Chapter -1(Fundamental of partnership firm)

Q1.X and Y are partners in a firm. They do not have any partnership deed. What should be done in
the following cases:

(a) X has invested ₹10,00,000 and Y only ₹5,00,000 as capital. X wants interest on capital @ 8% p.a.

(b) X spends twice the time that Y devotes to the business. He wants a salary of ₹10,000 per month
for the extra time spent by him.

(c) X has advanced a loan of ₹2,00,000 to the firm. He claims interest @9% p.a.

(e) Y withdraws ₹10,000 per month from the firm for his personal use. X claims that interest on
drawings @ 12% p.a. be charged from Y.

Q2. Girish and Satish are partners in a firm. Their Capitals on April 1, 2023 were ₹5,60,000 and
₹4,75,000 respectively. On August 1, 2023 they decided that their Capitals should be ₹5,00,000 each.
The necessary adjustment in the Capitals were made by introducing or withdrawing cash. Interest on
Capital is allowed at 6% p.a. You are required to compute interest on Capital for the year ending
March 31, 2024.

[Ans. Interest on Capitals: Girish ₹31,200 and Satish ₹29,500.]

Q3. On 1st April, 2023 A and B commenced business with Capitals of 6,00,000 and ₹2,00,000
respectively. On 31st March, 2024 the net profit (before taking into account the provisions of deed)
was 2,40,000.Interest on capitals is to be allowed at 6% p.a. B was entitled to a salary of ₹60,000
p.a. The drawings of the partners A and B were ₹60,000 and ₹40,000 respectively. The interest on
Drawings for A being ₹2,000 and B₹1,000. Assuming that A and B are equal partners, prepare the
Profit & Loss Appropriation A/c and Partners' Capital Accounts as at 31st March, 2024.

[Ans. Divisible Profits ₹1,35,000; Capitals A ₹6,41,500 and B ₹2,98,500.]

Q4. X and Y are partners with capitals of ₹1,00,000 and ₹80,000 respectivel on 1st April, 2022 and
their profit sharing ratio is 2: 1. Interest on capital is agreed @ 12% p.a. Y is to be allowed an annual
salary of ₹6,000. Th profit for the year ended 31st March, 2023 amounted to ₹50,000. Manage is
entitled to a commission of 10% of the profits.

Prepare Profit and Loss Appropriation Account and Capital Accounts.

[Ans. Divisible Profit ₹17,400; Commission to manager is 10% of ₹50,000, i.e *5,000. Balances of
Capital Accounts : X₹1,23,600 and Y₹1,01,400.]

Q5. Y and Z are partners with capitals of ₹2,50,000 and ₹1,50,000 respectively on 1st April, 2023.
Each partner is entitled to 9% p.a. interest on his capital. Z is entitled to a salary of ₹60,000 p.a.
together with a commission of 6% of Net Profit after charging his commission. Net profit for the year
ended 31st March, 2024 amount to ₹2,12,000. Prepare Partner's Capital Accounts: (i) when capitals
are fixed

[ Ans. Divisible Profits ₹1,04,000; Commission to Z₹12,000.

(i) When capitals are fixed: Current A/c balances: Y₹74,500 (Cr.); Z₹1,37,500 (Cr.) Capital A/c
balances: Y₹2,50,000 (Cr.); Z₹1,50,000 (Cr.)

Q6. Lata and Mamta are partners with capitals of ₹3,00,000 and ₹2,00,000 respectively sharing
profits as Lata 70% and Mamta 30%. During the year ended 31st March 2024 they earned a profit of
₹2,26,440 before allowing interest on partner's loan. The terms of partnership are as follows:

(i) Interest on Capital is to be allowed @ 7% p.a.

Prepare the Profit and Loss Appropriation Account.

Q7. Radha and Rukmani are partners in a firm with fixed capitals of ₹2,00,000 and ₹3,00,000
respectively.

They share profits in the ratio of 1: 2. Both partners are entitled to interest on capitals @ 8% per
annum. In addition, Rukmani is entitled to a salary of 20,000 per month. Business is being carried
from the property owned by Radha on a yearly rent of ₹1,20,000. Net Profit for the year ended 31st
March 2024 before providing for rent was ₹5,50,000.

You are required to draw Profit & Loss Appropriation Account for the year ended 31st March, 2024.
[Ans. Share of Profit transferred to Radha's Current A/c ₹50,000 and Rukmani's Current A/c
₹1,00,000.]

Q8. A and B are partners in a firm sharing profits in the ratio of 1: 2. Their capitals on 1st April 2023
were ₹4,00,000 and ₹6,00,000 respectively. As per partnership deed, A is to get a monthly salary of
₹15,000 and interest on capitals is to be provided @ 10% p.a. and charged on drawings @ 12% p.a.
During the year A withdrew ₹30,000 and B withdrew ₹50,000. The firm incurred a loss of ₹60,000
during the year ended 31st March, 2024 before above adjustments. You are required to prepare an
account showing the distribution of profit/loss.
[Ans. Share of Loss A₹18,400 and B 36,800.]

Q9. X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2 with capitals of
₹10,00,000 and ₹5,00,000 respectively. As per the partnership deed, they are to be allowed interest
on capital @ 8% p.a. The net profit for the year ended 31st March, 2023 before providing for interest
on capital amounted to ₹45,000. Show the distribution of profit.

[Ans. Interest on capital allowed to X 30,000 and Y₹15,000.]

Q10. Mr. Ashok Gupta is a partner in a firm. He withdrew the following amounts during the year
ended 31st March, 2024:

April 30. 8,000

June30. 6,000

Sept.30. 5,000

Dec. 31. 12,000

Jan.31. 10,000
Calculate interest on drawings @ 9% p.a. for the year ended on 31st March, 2024.
(By simple & product method)

[Ans. Interest on Drawings 1,710.]

Q11.Calculate the interest on drawings of Sh. Ganesh @ 9% p.a. for the year ended 31st March,
2024, in each of the following alternative cases:

Case (i) If he withdrew ₹4,000 p.m. in the beginning of every month.

(ii) If he withdrew ₹5,000 p.m. at the end of every month;

(iii) If he withdrew ₹6,000 p.m.;

(iv) If he withdrew 72,000 during the year;

(v) If he withdrew as follows:

30th April, 2023. 10,000

1st July, 2023. 15,000

30th Nov., 2023. 12,000

31st March, 2024. 20,000

(vi) If he withdrew 12,000 in the beginning of each quarter;

vii) If he withdrew ₹18,000 at the end of each quarter;

(viii) If he withdrew 18,000 during the middle of each quarter.

[Ans. Case (i) 2,340; Case (ii) ₹2,475; Case (iii) ₹3,240; Case (iv) ₹3,240; Case (v) ₹3,008; Case (vi)
₹2,700; Case (vii) ₹2,430; Case (viii) ₹3,240.]

Q12. Calculate interest on A's drawings:

(i) If he has withdrawn ₹60,000 on 1st October, 2022 and rate of interest on drawings is 8% per
annum.

(ii) If he has withdrawn ₹60,000 on 1st October, 2022 and rate of interest on drawings is 8%.

Books are closed on 31st March, 2023.

Q13. P and Q were partners in a firm sharing profits in 3 : 1 ratio. Their respective fixed capitals were
₹10,00,000 and ₹6,00,000. The partnership deed provided interest on capital @ 12% p.a. The
partnership deed further provided that interest on capital will be allowed fully even if it will result into
a loss to the firm. The net profit of the firm for the year ended 31st March, 2018 was ₹1,50,000.

Pass necessary journal entries in the books of the firm allowing interest on capital and division of
profit/loss among the partners.