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:

1st July, 2023. 15,000

1st Oct., 2023. 18,000

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.