NCERT Solutions for Class 12 Accountancy (Part 1) Chapter 1 Accounting for Partnership: Basic Concept

NCERT
SOLUTIONS
CLASS - 12th

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Class : 12th
Subject : Accountancy
Chapter : 2
Chapter Name : Accounting for partnership: Basic concept

Q1 Define Partnership Deed.

Answer. It is a legal agreement among all the partners of the firm. It is a written agreement in
which all the details of partnership are mentioned like share of each partner in profit, Interest on
drawing or capital or loan, etc. In general we have following details written in the partnership
deed:

⮚ Goal of business.
⮚ Correspondence details of the firm
⮚ Details of all partners
⮚ Sharing ratio of profit and loss with the firms
⮚ Capital investment by each partner
⮚ Responsibilities of partners
⮚ Time period of partnership
⮚ Interest rate on capital, loans etc.

Page : 97 , Block Name : Short Answer Questions

Q2 Why it is considered desirable to make the partnership agreement in writing.

Answer. It is not mandatory that the partnership agreement should be in written. It can be oral
also. According to the Partnership Act, 1932 it is not mandatory to make partnership deed in
written. However it is recommended to make partnership deed in written as it helps in many
situations since in case any dispute arises among the partners then in that situation the partners
can settle the dispute by changing the agreement with the consent of all the partners. The
partners can also use partnership agreement in the court as a valid evidence in case of any
dispute.

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Q3 List the items which may be debited or credited in the capital accounts of the partners when:

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(i) Capitals are fixed
(ii) Capitals are fluctuating

Answer. (i) When Capitals are fixed
The following items are credited when capital accounts are fixed.

⮚ Additional capital introduced by partners during an accounting year
⮚ Opening balance of capital
The following items are debited when capital accounts are fixed.

⮚ Closing balance of capital
⮚ Part of capital withdrawn by partners.

(ii) When Capitals are fluctuating
The following items are credited when capital accounts of the partners are fluctuating.

⮚ Additional capital introduced by partners during an accounting year.
⮚ Share of profit of every partner.
⮚ Opening balance of capital.
⮚ Commission and bonus to the partners
⮚ Interest on capital
⮚ Salaries to the partners
The following items are debited when capital accounts are fluctuating.

⮚ Closing balance of capital.
⮚ Drawings made by partners during the accounting period
⮚ Share of loss.
⮚ Interest on drawings.

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Q4 Why is Profit and Loss Adjustment Account prepared? Explain.

Answer. We prepare profit & loss adjustment A/c mainly for two reasons:

⮚ For rectifying errors - After preparing P&L A/c and balance sheet, if there is any error
that came into notice, then these errors are to be rectified in the Profit & loss adjustment
A/c without altering previous Profit & loss A/c.

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⮚ Distribution of profit or losses-This Account is often used for distribution of profit and loss
among the partners. Sometimes profit & loss adjustment A/c is used instead of profit &
loss appropriation A/c. The main reason to prepare this account is to ascertain correct
profit or loss that occurred during the accounting year.

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Q5 Give two circumstances under which the fixed capitals of partners may change.

Answer. The following are the two circumstances under which the fixed capitals of partner may
change.

⮚ If a partner withdraws any part or whole amount of his capital during the year.

⮚ If a partner introduces fresh capital in the business during the year.

Page : 97 , Block Name : Short Answer Questions

Q6 If a fixed amount is withdrawn on the first day of every quarter, for what period the interest
on total amount withdrawn will be calculated?

Answer. Suppose if we withdraw a fixed amount on the very first day of every quarter, then the

interest is calculated for a period of year. year.
For example: If Partner A withdraws Rs. 4000 on the first day of every quarter and the interest
rate is 5%, then interest on drawing is calculated as:

Drawing made by the A during the whole year=

Interest on drawing

Page : 97 , Block Name : Short Answer Questions

Q7 In the absence of partnership deed, specify the rules relating to the following:
(i) Sharing of profits and losses.

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(ii) Interest on partner’s capital.
(iii) Interest on Partner’s drawings.
(iv) Interest on Partner’s loan
(v) Salary to a partner.

Answer. (i) Sharing of profits and losses: If there is no clause in the partnership deed regarding
the distribution of profit or losses between the partners of a firm, then according to the
Partnership Act, 1932, profits and losses are to be shared equally by all the partners of the firm.
(ii) Interest on partner’s capital: If there is no clause in the partnership deed regarding the
interest on capital, then according to the Partnership Act, 1932, no interest on capital should be
given to the partners.
(iii) Interest on partner’s drawings:If there is no clause in the partnership deed regarding the
interest on drawings, then according to the Partnership Act, 1932, no interest on drawing should
be charged from the partners.
(iv) Interest on partner’s loan: If there is no clause in the partnership deed regarding the interest
on partner’s loan, then according to the Partnership Act, 1932, the partners will get interest on
loan @ 6% p.a. on the amount of loan provided by them to the firm.
(v) Salary to a partner: If there is no clause in the partnership deed regarding the salary to be
provided to the partners, then according to the Partnership Act, 1932, no salary or remuneration
should be given to any partner.

Page : 98 , Block Name : Short Answer Questions

Q1 What is partnership? What are its chief characteristics? Explain.

Answer. According to the Partnership Act, 1932, partnership is an agreement between two or
more persons who have agreed to share profits or losses of an organisation that will be carried
by every partner or by any one partner from them acting for all.
Person who come together to start and run the business are called ‘partners’ individually and
‘firm’ collectively and the name on which they execute their business is known as ‘firm name’.
The following are the characteristics of partnership.

⮚ Partnership Deed: The partnership among the partners should be governed by a
partnership deed. A partnership deed is an agreement among the partners containing
the necessary provisions for conducting the business of the firm. The deed may be oral
or written.

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⮚ Mutual agency: Partnership may be carried on by all partners or any one of the partner
acting on behalf of all. It means that all the partners of a firm are equally entitled to
participate in the activities of the business or any one of them who is acting on behalf of
all. Every partner binds other partners by his acts and thus acts as their agent. Similarly,
other partners bind him by their acts and thus he acts as the principal.
⮚ Two or more persons: A partnership can be formed by the association of at least two
persons. According to the Partnership Act, 1932, there can be any number of partners in
the partnership, but as per the Rule (10) of the Companies (Miscellaneous) Rules Act
2014, there can be atmost 50 partners in a firm. As per the Section 464 of Companies
Act 2013, the maximum number of partners allowed are one hundred.
⮚ Liability: Liability of a partnership firm is unlimited and each partner is liable for the firm’s
liabilities whether individually and jointly with other partners to the third party. Moreover,
each partner along with his/her co-partners is responsible for all the acts of the
partnership firm.
⮚ Sharing of profits : In case their is no partnership deed among the partners, then the
profit or loss earned by a partnership firm must be distributed equally among the
partners. In case their is a deed then the profits or losses will be distributed as per the
partnership deed. Any association formed for the purpose of charity will not be
considered as partnership as it is not formed for earning profits.
⮚ Business: A partnership is formed to carry out a legal business. Any partnership formed
for carrying out illegal activities like black marketing, smuggling etc. will not constitute a
legal business or partnership.

Page : 97 , Block Name : Long Answer Questions

Q2 Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to
partnership accounts if there is no partnership deed.

Answer. These are the main provisions of the Indian Partnership Act, 1932 relevant to the
partnership accounts in the absence of partnership deed.

⮚ Interest on Drawings:If there is no clause in the partnership deed regarding the interest
on drawings, then no interest should be charged from the partners on the amount
withdrawn by them out of their capital as drawings.
⮚ Salary to Partner: If their is no clause in the partnership deed regarding the salary to be
given to partners, then no salary should be provided.
⮚ Interest on Partner’s Loan: If their is no clause in the partnership deed regarding interest
on partner’s loan, then according to the Partnership Act, 1932, the partners will get
interest on loan @ 6% p.a. on the amount of loan provided by them to the firm.
⮚ Interest on Capital: If their is no clause in the partnership deed regarding the interest on
partner’s capital, then according to the Partnership Act, 1932, no interest on capital
should be given to the partners of the firm. In case the partners mutually agree to
provide interest on capital out of their profits, then it can be given at an agreed rate.

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⮚ Profit Sharing Ratio: If their is no clause in the partnership deed regarding sharing of
profit or losses among the partners, then according to the Partnership Act of 1932, then
the profits or losses of the firm must be distributed equally among the partners.

Page : 97 , Block Name : Long Answer Questions

Q3 Explain why it is considered better to make a partnership agreement in writing.

Answer. A partnership deed forms the basic of a partnership firm. A partnership deed contains
all the terms and conditions that are agreed by all the partners while forming the partnership.
Mainly these details are included in a partnership deed.

⮚ Name and address of the firm
⮚ Profit and loss sharing ratio
⮚ Contribution to capital by each partner
⮚ Rate of interest on capital, drawings and loans
⮚ Name and address of all partners
⮚ Duration of partnership
⮚ Objective of business of the firm
⮚ Salaries, commission, if payable to partners.
⮚ Rights, types of roles and duties of partners

However, it is not mandatory to have the partnership agreement in written. It can be oral also.
But it is recommended to have partnership deed in written as it helps in solving disputes
between the partners. The partners can also settle the disputes by changing the agreement with
the consent of all the partners. It can also be used in the court as a valid evidence in case any
dispute arises.
Page : 97 , Block Name : Long Answer Questions

Q4 Illustrate how interest on drawings will be calculated under various Conditions.

Answer. When any partner withdraw an amount in cash or in any other form, from the firm for
personal use, then it is known as drawings. The interest on drawing is interest charged by the
firm on that drawings. There are various methods to calculate interest on drawings .However the
method to calculate interest on drawings depends on the information given for time and
frequency of the drawings made by the partner. These are the following Conditions of drawings:
Condition 1: When information about Date, Amount and Rate of Interest on drawings are given.

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If a partner withdrew Rs1,000 on Jan 01 and interest on drawing is charged at 10% p.a. and the
firm closes its books on December 31 every year then interest of drawings amounts to Rs 100

Interest on drawings =Total amount

Interest on drawings
Condition 2: When information of only Amount and Rate of Interest on drawings is given
Case I: If the Amount and Rate of Interest on drawings (per annum) is given but date is not
mentioned
If the information of the amount of drawings and rate of interest of drawings (p.a.) is given but
the date of drawings is not provided then interest is charged on 6 months.
Example- If a partner withdrew Rs 20,000 and rate of interest on drawings is 15% p.a. then the
interest of drawings amounts to Rs 1500

Interest on drawings
Case II: If the Rate of Interest on drawings and Amount is given but the date and per annum
rate of interest is not mentioned
If the date and the rate of interest are given but per annum is not specified, interest is charged
for the whole year.
Example- If a partner withdrew Rs 10,000 and interest rate is 15% , then the interest on
drawings amounts to Rs 1,500.

Interest on drawings

Condition 3: When any partner withdraws fixed amount at regular interval
Case I: If any partner withdraws fixed amount at the beginning of each month, then the interest
is calculated for 6.5 months.
Example- If a partner withdraws Rs 2,000 in the beginning of every month and the rate of
interest is 10% p.a., then the interest on drawings amount to Rs 1350.

Interest on drawings
Case II: If any partner withdraws fixed amount at the end of each month, then the interest is
calculated for 5.5 months

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Example- If a partner withdraws Rs 2,000 at the end of each month and rate of interest is 10%
p.a., then the interest on drawings amount to Rs 1100.

Interest on drawings
Case III: If any partner withdraws fixed amount in the middle of every month then interest on
drawings is calculated for 6 months
Example- If a partner withdraws Rs 2,000 on 15th of every month and the rate of interest is 10%
p.a., then the interest on drawings amount to Rs 1200.

Interest on drawings
Case IV: If any partner withdraws fixed amount in the beginning of every quarter then the
interest is calculated for 7.5 months
Example- If a partner withdraws Rs 6,000 in the beginning of every quarter and the rate of
interest is 10% p.a. then the interest on drawings amount to Rs 1500

Interest on drawings
Case V: If any partner withdraws fixed amount at the end of every quarter, then the interest is
calculated for 4.5 months
Example- If a partner withdraws Rs 6,000 at the end of every quarter and the rate of interest is
10% p.a., then the interest on drawings amounts to Rs 900.
Interest on drawings

Condition 4:If different amount is withdrawn by a partner at different points of time then the
interest is calculated by Product Method. The drawings is calculated from the date of withdrawal
to the last date of the accounting year.
Example- A partner withdraws Rs 4,000 on March 01, Rs 2,000 on June 01, Rs 4,000 on Sep.
30 and Rs 2000 on Dec. 31 and the rate of interest on drawings is 20% p.a. The firm closes its
book on December 31.
Calculation of Interest on Drawings by Product Method

Interest on Drawings

Amount Outstanding
Date Product
Rs Period

Feb. 01 4,000 10 = 40,000

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May. 01 2,000 7 = 14,000

Sep. 30 4,000 3 = 12,000

Dec. 31 2,000 0 = 0

66,000

Interest on drawings = (sum of product)
Interest on drawings =

Page : 97 , Block Name : Long Answer Questions

Q5 How will you deal with a change in the profit sharing ratio among existing partners?
Take imaginary figures to illustrate your answer?

Answer. We will take an imaginary example -
Partners decide to change their profit sharing ratio generally due to retirement or death of
partner, admission of new partner or sometimes with consent of all the partners. Some
adjustments that should be taken into consideration while changing profit sharing ratio are,
liabilities and adjustment of capitals, reserves and accumulated profits ,goodwill, profit or loss on
the revaluation of assets etc. The reserves and accumulated profits and profit or loss on
revaluation of assets and liabilities should be credited/ debited in the Partner's Capital Account
in their old profit sharing ratio.
If the existing partners decide to change the profit sharing ratio then some partners will gain
(gaining partners) while other partners lose some part of their share in profits (sacrificing
partners).Therefore, the gaining partners’ capital accounts will be debited to the extent of their
gain while the sacrificing Partners' capital accounts will be credited to extent of their sacrifice.
The following Journal entry is passed -
Gaining Partner’s Capital A/c Dr
To Sacrificing Partner's Capital A/c
(Being adjustment entry passed)
Example: X, Y, Z are partners in a firm sharing profits and losses in the ratio 3:2:1. They
decided to share future profits and losses equally. On that date, general reserves stood at

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₹12000 and the profit on revaluation of building was ₹ 3,000. The following adjustment entry is
passed to adjust the capitals of the partners.

Particulars X Y Z

Share of profit as per 3:2:1 6,000 4,000 2,000

Profit on revaluation of building 1,500 1,000 500

7,500 5,000 2,500

Share of profit as per 1:1:1 5,000 5,000 5,000

Difference (Gain or Loss) 2,500 - 2,500

(Loss) (Gain)

Hence, in this above example, Z gains and X sacrifice, so the partner X needs to be
compensated by Z with the amount of Rs 2,500. The following adjustment entry is passed.
Adjustment entry:

Z’s capital A/c Dr 2500
To X's Capital A/c 2500
(Adjustment entry passed)

Page : 97 , Block Name : Long Answer Questions

Q1 Triphati and Chauhan are partners in a firm sharing profits and losses in the ratio of 3:2.
Their capitals were Rs 60,000 and Rs 40,000 as on January 01, 2015. During the year they
earned a profit of Rs 30,000. According to the partnership deed both the partners are entitled to
Rs 1,000 per month as Salary and 5% interest on their capital. They are also to be charged an
interest of 5% on their drawings, irrespective of the period, which is Rs 12,000 for Tripathi, Rs
8,000 for Chauhan. Prepare Partner’s Accounts when capitals are fixed.

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Answer.

Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Particulars
Rs Rs

To Partners’ Salary By Profit and Loss 30,000
(Profit)
Tripathi 1,000 × 12 = 12,000 By Interest on
Drawings
Chauhan 1,000 × 12 = 12,000 24,000 Tripathi A/c 600

Chauhan A/c 400 1,000

To Interest on Capital
Tripathi 3,000
Chauhan 2,000 5,000

To Profit Transferred
to:
Tripathi’s Current 1,200
Chauhan’s Current 800 2,000

31,000 31,000

.
Dr. Partners Capital A/c Cr

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

To Drawings 12000 8,000 By Balance b/d 60,000 40,000

To Balance c/d 58,000 32,000

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60,000 40,000 60,000 40,000

Partners’ Current Account
Dr. Cr.

Particulars Tripathi Chauhan Particulars Tripathi Chauhan

To Interest on 600 400 By Partners’ Salaries 12,000 12,000
Drawings
To Balance c/d 15,600 14,400 By Interest on Capital 3,000 2,000

By Profit and Loss 1,200 800
Appropriation

16,200 14,800 16,200 14,800

Page : 98 , Block Name : Numerical Questions

Q2 Anubha and Kajal are partners of a firm sharing profits and losses in the ratio of 2:1. Their
capital, were Rs 90,000 and Rs 60,000. The profit during the year were Rs 45,000. According to
partnership deed, both partners are allowed salary, Rs 700 per month to Anubha and Rs 500
per month to Kajal. Interest allowed on capital @ 5% p.a. The drawings at the end of the period
were Rs 8,500 for Anubha and Rs 6,500 for Kajal. Interest is to be charged @ 5% p.a. on
drawings. Prepare partners capital accounts, assuming that the capital account are fluctuating.

Answer.
a)If Partner’s Interest on capital, Salaries, and Interest on Drawing are already adjusted in Profit
and Loss Account. The answer will be as follows

Partners’ Capital Account
Dr. Cr.

Particulars Anubha Kajal Particulars Anubha Kajal

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To Drawings A/c 8,500 6,500 By Balance b/d 90,000 60,000
To Interest on Drawings 425 325 By Partner’s Salaries 8,400 6,000
A/c A/c
By Interest on Capital 4,500 3,000
A/c
To Balance c/d 1,23,975 77,175 By Profit and Loss 30,000 15,000
Appropriation A/c

1,32,900 84,000 1,32,900 84,000

b)If Partner’s interest on capital, salaries and interest on drawings adjusted in Profit and Loss
Appropriation Account. The solution will be as follows
Profit and Loss Appropriation Account
Dr.
Cr.

Amo
Amount unt
Particulars Rs Particulars Rs

To Partner’s By Profit and 45,0
Salaries: Loss A/c 00
Anubha 8,400 By Interest on
Drawings
Kajal 6,000 14,400 Anubha A/c 425

Kajal A/c 325 750

To Interest on
Capital:
Anubha 4,500
Kajal 3,000 7,500

To Profit
transferred to
Anubha’s Capital 15,90
0

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Kajal’s Capital 7,950 23,850

45,750 45,7
50

Partners’ Capital Account
Dr. Cr.

Particulars Anubha Kajal Particulars Anubha Kajal

To Drawings 8,500 6,500 By Balance b/d 90,000 60,000
To Interest on 425 325 By Partners’ Salaries 8,400 6,000
Drawings
By Interest on Capital 4,500 3,000
To Balance c/d 1,09,875 70,125 By Profit and Loss 15,900 7,950
Appropriation

1,18,800 76,950 1,18,800 76,950

Page : 98 , Block Name : Numerical Questions

Q3 Harshad and Dhiman are in partnership since April 01, 2016. No Partnership agreement was
made. They contributed Rs 4,00,000 and 1,00,000 respectively as capital. In addition, Harshad
advanced an amount of Rs 1,00,000 to the firm, on October 01, 2016. Due to long illness,
Harshad could not participate in business activities from August 1, to September 30, 2017. The
profits for the year ended March 31, 2017 amounted to Rs 1,80,000. Dispute has arisen
between Harshad and Dhiman.
Harshad Claims:
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in proportion of capital;
Dhiman Claims:
(i) Profits should be distributed equally;
(ii) He should be allowed Rs 2,000 p.m. as remuneration for the period he managed the
business, in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.

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You are required to settle the dispute between Harshad and Dhiman. Also prepare Profit and
Loss Appropriation Account.

Answer. Decision on Harshad Claims

⮚ According to partnership Act 1932 if there is no agreement on interest on partner’s
capital, no interest will be allowed to partners.
⮚ According to Partnership Act 1932 if there is no agreement on the matter of profit
sharing, profit is distributed equally.
Decision on Dhiman Claims

⮚ Dhiman’s claim is valid, profit should be distributed equally because it is mentioned in
partnership act 1932 that profit is shared equally in absence of profit sharing ratio in
partnership deed.
⮚ According to partnership Act 1932 second claim of Dhiman is not valid and No salary will
be allowed to any partner because there is no agreement on matter of remuneration.
⮚ Dhiman’s claim is not correct on the matter of interest on capital but justified on the
matter of interest on loan. According to Partnership Act 1932if there is no agreement on
interest on partner’s loan, Interest shall be provided at 6% p.a. and if there is no
agreement related to interest on capital the interest on capital should not be provided.
Profit and Loss Adjustment Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Partner’s Loan By Profit and Loss A/c 1,80,000
Harshad 1,00,000
\times \left times 3,000
\left$$dfrac{6}{12}\right)
To Profit and Loss Appropriation 1,77,000

1,80,000 1,80,000

Profit and Loss Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

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To Profit transferred to By Profit and Loss 1,77,000
Adjustment
Harshad’s Capital 88,500
Sharma’s Capital 88,500

1,77,000 1,77,000

Page : 99 , Block Name : Numerical Questions

Q4 Aakriti and Bindu entered into partnership for making garment on April 01, 2016 without any
Partnership agreement. They introduced Capitals of Rs 5,00,000 and Rs 3,00,000 respectively
on October 01, 2016. Aakriti Advanced. Rs 20,000 by way of loan to the firm without any
agreement as to interest. Profit and Loss account for the year ended March 2017 showed profit
of Rs 43,000. Partners could not agree upon the question of interest and the basis of division of
profit. You are required to divide the profits between them giving reason for your solution.

Answer.
Profit and Loss Adjustment Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Partner’s Loan By Profit and Loss A/c 43,000

600
Aakriti
To Profit transferred to:
Aakriti’s Capital A/c 21,200
Bindu’s Capital A/c 21,200 42,400

43,000 43,000

Reason

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⮚ According to Partnership Act 1932 Interest on partners loan should be 6% p.a. as there
is no partnership deed.
⮚ According to Partnership Act 1932 Interest on capital should not be provided as there is
no agreement on interest on capital.
⮚ According to Partnership Act 1932 Profit should be distributed equally because profit
sharing ratio is not given.

Page : 99 , Block Name : Numerical Questions

Q5 Rakhi and Shikha are partners in a firm, with capitals of Rs 2,00,000 and Rs 3,00,000
respectively. The profit of the firm, for the year ended 2016-17 is Rs 23,200. As per the
Partnership agreement, they share the profit in their capital ratio, after allowing a salary of Rs
5,000 per month to Shikha and interest on Partner’s capital at the rate of 10% p.a. During the
year Rakhi withdrew Rs 7,000 and Shikha Rs 10,000 for their personal use. You are required to
prepare Profit and Loss Appropriation Account and Partner’s Capital Accounts.

Answer.
If we provide partner’s salary and interest on capital even if the firm goes in loss then answer
will be as follows-
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Partner’s Salaries: By Profit and Loss A/c 23,200
Shikha 60,000 By Loss transferred to:
Rakhi Capital A/c 34,720
To Interest on Shikha’s Capital A/c 52,080 86,800
Capital:

Rakhi A/c 20,000
Shikha A/c 30,000 50,000

1,10,000 1,10,000

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Partners’ Capital Account
Dr. Cr.

Particulars Rakhi Shikha Particulars Rakhi Shikha

To Drawings A/c 7,000 10,000 By Balance b/d 2,00,000 3,00,000
To Profit & Loss 34,720 52,080 By Partner’s 60,000
Appropriation A/c Salaries
To Balance c/d 1,78,280 3,27,920 By Interest on 20,000 30,000
Capital A/c

2,20,000 3,90,000 2,20,000 3,90,000

If interest on capital and salaries is provided out of profit then answer will be as follows-
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Partner’s Salaries By Profit and Loss A/c 23,200
Shikha
12,655

To Interest on Capital

4,218
Rakhi
Shikha 6,327

23,200 23,200

If the profit is less than the total of distributable items then answer will be as follows-

To Partners Salaries: Ratio

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Shikha A/c (Rs 60,000) 6
12,655

Interest on Capital:
Rakhi A/c (Rs 20,000) 2
4,218

Shikha A/c (Rs 30,000) 3
6,327

11 23,200

Partners’ Capital Account
Dr. Cr.

Particulars Rakhi Shikha Particulars Rakhi Shikha

To Drawings A/c 7,000 10,000 By Balance b/d 2,00,000 3,00,000
By Partner’s Salaries 12,655
To Balance c/d 1,97,218 3,08,972 By Interest on Capital 4,218 6,327

2,04,218 3,18,972 2,04,218 3,18,972

Page : 99 , Block Name : Numerical Questions

Q6 Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs 50,000 and
Rs 30,000, respectively. Interest on capital is agreed to be paid @ 6% p.a. Azad is allowed a
salary of Rs 2,500 p.a. During 2016, the profits prior to the calculation of interest on capital but
after charging Azad’s salary amounted to Rs 12,500. A provision of 5% of profits is to be made
in respect of manager’s commission. Prepare accounts showing the allocation of profits and
partner’s capital accounts.
Answer.
Profit and Loss Adjustment Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

To Interest on Capital: By Profit and Loss A/c 15,000

Lokesh 3,000
Azad 1,800 4,800

To Partner’s Salaries:
Azad 2,500

To Provision for
Manager’s Commission

750
To Profit transferred to:
Lokesh Capital 4,170
Azad Capital 2,780 6,950

15,000 15,000

Partners’ Capital Account
Dr. Cr.

Particulars Lokesh Azad Particulars Lokesh Azad

By Balance b/d 50,000 30,000
By Interest on Capital 3,000 1,800
A/c
To Balance c/d 57,170 37,080 By Partner’s Salaries 2,500
By Profit and loss 4,170 2,780
Appropriation A/c

57,170 37,080 57,170 37,080

Page 20 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 99 , Block Name : Numerical Questions

Q7 The partnership agreement between Mannesh and Girish provides that:
(i) Profits will be shared equally;
(ii) Mannesh will be allowed a salary of Rs 400 p.m;
(iii) Girish who manages the sales department will be allowed a commission equal to 10% of the
net profits, after allowing Maneesh’s salary;
(iv) 7% interest will be allowed on partner’s fixed capital;
(v) 5% interest will be charged on partner’s annual drawings;
(vi) The fixed capitals of Mannesh and Girish are Rs 1,00,000 and Rs 80,000, respectively.
Their annual drawings were Rs 16,000 and 14,000, respectively. The net profit for the year
ending March 31, 2015 amounted to Rs 40,000;
Prepare firm’s Profit and Loss Appropriation Account.

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Partner’s Salary: By Profit and Loss A/c 40,000
● Mannesh 4,800 By Interest on Drawings:
Mannesh A/c 800
To Partner’s commission: Girish A/c 700 1,500

Girish
3,520

To Interest on Capital:
Mannesh A/c 7,000
Girish A/c 5,600 12,600

To Profit transferred to:

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Maneesh’s Current A/c 10,290
Girish’s Current A/c 10,290 20,580

41,500 41,500

Page : 100 , Block Name : Numerical Questions

Q8 Ram, Raj and George are partners sharing profits in the ratio 5 : 3 : 2. According to the
partnership agreement George is to get a minimum amount of Rs 10,000 as his share of profits
every year. The net profit for the year 2013 amounted to Rs 40,000. Prepare the Profit and Loss
Appropriation Account.

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to: By Profit and Loss A/c 40,000
Ram’s Capital A/c
18,750

Raj’s Capital A/c
11,250

George’s Capital A/c
10,000

40,000 40,000

Page : 100 , Block Name : Numerical Questions

Q9 Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is
guaranteed a minimum amount of Rs 10,000 as share of profit, every year. Any deficiency on

Page 22 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

that account shall be met by Babita. The profits for two years ending December 31, 2016 and
December 31, 2017 were Rs 40,000 and Rs 60,000, respectively. Prepare the Profit and Loss
Appropriation Account for the two years.
Answer.
Profit and Loss Appropriation Account
for the year ending 31st December, 2016
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to: By Profit and Loss A/c 40,000
Amann’s Capita A/c 16,000 16,000

Babita’s Capital A/c 14,000

Suresh’s Capital A/c
10,000

40,000 40,000

Profit and Loss Appropriation Account
for the year ending 31st December 2017
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to: By Profit and Loss A/c 60,000
Amann’s Capital A/c 24,000
Babita’s Capital A/c 24,000
Suresh’s Capital A/c 12,000

60,000 60,000

Page 23 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 100 , Block Name : Numerical Questions

Q10 Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The
profit and loss account of the firm for the year ending March 31, 2017 shows a net profit of Rs
1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the
following information:
(i) Partners capital on April 1, 2016;
Simmi, Rs 30,000; Sonu, Rs 60,000;
(ii) Current accounts balances on April 1, 2016;
Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.);
(iii) Partners drawings during the year amounted to
Simmi, Rs 20,000; Sonu, Rs 15,000;
(iv) Interest on capital was allowed @ 5% p.a.;
(v) Interest on drawing was to be charged @ 6% p.a. at an average of six months;
(vi) Partners’ salaries : Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current
accounts.

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Capital: By Profit and Loss Account 1,50,000
Simmi A/c 1,500 By Interest on Drawings:
Sonu A/c 3,000 4,500 Simmi A/c 600

Sonu A/c 450 1,050

To Partners’ Salaries:
Simmi A/c 12,000
Sonu A/c 9,000 21,000

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

To Profit transferred to:
Simmi’s Current A/c 94,162
Sonu’s Current A/c 31,388 1,25,550

1,51,050 1,51,050

Partners’ Capital Account
Dr. Cr.

Particulars Simmi Sonu Particulars Simmi Sonu

By Balance b/d 30,000 60,000
To Balance c/d 30,000 60,000

30,000 60,000 30,000 60,000

Partners’ Current Account
Dr. Cr.

Particulars Simmi Sonu Particulars Simmi Sonu

To Drawings A/c 20,000 15,000 By Balance b/d 30,000 15,000
To Interest on 600 450 By Interest on Capital 1,500 3,000
Drawings
By Partners’ Salaries 12,000 9,000
To Balance c/d 1,17,662 43,388 By Profit and Loss 94,162 31,388
Appropriation

1,37,662 58,388 1,37,662 58,388

Page : 100 , Block Name : Numerical Questions

Page 25 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Q11 Ramesh and Suresh were partners in a firm sharing profits in the ratio of their capitals
contributed on commencement of business which were Rs 80,000 and Rs 60,000 respectively.
The firm started business on April 1, 2016. According to the partnership agreement, interest on
capital and drawings are 12% and 10% p.a., respectively. Ramesh and Suresh are to get a
monthly salary of Rs 2,000 and Rs 3,000, respectively.
The profits for year ended March 31, 2017 before making above appropriations was Rs
1,00,300. The drawings of Ramesh and Suresh were Rs 40,000 and Rs 50,000, respectively.
Interest on drawings amounted to Rs 2,000 for Ramesh and Rs 2,500 for Suresh. Prepare Profit
and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are
fluctuating.

Answer.

Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Capital By Profit and Loss 1,00,300
Ramesh A/c 9,600 By Interest on
Drawings
Suresh A/c 7,200 16,800 Ramesh A/c 2,000

Suresh A/c 2,500 4,500

To Partners’ Salaries
Ramesh A/c 24,000
Suresh A/c 36,000 60,000

To Profit Transferred to
Ramesh’s Capital A/c {28,000 ×
16,000
(4/7)}
Suresh’s Capital A/c {28,000 ×
12,000
(3/7)}

1,04,800 1,04,800

Page 26 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Partners’ Capital Account
Dr. Cr.

Particulars Ramesh Suresh Particulars Ramesh Suresh

To Drawings 40,000 50,000 By Cash 80,000 60,000
To Interest on 2,000 2,500 By Interest on Capital 9,600 7,200
Drawings
To Balance c/d 87,600 62,700 By Partners’ Salaries 24,000 36,000
By Profit & Loss 16,000 12,000
Appropriation

1,29,600 1,15,200 1,29,600 1,15,200

Calculation of profit sharing ratio- Suresh : Ramesh
80,000 : 60,000
4:3

Page : 101 , Block Name : Numerical Questions

Q12 Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:
(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
(ii) 5% interest is to be allowed on capital;
(iii) Vanita should be paid a monthly salary of Rs 600.
The following balances are extracted from the books of the firm, on March 31, 2017.
Sukesh Verma *
Rs Rs
Capital Accounts 40,000 40,000
Current Accounts (Cr.) 7,200 (Cr.) 2,800
Drawings 10,850 8,150
Net profit for the year, before charging interest on capital and after charging partner’s salary was
Rs 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current
Accounts.

Page 27 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Capital By Profit and Loss 9,500
Sukesh A/c 2,000
Vanita A/c 2,000 4,000

To Profit transferred to
Sukesh’s Current A/c {5,500 × (3/5)} 3,300
Vanita’s Current A/c {28,000 × (2/5)} 2,200

9,500 9,500

Partner’s Capital Account
Dr. Cr.

Particulars Sukesh Vanita Particulars Sukesh Vanita

By Balance b/d 40,000 40,000
To Balance c/d 40,000 40,000

40,000 40,000 40,000 40,000

Partner’s Current Account
Dr. Cr.

Particulars Sukesh Vanita Particulars Sukesh Vanita

To Drawings 10,850 8,150 By Balance b/d 7,200 2,800
By Partner’s Salaries 7,200

Page 28 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

By Profit and Loss 3,300 2,200
Appropriation
To Balance c/d 1,650 6,050 By Interest on capital 2,000 2,000

12,500 14,200 12,500 14,200

Page : 101 , Block Name : Numerical Questions

Q13 Rahul, Rohit and Karan started partnership business on April 1, 2016 with capitals of Rs
20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for the year ended March
2017 amounted to Rs 1,35,000 and the partner’s drawings had been Rahul Rs 50,000, Rohit Rs
50,000 and Karan Rs 40,000. The profits are distributed among partner’s in the ratio of 3:2:1.
Calculate the interest on capital @ 5% p.a.

Answer.
Calculation of Interest on Capital=
5
Interest on Capital of Rahul = 20,00,000 × = Rs 1,00,000
100
5
Interest on Capital of Rohit = 18,00,000 × 100= Rs 90,000
5
Interest on Capital of Karan = 16,00,000 ×100 = Rs 80,000

Page : 102 , Block Name : Numerical Questions

Q14 Sunflower and Pink Rose started partnership business on April 01, 2016 with capitals of Rs
2,50,000 and Rs 1,50,000, respectively. On October 01, 2016, they decided that their capitals
should be Rs 2,00,000 each. The necessary adjustments in the capitals are made by
introducing or withdrawing cash. Interest on capital is to be allowed @ 10% p.a. Calculate
interest on capital as on March 31, 2017.

Answer.
Product Method
For Sunflower

01-04-16 to 30-09-16 2,50,000 × 6 = 15,00,000

Page 29 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

01-10-16 to 31-03-17 2,00,000 × 6 = 12,00,000

Sum of Product 27,00,000
𝑅𝑎𝑡𝑒 1
Interest on capital= 𝑆𝑢𝑚 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 ∗ 100 ∗ 12
10 1
Interest on Sunflower’s capital=27,00,000 ∗ 100 ∗ 12 = 22,500 𝑅𝑠

Pink Rose

01-04-16 to 30-09-16 1,50,000 × 6 = 9,00,000
01-10-16 to 31-03-17 2,00,000 × 6 = 12,00,000

Sum of Product 21,00,000
10 1
Interest on pink rose’s capital=21,00,000 ∗ 100 ∗ 12 = 17,500 𝑅𝑠

Second Method: Simple Interest Method
For Sunflower

10 6
April 01, 2016 to September 30, 2016 2,50,000 × × = Rs 12,500
100 12

10 6
October 01, 2016 to March 31, 2017 2,00,000 × × = Rs 10,000
100 12

Interest on Sunflower’s Capital Rs 22,500

For Pink Rose

10 6
April 01, 2016 to September 30, 2016 1,50,000 × × = Rs 7,500
100 12

10 6
October 01, 2016 to March 31, 2017 2,00,000 × × = Rs 10,000
100 12

Page 30 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Interest on Pink Rose’s Capital Rs 17,500

Page : 102 , Block Name : Numerical Questions

Q15 On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock
stood in the books of the firm at Rs 4,00,000, Rs 3,00,000 and Rs 2,00,000, respectively.
Subsequently, it was discovered that the interest on capital @ 10% p.a. had been omitted. The
profit for the year amounted to Rs 1,50,000 and the partner’s drawings had been Mountain: Rs
20,000, Hill Rs 15,000 and Rock Rs 10,000. Calculate interest on capital.

Answer.
As we know Interest on Capital is calculated on opening balance of capital. In the question we
are not provided with interest on capital so we first need to calculate interest on capital-

Mountain Hill Rock

Closing Capital 4,00,000 3,00,000 2,00,000
Add: Drawings 20,000 15,000 10,000
Less: Profit (1:1:1) (50,000) (50,000) (50,000)

Opening Capital 3,70,000 2,65,000 1,60,000

Now, Calculation of Interest on Capital=
10
Mountain=3,70,000 ∗ = 37,000 𝑅𝑠
100
10
Hill=2,65,000 ∗ 100 = 26,500 𝑅𝑠
10
Rock=1,60,000 ∗ 100 = 16,000 𝑅𝑠

Page : 102 , Block Name : Numerical Questions

Q16 Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31,
2017:
Balance Sheet as at March 31, 2017

Amount Amount

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Liabilities Rs Assets Rs

Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000
Mahadev’s Capital 10,00,000
Neelkant’s Current Account 1,00,000
Mahadev’s Current Account 1,00,000
Profit and Loss Appropriation
(March 2017) 8,00,000

30,00,000 30,00,000

During the year Mahadev’s drawings were Rs 30,000. Profits during 2017 is Rs 10,00,000.
Calculate interest on capital @ 5% p.a for the year ending March 31, 2017.

Answer.
Calculation Interest on Capital
5
Neelkant=10,00,000 ∗ 100 = 50,000 𝑅𝑠
5
Mahadev=10,00,000 ∗ = 50,000 𝑅𝑠
100

We can see In this question the balances of both Partner's Capital Account and of Partner's
Current Account are mentioned, so we assumed that the capital of the partners is fixed.
When the capital of the partners is fixed, interest on capital and drawings does not affect the
capital balances of the partners instead it affect their current account balances. So, here in this
case, opening capital and closing capital of the year will remain same. So, the interest on capital
is calculated on fixed capital balances

Page : 102 , Block Name : Numerical Questions

Q17 Rishi is a partner in a firm. He withdrew the following amounts during the year ended
March 31, 2018.
May 01, 2017 Rs 12,000
July 31, 2017 Rs 6,000
September 30, 2017 Rs 9,000
November 30, 2017 Rs 12,000

Page 32 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

January 01, 2018 Rs 8,000
March 31, 2018 Rs 7,000
Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.

Answer.
Product Method

Drawings × Period Product
01-05-17 to 31-03-18 12,000 × 11 = 1,32,000
31-07-17 to 31-03-18 6,000 × 8 = 48,000
30-09-17 to 31-03-18 9,000 × 6 = 54,000
30-11-17 to 31-03-18 12,000 × 4 = 48,000
01-01-18 to 31-03-18 8,000 × 3 = 24,000
31-03-18 to 31-03-18 7,000 × 0 = 0

Sum of Product 3,06,000
𝑅𝑎𝑡𝑒 1
Interest on Drawings = Product × ∗
100 12
9 1
= 3,06,000 ∗ ∗ = Rs 2,295
100 12

Page : 103 , Block Name : Numerical Questions

Q18 The capital accounts of Moli and Golu showed balances of Rs 40,000 and Rs 20,000 as on
April 01, 2016. They shared profits in the ratio of 3:2. They allowed interest on capital @ 10%
p.a. and interest on drawings, @ 12 p.a. Golu advanced a loan of Rs 10,000 to the firm on
August 01, 2016. During the year, Moli withdrew Rs 1,000 per month at the beginning of every
month whereas Golu withdrew Rs 1,000 per month at the end of every month. Profit for the
year, before the above mentioned adjustments was Rs 20,950. Calculate interest on drawings
show distribution of profits and prepare partner’s capital accounts.
Answer.
𝑅𝑎𝑡𝑒 12
Interest on Moli’s Drawing = Total Drawings × 100 ∗ 2∗12
12 13
= 12,000 ∗ ∗ = Rs 780
100 2∗12
𝑅𝑎𝑡𝑒 11
Interest on Golu’s Drawings = Total Drawing × 100 ∗ 2∗12

Page 33 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

12 11
=12,000 ∗ 100 ∗ 2∗12= Rs 660

Profit and Loss Adjustment Account
Dr. Cr.

Particulars Amount Particulars Amount
Rs Rs

To Interest on Capital By Profit and Loss 20,950
Account
Moli 4,000 By Interest on
Drawings
Golu 2,000 6,000 Moli A/c 780

Golu A/c 660 1,440

To Interest on Partner’s
Loan
Golu’s {10,000 × (6/100) × (8/12)} 400

To Profit transferred to
Moli’s Capital A/c {15,990
9,594
× (3/5)}
Golu’s Capital A/c {15,990
6,396 15,990
× (2/5)}

22,390 22,390

Partners’ Capital Account
Dr. Cr.

Particulars Moli Golu Particulars Moli Golu

To Drawings 12,000 12,000 By Balance b/d 40,000 20,000
To Interest on Drawing 780 660 By Interest on Capital 4,000 2,000
To Balance c/d 40,814 15,736 By Profit and Loss 9,544 6,396
Adjustment

Page 34 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

53,594 28,396 53,594 28,396

Page : 103 , Block Name : Numerical Questions

Q19 Rakesh and Rohan are partners, sharing profits in the ratio of 3:2 with capitals of Rs
40,000 and Rs 30,000, respectively. They withdrew from the firm the following amounts, for their
personal use:

Rakesh Month Rs

May 31, 2016 600
June 30, 2016 500
August 31, 2016 1,000
November 1, 2016 400
December 31, 2016 1,500
January 31, 2017 300
March 01, 2017 700

Rohan At the beginning of each month 400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book of
accounts are closed on March 31, 2017, every year.

Answer.
Rakesh’s Interest on Drawings

Drawings × Period Product
31-05-16 to 31-03-17 600 × 10 = 6,000
30-06-16 to 31-03-17 500 × 9 = 4,500
31-08-16 to 31-03-2017 1,000 × 7 = 7,000
1-11-16 to 31-03-17 400 × 5 = 2,000
31-12-16 to 31-03-17 1,500 × 3 = 4,500

Page 35 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

31-01-17 to 31-03-17 300 × 2 = 6,00
01-03-17 to 31-03-17 700 × 1 = 700

Sum of Product 25,300
𝑅𝑎𝑡𝑒 1
Interest on drawing of Rakesh = Sum of Product × 100 ∗ 12
6 1
=25,300 ∗ 100 ∗ 12= Rs 126.5
𝑅𝑎𝑡𝑒 13
Interest on Rohan’s Drawing=Total Drawing× 100 ∗ 2∗12
6 3
=4,800 ∗ 100 ∗ 2∗12= Rs 156

Page : 103 , Block Name : Numerical Questions

Q20 Himanshu withdrew Rs 2,500 at the end Month of each month. The Partnership deed
provides for charging the interest on drawings @ 12% p.a. Calculate interest on Himanshu’s
drawings for the year ending 31st December, 2017.

Answer.
Himanshu’s drawing for the whole year = Rs 2,500 × 12 = Rs 30,000
𝑅𝑎𝑡𝑒 11
Calculation of Interest on Drawing = Total Drawings × ∗
100 2∗12
12 11
=30,000 ∗ 100 ∗ 2∗12= Rs 1,650

Page : 103 , Block Name : Numerical Questions

Q21 Bharam is a partner in a firm. He withdraws Rs 3,000 at the starting of each month for 12
months. The books of the firm closes on March 31 every year. Calculate interest on drawings if
the rate of interest is 10% p.a.

Answer.
Bharam’s drawing for the whole year = Rs 3,000 ×12 = Rs 36,000
𝑅𝑎𝑡𝑒 13
Calculation of Interest on Drawing = Total Drawings × 100 ∗ 2∗12
10 13
=36,000 ∗ 100 ∗ 2∗12= Rs 1,950

Page 36 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 104 , Block Name : Numerical Questions

Q22 Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017 were Rs 2,50,000
and Rs 1,50,000, respectively. They share profits equally. On July 01, 2017, they decided that
their capitals should be Rs 1,00,000 each. The necessary adjustment in the capitals were made
by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a.
Compute interest on capital for both the partners for the year ending on March 31, 2018.

Answer.
Calculation of Interest on Capital
For Raj

Capital × Period Product
1-04-17 to 30-06-17 2,50,000 × 3 = 7,50,000
1-07-17 to 31-03-18 1,00,000 × 9 = 9,00,000

Sum of Product 16,50,000
𝑅𝑎𝑡𝑒 1
Interest on drawing = Sum of Product × 100 ∗ 12
8 1
=16,50,000 × ∗ = Rs 11,000
100 12

For Neeraj

Capital × Period Product
1-04-17 to 30-06-17 1,50,000 × 3 = 4,50,000
1-07-17 to 31-03-18 1,00,000 × 9 = 9,00,000

Sum of Product 13,50,000
8 1
Interest on drawing = 13,50,000 × 100 ∗ 12 = Rs 9,000

Page : 104 , Block Name : Numerical Questions

Q23 Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As per their
partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during
2017 were Rs 24,000 and Rs 16,000, respectively. Calculate interest on drawings based on the
assumption that the amounts were withdrawn evenly, throughout the year.

Page 37 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

𝑅𝑎𝑡𝑒
Answer. Calculation of Interest on Drawings = Drawings × 100
10 6
Interest on Drawing of Amit = 24,000 ×100 ∗ 12 = Rs 1,200
10 6
Interest on Drawing of Bhola = 16,000 × 100 ∗ 12 = Rs 800

Page : 104 , Block Name : Numerical Questions

Q24 Harish is a partner in a firm. He withdrew the following amounts during the year 2017 :

Rs

February 01 4,000
May 01 10,000
June 30 4,000
October 31 12,000
December 31 4,000

Interest on drawings is to be charged @ 7.5 % p.a.
Calculate the amount of interest to be charged on Harish’s drawings for the year ending
December 31, 2017.

Answer.
Calculation of interest on Harish’s drawings

Drawings × Period Product
01-02-17 to 31-12-17 4,000 × 11 = 44,000
01-05-17 to 31-12-17 10,000 × 8 = 80,000
30-06-17 to 31-12-17 4,000 × 6 = 24,000
31-10-17 to 31-12-17 12,000× 2 = 24,000
31-12-17 to 31-12-17 4,000 × 0 = 0

Sum of Product 1,72,000
7.5 1
Interest on drawings = 1,72,000 × 100 ∗ 12= Rs 1,075

Page 38 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 104 , Block Name : Numerical Questions

Q25 Menon and Thomas are partners in a firm. They share profits equally. Their monthly
drawings are Rs 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate
interest on Menon’s drawings for the year 2006, assuming that money is withdrawn: (i) in the
beginning of every month, (ii) in the middle of every month, and (iii) at the end of every month.

Answer.
Case (i)in the beginning of every month
13
Calculation of Interest of drawings = Total drawings × Rate ×
2∗12
10 13
Interest on drawings of Menon’s = 24,000 × 100 ∗ 2∗12 = Rs 1,300
10 13
Interest on drawings of Thomas’s = 24,000 × ∗ = Rs 1,300
100 2∗12

Case (ii)in the middle of every month
10 6
Calculation of Interest on Drawings = Total drawings × 100 ∗ 12
10 6
Interest on drawings of Menon’s = 24,000 × 100 ∗ 12 = Rs 1,200
10 6
Interest of drawings on Thomas’s = 24,000 × ∗ = Rs 1,200
100 12

Case (iii)at the end of every month
𝑅𝑎𝑡𝑒 11
Calculation of Interest on drawings = Total drawings × 100 ∗ 2∗12
10 11
Interest on drawings of Menon’s = 24,000 × 100 ∗ 2∗12= Rs 1,100
10 11
Interest on drawings of Thomas’s = 24,000 × 100 ∗ 2∗12= Rs 1,100

Page : 104 , Block Name : Numerical Questions

Q26 On March 31, 2017, after the close of books of accounts, the capital accounts of Ram,
Shyam and Mohan showed balance of Rs 24,000 Rs 18,000 and Rs 12,000, respectively. It was
later discovered that interest on capital @ 5% had been omitted. The profit for the year ended
March 31, 2017, amounted to Rs 36,000 and the partner’s drawings had been Ram, Rs 3,600;
Shyam, Rs 4,500 and Mohan, Rs 2,700. The profit sharing ratio of Ram, Shyam and Mohan
was 3:2:1. Calculate interest on capital.

Answer.

Page 39 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Calculation of opening capital

Ram Shyam Mohan

Capital on March 31 24,000 18,000 12,000
Add: Drawings 3,600 4,500 2,700
Less: Profit (3:2:1) (18,000) (12,000) (6,000)

Capital April 01, 2012 9,600 10,500 8,700
𝑅𝑎𝑡𝑒
Calculation of Interest on Capital = Opening Capital ×
100
5
Interest on capital for Ram’s = 9,600 ∗ 100= Rs 480
5
Interest on capital for Shyam’s = 10,500 ∗ 100= Rs 525
5
Interest on capital for Mohan’s = 8,700 ∗ 100= Rs 435

Page : 104 , Block Name : Numerical Questions

Q27 Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1. Samiksha’
share in profit has been guaranteed by Amit and Sumit to be a minimum sum of Rs 8,000.
Profits for the year ended March 31, 2017 was Rs 36,000. Divide profit among the partners.

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to By Profit and Loss 36,000
Amit’s Capital A/c 18,000
Less: Guarantee to Samiksha
(1,200) 16,800
{2,000 × (3/5)}

Sumit’s Capital A/c 12,000
Less: Guarantee to Samiksha (800) 11,200

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

{2,000 × (2/5)}

Samiksha Capital 6,000
Add: Amit’s Guarantee 1,200
Add: Sumit’s Guarantee 800 8,000

36,000 36,000

Page : 105 , Block Name : Numerical Questions

Q28 Pinki, Deepati and Kaku are partner’s sharing profits in the ratio of 5:4:1. Kaku is given a
guarantee that his share of profits in any given year would not be less than Rs 5,000.
Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to
Rs 40,000. Record necessary journal entries in the books of the firm showing the distribution of
profit.

Answer.
Profit and Loss Appropriation Account
Dr. Cr.

Particulars Amount Particulars Amount
Rs Rs

To Profit transferred to By Profit & Loss 40,000
Pinki’s Capital A/c 20,000
Less: Guarantee to Kaku
(500) 19,500
{1,000 × (1/2)}

Deepti’s Capital A/c 16,000
Less: Guarantee to Kaku
(500) 15,500
{1,000 × (1/2)}

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Kaku’s Capital A/c 4,000
Add: Deficiency received
from
Pinki 500
Deepti 500 5,000

40,000 40,000

Page : 105 , Block Name : Numerical Questions

Q29 Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2.
Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any
deficiency arising on that account shall be met by Siddharth. Profits for the years ending March
31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss
Appropriation Account.
Answer.
Profit and Loss Appropriation Account
For the year ending March 31, 2016
Dr. Cr.

Particulars Amount Particulars Amount
Rs Rs

To Profit transferred to By Profit 40,000
and Loss
Abhay’s Capital A/c 20,000

Siddharth’s Capital A/c 12,000
Less: Guarantee
(2,000) 10,000
to Kusum’s

Kusum’s 8,000
Capital A/c

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Add: Deficiency received 2,000 10,000
from Siddharth

40,000 40,000

Profit and Loss Appropriation Account
For the year ending March 31, 2017
Dr. Cr.

Particulars Amount Particulars Amount
Rs Rs

To Profit transferred to By Profit and Loss 60,000
Abhay’s Capital A/c 30,000
Siddharth’s Capital A/c 18,000
Kusum’s Capital A/c 12,000

60,000 60,000

Page : 105 , Block Name : Numerical Questions

Q30 Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a
guarantee that her share of profit, in any year will not be less than Rs 5,000. The profits for the
year ending March 31, 2017 amounts to Rs 35,000. Shortfall if any, in the profits guaranteed to
Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to
show distribution of profit among partner.
Answer.
Profit and Loss Appropriation Account
Dr. Cr.

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Particulars Amount Particulars Amount
Rs Rs

To Profit transferred to By Profit and Loss 35,000
Radha’s Capital A/c 17,500
Less: Fatima’s Deficiency
(900) 16,600
{1,500 × (3/5)}

Mary’s Capital A/c 14,000
Less: Fatima’s Deficiency
(600) 13,400
{1,500 × (2/5)}

Fatima’s Capital A/c 3,500
Add: Deficiency born by
Radha 900
Mary 600 5,000

35,000 35,000

Journal

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Profit and Loss Appropriation A/c Dr. 35,000
To Radha’s Capital A/c 16,600
To Mary’s Capital A/c 13,400
To Fatima’s Capital A/c 5,000
(Profit distributed among Partners)

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Another Method
Journal

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Profit and Loss Appropriation A/c Dr. 35,000
To Radha’s Capital A/c 17,500
To Mary’s Capital A/c 14,000
To Fatima’s Capital A/c 3,500
(Profit distributed among Partners)

Radha’s Capital A/c Dr. 900
Mary’s Capital A/c Dr. 600
To Fatima’s Capital A/c 1,500
(Deficiency of Fatima’s Share taken from Radha and
Mary)

Page : 105 , Block Name : Numerical Questions

Q31 X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3 : 2 : 1,
respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The
net profit for the year ended March 31, 2017 was Rs 30,000. Prepare Profit and Loss
Appropriation Account, indicating the amount finally due to each partner.

Answer.
Profit and Loss Appropriation Account
For the year ending March 31, 2017
Dr. Cr.

Page 45 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to By Profit and Loss 30,000
X’s Capital A/c 15,000
Less: Z’s Deficiency {3,000
(1,800) 13,200
× (3/5)}

Y’s Capital A/c 10,000
Less: Z’s Deficiency {3,000
(1,200) 8,800
× (2/5)}

Z’s Capital A/c 5,000
Add: Share of Deficiency
born by
Radha 1,800
Mary 1,200 8,000

30,000 30,000

Page : 105 , Block Name : Numerical Questions

Q32 Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to
the terms of the partnership agreement, Chintu has to get a minimum of Rs 60,000, irrespective
of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne
by Arun. Prepare the profit and loss appropriation account showing distribution of profits among
partners in case the profits for year 2015 are: (i) Rs 2,50,000; (ii) 3,60,000.

Answer.
Case (i)
Profit and Loss Appropriation Account
as on March 31, 2015

Page 46 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to By Profit and 2,50,000
Loss
Arun’s Capital A/c 1,00,000
Less: Chintu’s share of
(10,000) 90,000
deficiency

Bobby’s Capital A/c 1,00,000

Chintu’s Capital A/c 50,000
Add: Deficiency received 10,000 60,000
from Arun

2,50,000 2,50,000

Profit and Loss Appropriation Account
for the year ending March 31, 2015
Dr. Cr.

Particulars Amount Particulars Amount
Rs Rs

To Profit transferred to By Profit and Loss 3,60,000
Arun’s Capital A/c {3,60,000 ×
1,44,000
(2/5)}
Bobby’s Capital {3,60,000 × (2/5)} 1,44,000
Chintu’s Capital A/c {3,60,000 ×
72,000
(1/5)}

3,60,000 3,60,000

Page 47 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 105 , Block Name : Numerical Questions

Q33 Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2 : 2 : 1.
Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than Rs
20,000. The net profit for the year ended March 31, 2017 amounted to Rs 70,000. Prepare Profit
and Loss Appropriation Account.

Answer.
Profit and Loss Appropriation Account
For the year ending March 31, 2017
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit transferred to By Profit and Loss 70,000
Ashok’s Capital A/c 28,000
Less: Cheena’s share of deficiency
(3,000) 25,000
{6,000 × (1/2)}

Brijesh’s Capital A/c 28,000
Less: Cheena’s share of deficiency
(3,000) 25,000
{6,000 × (1/2)}

Cheena’s Capital 14,000
A/c
Add: Deficiency received from
Ashok 3,000
Brijesh 3,000 20,000

70,000 70,000

Page 48 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 106 , Block Name : Numerical Questions

Q34 Ram, Mohan and Sohan are partners with capitals of Rs 5,00,000, Rs 2,50,000 and
2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are divisible as
follows:
Ram 1/2 , Mohan 1/3 Sohan 1/6 . But Ram and Mohan have guaranteed that Sohan’s share in
the profit shall not be less than Rs 25,000, in any year. The net profit for the year ended March
31, 2017 is Rs 2,00,000, before charging interest on capital. You are required to show
distribution of profit.
Answer.
Profit and Loss Appropriation A/c
For the year ending 31 March 2017
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Capital By Profit and Loss 2,00,000
Ram A/c 50,000
Mohan A/c 25,000
Sohan A/c 20,000 95,000

To Profit Transferred to
Ram’s Capital A/c 52,500
Less: Share of deficiency
(4,500) 48,000
{7,500 × (3/5)}

Mohan’s Capital A/c 35,000
Less: Share of deficiency
(3,000) 32,000
{7,500 × (2/5)}

Sohan’s Capital 17,500
Add: Deficiency received
from

Page 49 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Ram A/c 4,500
Mohan A/c 3,000 25,000

2,00,000 2,00,000

Page : 106 , Block Name : Numerical Questions

Q35 Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3 : 2 : 1,
subject to the following :
(i) Sona’s share in the profits, guaranteed to be not less than Rs 15,000 in any year.
(ii) Babita gives guarantee to the effect that gross fee earned by her for the firm shall be
equal to her average gross fee of the proceeding five years, when she was carrying on
profession alone (which is Rs 25,000). The net profit for the year ended March 31,
2017 is Rs 75,000. The gross fee earned by Babita for the firm was Rs 16,000.
You are required to show Profit and Loss Appropriation Account (after giving effect to the
alone).

Answer.
Profit and Loss Appropriation Account
For the year ending March 31, 2017
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Profit Transferred to By Profit and Loss 75,000
Amit’s Capital {84,000 × 42,000 By Babita’s Capital 9,000
(3/6)}
Less: Sona’s share of (Deficiency of Fees
(600) 41,400
deficiency {1,000 × (3/5)} 25,000 – 16,000)

Babita’s Capital {84,000 ×
28,000
(2/6)}

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Less: Sona’s share of
(400) 27,600
deficiency {1,000 × (2/5)}

Sona’s Capital {84,000 ×
14,000
(1/6)}
Add: Deficiency received
from
Amit A/c 600
Babita A/c 400 15,000

84,000 84,000

Page : 106 , Block Name : Numerical Questions

Q36 The net profit of X, Y and Z for the year ended March 31, 2016 was Rs 60,000 and the
same was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently
discovered that the under mentioned transactions were not recorded in the books :
(i) Interest on Capital @ 5% p.a.
(ii) Interest on drawings amounting to X Rs 700, Y Rs 500 and Z Rs 300.
(iii) Partner’s Salary : X Rs 1000, Y Rs 1500 p.a.
The capital accounts of partners were fixed as : X Rs 1,00,000, Y Rs 80,000 and Z Rs 60,000.
Record the adjustment entry.

Answer.
Entries which were omitted and also the correct distribution of profit after recording omitted
entries-

X Y Z Total

Interest on Capital 5,000 4,000 3,000 = 12,000
Less: Interest on Drawings (700) (500) (300) = (1,500)
Add: Partner’s Salaries 1,000 1,500 NIL = 2,500

Right distribution of Rs 13,000 5,300 5,000 2,700 = 13,000

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Less: Wrong distribution of Rs 13,000 (7,800) (2,600) (2,600) = (13,000)
(3:1:1)

(2,500) 2,400 Cr 100 Cr = NIL
Dr.

Here we can see that X is wrongly got Rs 2,500 extra and at the same time Y and Z got less
amount. So now, Rs 2,500 will be deducted from X and given to Y and Z(2,400 and 100
respectively).

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

X’s Capital A/c Dr. 2,500
To Y’s Capital A/c 2,400
To Z’s Capital A/c 100
(Profit adjusted among partners)

Page : 106 , Block Name : Numerical Questions

Q37 The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1,
have existed for same years. Ali wants that he should get equal share in the profits with Harry
and Porter and he further wishes that the change in the profit sharing ratio should come into
effect retrospectively were for the last three year. Harry and Porter have agreement on this
account. The profits for the last three years were:
Rs
2014-15 22,000
2015-16 24,000
2016-17 29,000
Show adjustment of profits by means of a single adjustment journal entry.

Answer.
Distribution of Profit

Old Ratio (2:2:1) Harry Porter Ali Total
Year

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

2014 – 15 (8,800) (8,800) (4,400) = (22,000)
2015 – 16 (9,600) (9,600) (4,800) = (24,000)
2016 – 17 (11,600) (11,600) (5,800) = (29,000)
=

Total Profit of 3 years in old ratio (30,000) (30,000) (15,000) = (75,000)
Distribution of 3 years profit in new 25,000 25,000 25,000 = 75,000
Ratio (1:1:1)

Adjusted Profit (5,000) (5,000) 10,000 NIL

Journal (Adjusting entry)

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

Harry's Capital A/c Dr. 5,000
Porter's Capital A/c Dr. 5,000
To Ali's Capital A/c 10,000
(Profit adjusted due to change in profit sharing ratio)

Page : 106 , Block Name : Numerical Questions

Q38 Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3 : 2. Following is the
balance sheet of the firm as on March 31, 2017.

Amount Amount
Liabilities Rs Assets Rs

Mannu’s Capital A/c 30,000 Drawings :
Shristhi’s Capital A/c 10,000 40,000 Mannu A/c 4,000

Shristhi A/c 2,000 6,000

Other Assets 34,000

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Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

40,000 40,000

Profit for the year ended March 31, 2017 was Rs 5,000 which was divided in the agreed ratio,
but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently enquired.
Adjust interest on drawings on an average basis for 6 months. Give the adjustment entry.

Answer.
Adjustment of Profit

Mannu’s Shrishti Total

Interest on Capital 1,500 500 = 2,000
Less: Interest on Drawings (120) (60) = (180)

Right distribution of Rs 1,820 1,380 440 = 1,820
Less: Wrong distribution of Rs 1,820 (3 : 2) (1,092) (728) = (1,820)

Adjusted Profit 288 (288) = NIL

Adjusting Journal Entry

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

Shrishti's Capital A/c Dr. 288
To Mannu's Capital A/c 288
(Adjustment of profit made)

Page : 107 , Block Name : Numerical Questions

Q39 On March 31, 2017 the balance in the capital accounts of Eluin, Monu and Ahmed, after
making adjustments for profits, drawing, etc; were Rs 80,000, Rs 60,000 and Rs 40,000
respectively. Subsequently, it was discovered that interest on capital and interest on drawings
had been omitted. The partners were entitled to interest on capital @ 5% p.a. The drawings
during the year were Eluin Rs 20,000; Monu, Rs 15,000 and Ahmed, Rs 9,000. Interest on
drawings chargeable to partners were Eluin Rs 500, Monu Rs 360 and Ahmed Rs 200. The net

Page 54 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

profit during the year amounted to Rs 1,20,000. The profit sharing ratio was 3 : 2 : 1. Pass
necessary adjustment entries.

Answer.
In this question interest on capital shall be calculated on opening capital

Eluin Monu Ahmed

Capital on 31 Mar. 2017 (Closing Capital) 80,000 60,000 40,000
Add: Drawings 20,000 15,000 9,000
Less: Profit Rs 120,000 (3:2:1) (60,000) (40,000) (20,000)

Capital on April 01, 2016 (Opening Capital) 40,000 35,000 29,000

Adjustment of Profit

Eluin Monu Ahmed Total

Interest on Capital (on Opening Capital) 2,000 1,750 1,450 = 5,200
Less: Interest on Drawings (500) (360) (200) = (1,060)

Right distribution of Rs 4,140 1,500 1,390 1,250 = 4,140
Less: Wrong distribution of Rs 4,140 (in the (2,070) (1,380) (690) = (4,140)
ratio 3:2:1)

(570) 10 560 = NIL

Adjusting Journal Entry

Debit Credit
Date Particulars L.F. Amount Amount
Rs Rs

Eluin's Capital A/c Dr. 570
To Monu's Capital A/c 10
To Ahmed's Capital A/c 560
(Adjustment of Profit made)

Page 55 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 107 , Block Name : Numerical Questions

Q40 Azad and Benny are equal partners. Their capitals are Rs 40,000 and Rs 80,000,
respectively. After the accounts for the year have been prepared it is discovered that interest at
5% p.a. as provided in the partnership agreement, has not been credited to the capital accounts
before distribution of profits. It is decided to make an adjustment entry at the beginning of the
next year. Record the necessary journal entry.

Answer.
Interest on Capital =
5
Azad=40,000 ∗ 100 = 2,000 𝑅𝑠
5
Benny=80,000 ∗ = 4,000 𝑅𝑠
100

Adjustment of Profit

Azad Benny Total

Interest on Capital 2,000 4,000 = 6,000
Less: Wrong distribution of Profit Rs 6,000 (1: 1) (3,000) (3,000) = (6,000)

Adjusted Profit (1,000) (1,000) = NIL

Adjusting Journal Entry

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

Azad's Current A/c Dr. 1,000
To Benny's Current A/c 1,000
(Adjustment of profit made)

Page 56 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Page : 107 , Block Name : Numerical Questions

Q41 Kavita and Pradeep are partners, sharing profits in the ratio of 3 : 2. They employed
Chandan as their manager, to whom they paid a salary of Rs 750 p.m. Chandan deposited Rs
20,000 on which interest is payable @ 9% p.a. At the end of 2017 (after the division of profit), it
was decided that Chandan should be treated as partner w.e.f. Jan. 1, 2014 with 1/6 the share
in profits. His deposit being considered as capital carrying interest @ 6% p.a. like capital of
other partners. Firm’s profits after allowing interest on capital were as follows:
Rs
2014 Profit 59,000
2015 Profit 62,000
2016 Loss (4,000)
2017 Profit 78,000
Record the necessary journal entries to give effect to the above.

Answer.

Interest on
Loan + Salary = Total

2014 59,000 + 1,800 + 9,000 = 69,800
2015 62,000 + 1,800 + 9,000 = 72,800
2016 (4,000) + 1,800 + 9,000 = 6,800
2017 78,000 + 1,800 + 9,000 = 88,800

1,95,000 + 7,200 + 36,000 = 2,38,200

Calculation of Amount Chandan received as Manager = Interest on Loan + Salary = 7,200 +
36,000 = Rs 43,200
Calculation of Total Profit of 4 years before interest on Chandan’s Loan and Salary = 2,38,200
Calculation of Interest on Chandan’s Capital for 4 years ={20,000 × (6/100) = 1,200}
= 1,200 × 4 = Rs 4,800
Calculation of Profit after interest on all partners Capital= Total Profit of four years before
interest on Chandan’s loan and Salary – Interest on Chandan’s Capital for four years
= 2,38,200 – 4,800= Rs 2,33,400

Page 57 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Wrong Distribution – Distribution of 4 years
Calculation of Profit when Chandan is Manager
3
Kavita=1,95,000× = 1,17,000
5
2
Pradeep=1,95,000×5 = 78,000

Amount Chandan received as manager = Interest on Loan + Salary
= 7,200 + 36,000 = 43,200

2,38,200

Right Distribution – Division of Profit when Chandan as Partner

Chandan Share of Profit {2,33,400 × (1/6)} 38,900
Interest on Capital 4,800

43,700

3
Kavita’s Share of Profit (2,33,400 – 38,900)×5 =1,16,700
2
Pradeep’s share of Profit (2,33,400 – 38,900)× =77,800
5

Adjustment of Profit

Kavita Pradeep Chandan = Total

Distribution of profit 1,16,700 77,800 43,700 = 2,38,200
when Chandan as partner
Less: Distribution of profit (1,17,000) (78,000) (43,200) = (2,38,200)
when Chandan as manager

Right distribution of Rs 4,140 (300) (200) (500) = NIL

Debit Credit
Date Particulars L.F.
Amount Rs Amount Rs

Kavita's Capital A/c Dr. 300

Page 58 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Pradeep's Capital A/c Dr. 200
To Chandan's Capital A/c 500
(Adjustment of profit made)

Page : 108 , Block Name : Numerical Questions

Q42 Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs 30,000,
Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for the year ended
March 31, 2017 amounting to Rupees 24,000 had been credited to partners in the proportion in
which they shared profits. During the tear their drawings for Mohan, Vijay and Anil were Rs
5,000, Rs 4,000 and Rs 3,000, respectively. Subsequently, the following omissions were
noticed:
(a) Interest on Capital, at the rate of 10% p.a., was not charged.
(b) Interest on Drawings: Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded in
the books.
Record necessary corrections through journal entries.
Answer.
We know Interest on Capital is calculated on opening capital. So calculation of opening capital-

Mohan Vijay Anil

Closing Capital 30,000 25,000 20,000
Add: Drawings 5,000 4,000 3,000
Less: Profit (1:1:1) (8,000) (8,000) (8,000)

Opening Capital 27,000 21,000 15,000

Calculation of Interest on Capital=
10
Interest on Capital of Mohan=27,000 ∗ 100 = 2,700 𝑅𝑠
10
Interest on Capital of Vijay=21,000 ∗ 100 = 2,100 𝑅𝑠
10
Interest on Capital of Anil=15,000 ∗ = 1,500 𝑅𝑠
100

Adjustment of Profit

Page 59 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Mohan Vijay Anil Total

Interest on Capital (on Opening Capital) 2,700 2,100 1,500 6,300
Interest on Drawings (250) (200) (150) (600)

2,450 1,900 1,350 5,700
Wrong distribution (1,900) (1,900) (1,900) = (5,700)

550 NIL (550)

Adjusting Journal Entry

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

Anil's Capital A/c Dr. 550
To Vijay’s Capital A/c 550
(Adjustment of profit made)

Page : 108 , Block Name : Numerical Questions

Q43 Anju, Manju and Mamta are partners whose fixed capitals were Rs 10,000, Rs 8,000 and
Rs 6,000, respectively. As per the partnership agreement, there is a provision for allowing
interest on capitals @ 5% p.a. but entries for the same have not been made for the last three
years. The profit sharing ratio during there years remained as follows:
Year Anju Manju Mamta
2014 4 3 5
2015 3 2 1
2016 1 1 1
Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan. 2017.

Answer.
Calculation of Interest on Capital=

Page 60 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

5
Interest on Capital of Anuj=10,000 ∗ 100 = 500 𝑅𝑠
5
Interest on Capital of Manju=8,000 ∗ 100 = 400 𝑅𝑠
5
Interest on Capital of Mamta=6,000 ∗ 100 = 30 𝑅𝑠

Adjustment of profit
Year 2014

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong distribution of Rs 1,200 (400) (300) (500) = (1,200)
(4:3:5)

100 100 (200) NIL

Year 2015

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong distribution of Rs 1,200 (600) (400) (200) = (1,200)
(3:2:1)

(100) NIL 100 NIL

Year 2016

Anuj Manju Mamta = Total
Interest on Capital 500 400 300 1,200
Wrong distribution of Rs 1,200 (400) (400) (400) = (1,200)
(1:1:1)

100 NIL (100) NIL

Final Adjustment

Anuj Manju Mamta
2014 100 100 (200)
2015 (100) NIL 100
2016 100 NIL (100)

Page 61 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

100 100 (200)

Adjusting Journal Entry

Debit Credit
Date Particulars L.F Amount Amount
Rs Rs

Jan.
2017
Mamta's Capital A/c Dr. 200
To Anuj’s Capital A/c 100
To Manju Capital A/c 100
(Adjustment of profit made)

Page : 108 , Block Name : Numerical Questions

Q44 Dinker and Ravinder were partners sharing profits and losses in the ratio of 2:1. The
following balances were extracted from the books of account, for the year ended December 31,
2017.

Debit Credit
Amount Amount
Account Name Rs Rs

Capital
Dinker 2,35,000
Ravinder 1,63,000
Drawings
Dinker 6,000
Ravinder 5,000
Opening Stock 35,100
Purchases and Sales 2,85,000 3,75,800
Carriage inward 2,200

Page 62 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Returns 3,000 2,200
Stationery 1,200
Wages 12,500
Bills receivables and Bills payables 45,000 32,000
Discount 900 400
Salaries 12,000
Rent and Taxes 18,000
Insurance premium 2,400
Postage 300
Sundry expenses 1,100
Commission 3,200
Debtors and creditors 95,000 40,000
Building 1,20,000
Plant and machinery 80,000
Investments 1,00,000
Furniture and Fixture 26,000
Bad Debts 2,000
Bad debts provision 4,600
Loan 35,000
Legal Expenses 200
Audit fee 1,800
Cash in Hand 13,500
Cash at Bank 23,000

8,91,200 8,91,200

Prepare final accounts for the year ended December 31,2017, with following adjustment:
(a) Stock on December 31,2017, was Rs 42,500.
(b) A Provision is to be made for bad debts at 5% on debtors
(c) Rent outstanding was Rs 1,600.

Page 63 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

(d) Wages outstanding were Rs 1,200.
(e) Interest on capital to be allowed on capital @ 4% per annum and interest on drawings to be
charged @ 6% per annum.
(f) Dinker and Ravinder are entitled to a Salary of Rs 2,000 per annum
(g) Ravinder is entitled to a commission Rs 1,500.
(h) Depreciation is to be charged on Building @ 4%, Plant and Machinery, 6%, and furniture
and fixture, 5%.
(i) Outstanding interest on loan amounted to Rs 350.
Answer.
Trading Account
For the year ending December 31,2017
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Opening 35,100 By Sales 3,75,800
Stock
To 2,85,000 Less: (3,000) 3,72,800
Purchas Sales
es Return

Less: (2,200) 2,82,80
Purchases 0
Return

By Closing Stock 42,500
To Carriage 2,200
Inwards
To Wages 12,500
Add: Outstanding 1,200 13,700

To Gross 81,500
Profit

4,15,30 4,15,300
0

Page 64 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Profit and Loss Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Stationery 1,200 By Gross Profit 81,500
To Discount 900 By Discount 400
Allowed Received
To Salaries 12,000 By Commission 3,200
To Rent & Taxes 18,000
Add: Outstanding 1,600 19,600

To Insurance 2,400
Premium
To Postage 300
To Sundry 1,100
Expenses
To Depreciation
on
Building 4,800
To Plant 4,800
and
Machine
ry
To Fixtures and 1,300
Fittings

To Provision for 4750
Bad Debts
Add: Bad Debt 2,000

6,750

Page 65 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Less: (Old) (4,600 2,150
Provision for Bad )
Debt

To Legal 200
Expenses
To Audit Fee 1,800
To Outstanding Interest on 350
Loan
To Profit and 32,200
Loss
Appropriation

85,100 85,100

Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on By Net Profit 32,200
Capital
Dinker 9,400 By Interest on Drawings
Ravinder 6,520 15,920 Dinker A/c 180

Ravinder A/c 150 330

To Partner’s
Salaries
Dinker 2,000
Ravinder 2,000 4,000

Page 66 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

To 1,500
Commission
(Ravinder)
To Profit
transferred to
Dinker’s 7,407
Capital A/c
Ravinder’s 3,703 11,110
Capital A/c

32,530 32,530

Partners’ Capital Account
Dr. Cr.

Particulars Dinker Ravinder Particulars Dinker Ravinder

To 6,000 5,000 By Balance b/d 2,35,000 1,63,000
Drawings
To Interest 180 150 By Interest on 9,400 6,520
on Capital
Drawings
To 2,47,627 1,71,573 By Partner’s 2,000 2,000
Balance Salaries
c/d
By Profit & Loss 7,407 3,703
Appropriation
By Commission 1,500

2,53,807 1,75,223 2,53,807 1,75,223

Balance Sheet

Amount
Amount
Liabilities Assets Rs

Page 67 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Rs

Bills Payable 32,000 Bills Receivables 45,000
9
5
,
0
0
Creditors 40,000 Debtors 0
(
4
,
7
5
0
Loan 35,000 Less: 5% Provision for Bad Debts ) 90,250

Add: Outstanding Interest 350 35,350

1
,
2
0
,
0
0
Building 0
(
4
,
8
0
0
Rent Outstanding 1,600 Less: 4% Depreciation ) 1,15,200

Wages outstanding 1,200
8
0
,
0
0
Capital: Plant and Machinery 0
(
Dinker A/c 2,47,627 Less: 6% Depreciation 475,200
,

Page 68 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

8
0
0
)

4,19,20
Ravinder A/c 1,71,573 0

Investments 1,00,000
2
6
,
0
0
Furniture and Fixtures 0
(
1
,
3
0
0
Less: 5% Depreciation ) 24,700

Cash in Hand 13,500
Cash at Bank 23,000
Closing Stock 42,500

5,29,35
0 5,29,350

Page : 108 , Block Name : Numerical Questions

Q45 Kajol and Sunny were partners sharing profits and losses in the ratio of 3:2. The following
Balances were extracted from the books of account for the year ended March 31, 2015 -

Debit Credit
Amount Amount
Account Name Rs Rs

Capital
Kajol 1,15,000

Page 69 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Sunny 91,000
Current accounts [on 1-04-2005*]
Kajol 4,500
Sunny 3,200
Drawings
Kajol 6,000
Sunny 3,000
Opening stock 22,700
Purchases and Sales 1,65,000 2,35,800
Freight inward 1,200
Returns 2,000 3,200
Printing and Stationery 900
Wages 5,500
Bills receivables and Bills payables 25,000 21,000
Discount 400 800
Salaries 6,000
Rent 7,200
Insurance premium 2,000
Traveling expenses 700
Sundry expenses 1,100
Commission 1,600
Debtors and Creditors 74,000 78,000
Building 85,000
Plant and Machinery 70,000
Motor car 60,000
Furniture and Fixtures 15,000
Bad debts 1,500
Provision for doubtful debts 2,200
Loan 25,000

Page 70 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Legal expenses 300
Audit fee 900
Cash in hand 7,500
Cash at bank 12,000

5,78,100 5,78,100

Prepare final accounts for the year ended March 31, 2015, with following adjustments:
(a) Stock on March 31, 2015 was Rs37,500.
(b) Bad debts Rs3,000 ; Provision for bad debts is to be made at 5% on debtors
(c) Rent Prepaid were Rs1,200 .
(d) Wages outstanding were Rs 2,200.
(e) Interest on capital to be allowed on capital at 6% per annum and interest on drawings to be
charged @ 5% per annum.
(f) Kajol is entitled to a Salary of Rs 1,500 per annum.
(g) Prepaid insurance was Rs 500.
(h) Depreciation was charged on Building, @ 4%; Plant and Machinery, @ 5%; Motor car, @
10% and furniture and fixture, @ 5%.
(i) Goods worth Rs 7,000 were destroyed by fire on January 20,2015. The
Insurance company agreed to pay Rs 5,000 in full settlement of the claim.
*As per the question, this year should be 01-04-2014
Answer.
Financial Statement as on March 31, 2015
Trading Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Opening Stock 22,700 By Sales 2,35,800
Purchases 1,65,000 Less: Sales (2,000) 2,33,800
Return

Page 71 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Less: Purchases (3,200)
Return
Less: Goods Lost by (7,000) 1,54,800 By Closing Stock 37,500
Fire

To Freight Inward 1,200
To Wages 5,500
Add: Outstanding 2,200 7,700

To Gross Profit 84,900

2,71,300 2,71,300

Profit and Loss Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Printing and 900 By Gross Profit 84,900
Stationery
To Discount Allowed 400 By Discount Received 800
To Salaries 6,000 By Commission 1,600
To Rent 7,200 By Insurance Co. (Claim) 5,000
Less: Prepaid (1,200) 6,000

To Insurance Premium 2,000
Less: Prepaid (500) 1,500

To Travelling Expenses 700
To Sundry Expenses 1,100

Page 72 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

To Bad Debt 1,500
Add: Further Bad debt 3,000
Add: Provision for Bad 3,550
Debts

8,050
Less: Provision for Bad (2,200) 5,850
Debt (Old)

To Legal Expenses 300
To Audit Fee 900
To Goods Lost by Fire 7,000
To Depreciation on
Building 3,400
To Plant and Machinery 3,500
To Motor Car 6,000
To Furniture and Fixture 750
To Net Profit 48,000

92,300 92,300

Profit and Loss Appropriation Account
Dr. Cr.

Amount Amount
Particulars Rs Particulars Rs

To Interest on Capital By Net profit 48,000
Kajol A/c 6,900
Sunny A/c 5,460 12,360 Interest on Drawings

Kajol A/c 300
To Partner’s Salaries Sunny A/c 150 450

Page 73 of 74

Book : Accountancy Part-I Ncert Solutions | Chapter - 2 Accountancy

Kajol A/c 1,500

To Profit & Loss – Gross
Profit
Kajol’s Current A/c 20,754
Sunny’s Current A/c 13,836 34,590

48,450 48,450

Partners’ Capital Account
Dr. Cr.

Particulars Kajol Sunny Particulars Kajol Sunny

By Balance b/d 1,15,000 91,000
To Balance c/d 1,15,000 91,000

1,15,000 91,000 1,15,000 90,000

Page : 110 , Block Name : Numerical Questions

Page 74 of 74