profit is guaranteed to be not less than Rs. 15,000 p.a

b.      Y gives guarantee to the effect that gross fees earned by him for the firm shall be equal to Rs. 25,000.

The profits for the first year of the partnership are Rs. 75,000. The gross fees earned by Y for the firm are Rs. 16,000. Show the distribution of profit.

Q47. A,B.C are partners sharing profit & losses in the ratio of 5:3:2 . D is admitted as  
          new partner . His share in the profits is 1/6^th or Rs. 10,000 whichever is more. Any
          excess of the latter over the former is to be borne by A, provided his share of profit     

          should not be less than Rs. 15,000 and shortfall ,if any, in the share of D will be
          borne by B & C equally. The profit during the year was Rs. 42,000 . 
          Prepare a statement showing distribution of profit among partners.

Q48. A, B and C are partners sharing profit and losses in the ratio of 2:2:1. They admit D as a new partner on the following arrangement:

            D’s share is 1/6^th or Rs. 10,000 whichever is more.

            C’s share is guaranteed at Rs. 10,000.

Any shortfall in the share of D from Rs. 10,000 will be borne by A, B and C in the profit sharing ratio. Any shortfall in the share of C from Rs. 10,000 will be borne by A and B equally. The profit earned is Rs. 54,000. Prepare the Profit & loss Appropriation Account.

Q49. A & B are partners sharing profit & losses in the ratio of 1:1. They admit C & D as new partner with 10% share each and upon the following arrangement:

Ø  C’s total earnings i.e share of profit + salary + Interest on capital, is guaranteed at Rs. 12.500

Ø  D’s share of profit is guaranteed at Rs. 10,000

by  A and B in their capital ratio

The profit during the year is Rs. 98,800 without taking into account the following:

Salary                                      Interest on capital

A                                             5,000                                       1,000

B                                             5,000                                       800

C                                             2,000                                       500

D                                             4,000                                       500

Prepare the Profit & loss appropriation account

Note: There has been no transaction in the capital Accounts of the old partners.

Q 50. P,Q,R and S are partners in a firm. Their capital accounts stood at Rs. 30,000, Rs. 15,000, Rs. 15,000 and Rs. 10,000 respectively on 1.4.99. They shared profit and losses in the ratio of 5:3:2:2. S’s share of profit ( excluding interest on capital) is guaranteed by the firm to be not less than Rs. 16,000 p.a. R’s share of profit ( Including interest on capital and salary) is guaranteed by P at Rs. 26,000 p.a. The profit for the year ended 31.3.2000 amounted to Rs. 91,000 before considering interest on capital @ 10% p.a. and salary of Rs. 1000 p.m. to R which is allowed under the partnership deed.

Prepare the profit & loss appropriation account for the year ended 31.3.2000.

Q51. A, B and C are partners sharing profit & losses in the ratio of  3:2:1 and subject to the following arrangement :

1.      C’s share of profit is guaranteed at Rs. 10,000.

2.      All the partners will be entitled to the interest on capital of Rs. 2000 each.

During the year ended 1999, the firm earned a profit of Rs. 54,000 which was distributed among the partners without providing interest on capital.

This mistake was discovered subsequently and it was decided to pass necessary entry, without altering the accounts, to give rectify the effect of said omission.

Q52. X, Y and Z are partners sharing profit & losses equally. They admit D for 1/4^th share subject to minimum profit of Rs. 35,000p.a. The deficiency in the share of D over hi normal share will be borne by other partners as follow:

First 20% of the deficiency by X

50% of the remaining deficiency by X and YB in the ratio of 2:3

Remaining deficiency by X, Y and Z in the ratio of 2:3:5

During the year the firm earned a net profit of Rs. 1,00,000. Prepare a profit & loss appropriation account.

Q53. A, B and C are partners. Their agreements provides for the following:-

a)      Interest on Capital @ 10% p.a

b)      A& B will share profits in the ratio of 3:2 and C will get Salary of Rs. 20000 & commission @ 10% of the profits before any appropriation or   1/5 of the profits , any excess of the later over the former will be borne by A & B in equal Proportion.

The fixed Capital of the Partners are Rs. 3,00,000 , Rs. 2,00,000 & Rs. 1,00,000 respectively. The profit earned by the firm is Rs. 5,00,000. Prepare the Profit & loss appropriation account.