TEST YOUR UNDERSTANDING – I
1. Mohan and Shyam are partners in a firm. State whether the claim is valid if the
(ii) Shyam had advanced a loan to the firm. He claims interest @ 10% per annum;
(iii) Mohan has contributed Rs. 20,000 and Shyam Rs. 50,000 as capital. Mohan wants equal share in profits.
(iv) Shyam wants interest on capital to be credited @ 6% per annum.
(ii) Each partner carrying on the business is the principal as well as the agent for all the other partners;
(iii) Maximum number of partners in a banking firm can be 20;
(iv) Methods of settlement of dispute among the partners can’t be part of the partnership deed;
(v) If the deed is silent, interest at the rate of 6% p.a. would be charged on the drawings made by the partner;
(vi) Interest on partner’s loan is to be given @ 12% p.a. if the deed is silent about the rate.
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Q.1. Soumya and Bimal are partners in a firm Sharing profits and losses in the ratio of 3:2. The balance in their capital and current accounts as on April 01, 2006 were as under:
2. Soniya, Charu and Smita started a partnership firm on April 1, 2006. They contributed Rs, 5,00,000, Rs. 4,00,000 and Rs. 3,00,000 respectively as their capitals and decided to share profits and losses in the ratio of 3:2:1.The partnership provides that Soniya is to be paid a salary of Rs. 10,000 per
TEST YOUR UNDERSTANDING – II
1. Raju and Jai commenced business in partnership on April 1, 2006. No partnership agreement was made whether oral or written. They contributed Rs. 4,00,000 and
State the correct position on each issue as per the provisions of the partnership Act. 1932.
Answer Raju’s Claims
2. Reena and Raman are partners with capitals of Rs. 3,00,000 and Rs. 1,00,000 respectively. The profit (as per Profit and Loss Account) for the year ended March
TEST YOUR UNDERSTANDING -III
1.Rani and Suman are in partnership with capitals of Rs, 80,000 and Rs. 60,000, respectively. During the year 2006-2007, Rani withdrew Rs. 10,000 from her capital and Suman Rs. 15,000. Profits before charging interest on capital was Rs. 50,000. Ravi and Suman shared profits in the ratio of 3:2. Calculate the amounts of interest on their capitals @ 12% p.a. for the year ended March 31, 2007.
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1. Govind is a partner in a firm. He withdrew the following amounts during the year 2006-07:
3. Verma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings should be charged @ 6% p.a. Verma withdraws Rs. 2,000 per month starting from April 01, 2006 to March 31, 2007. Kaul withdrew Rs, 3,000 per quarter, starting from April 01, 2006. Calculate interest on partner’s drawings.
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Q.1.Gupta and Sarin are partners in a firm sharing profits in the ratio of 3:2. Their fixed capitals are: Gupta 2,00,000, and Sarin 3,00,000. After the accounts for the year are prepared it is discovered that interest on capital @10% p.a. as provided in the partnership agreement, has not been credited in the capital accounts of partners before distribution of profits. Record adjustment entry to rectify the error.
2. Krishna, Sandeep and Karim are partners sharing profits in the ratio of 3:2:1. Their fixed capitals are: Krishan Rs. 1,20,000, Sandeep 90,000 and Karim 60,000.
3. Leela, Meera and Neha are partners and have omitted interest on capital @9% p.a. for three years ended March 31, 2007. Their fixed capitals on which interest was to be allowed throughout were: Leela Rs. 80,000, Meera Rs. 60,000 and Neha Rs. 1,00,000. Their profit sharing ratio during the last three years were:
SHORT ANSWER TYPE QUESTIONS
Question 1. Define Partnership Deed.
Question 2. Why it is considered desirable to make the partnership agreement in writing?
Question 3. List the items which may be debited or credited in capital accounts of the partners when
Answer (i)When capitals are fixed, the following items will be debited or^ credited in partners capital account
Question 6. 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?
Question 7. In the absence of partnership deed, specify the rules relating to the following
Long Answer Type Questions
Question 1. What is partnership? What are its chief characteristics? Explain.
Question 2. Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.
Question 3. Explain why it is considered better to make a partnership agreement in writing.
Question 4. Illustrate how interest on drawings will be calculated under various situations.
Situation(II) When information regarding amount, rate of interest on drawings is given
Case II Sometimes the amount and rate of is interest on drawings is given but the date and per anum rate of interest is not mentioned.
Situation III When a fixed amount is withdrawn at regular interval
Case II Sometimes a fixed amount is withdrawn at the end of each month and the rate of interest is given then the interest is calculated for 5.5 months.
Case III Sometimes a fixed amount is withdrawn at the mid of each month and the rate of interest is given then the interest is calculated for 6 months.
Case V If a fixed amount is withdrawn at the end of every quarter, then the interest is calculated for 4.5 months.
Situation IV When different amount is at different intervals
Question 5. How will you deal with a change in profit sharing ratio among existing partners? Take imaginary figures to illustrate your answer.
Example Ram. Mohan and Shyam are partners in a firm sharing profit and loss in 3 2 :1 ratio. They decide to share profit and loss equally in future. On dm: date, the books of the firm showsRs.2.40.000 as general reserve, profit on ^evaluation of Plant and Machinery Rs.60.000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.
Numerical Type Problems
1. 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, 2005. 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.
Answer In case, Interest on capital ,partners salary and interest on drawings is charged against profit.
2.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 Decisions according to partnership Act,1932, if there is no agreement .
4.Aakriti and Bindu entered into partnership for making garment on April 01, 2006 without any Partnership agreement. They introduced Capitals of Rs. 5,00,000 and Rs. 3,00,000 respectively on October 01, 2006. 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 2007 showed profit of Rs, 43,000. Partners could not agree upon the question of interest and the basis of division of profit.
5.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 2006-07 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.
6.Lokesh and Azad are partners sharing profits in the ratio 3:2, with capitals of Rs. 50,000 and 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 2006, 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.
7.The partnership agreement between Maneesh and Girish provides that:
8. 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
9.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,
10. 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 endingMarch 31, 2006 shows a net profit of Rs. 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
11.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, 2005. 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.
12.Sukesh and Vanita were partners in a firm. Their partnership agreement
13.Rahul, Rohit and Karan started partnership business on April 1, 2006 with capitals of Rs. 20,00,000, Rs. 18,00,000 and Rs. 16,00,000, respectively.
14.Sunflower and Pink Rose started partnership business on April 01, 2006 with capitals of Rs. 2,50,000 and Rs.1,50,000, respectively. On October 01, 2006,
15.On March 31, 2006 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.
16.Following is the extract of the Balance Sheet of, Neelkant and Mahdev as on March 31, 2007:
17.Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2007.
18.The capital accounts of Moli and Golu showed balances of Rs.40,000 and Rs. 20,000 as on April 01, 2006. 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, 2006.
19. Rakesh and Roshan 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: