Assignment - Fundamentals of Partnership (Class XII Accountancy)

1.      A, B and C are partners in a firm. A, who has advanced a loan of Rs 10,000 to the firm, demands interest on his loan at 10% p.a. at the end of the accounting period. State whether the claim of A is valid or not in absence of partnership deed. Also support your answer with sufficient reason.

2.      Abhay, Bhola and Charu are three partners in a shoe-producing firm. Charu without intimating the other two partners secretly started her own shoe-production unit. She used the firm's contacts and reputation to maximise profits in her personal business. Identify any two values violated by Charu in this case.   

3.      Is rent paid to partner debited to Profit and Loss Account or Profit and Loss Appropriation Account?

4.      Sabrina and Ankita started business on April 01, 2011 with their capital balances of Rs 3,00,000 and Rs 2,50,000 respectively. Sabrina withdrew Rs 50,000 on October 01, 2011 and Ankita introduced Rs 50,000 on the same day. Calculate interest on their capital at 12% per annum for the year ended March 31, 2012.

5.      Harman and Preet are partners in a firm with their capital balances of Rs 10,00,000 and Rs 20,00,000 respectively on April 01, 2010. Harman withdrew Rs 10,000 in the beginning of each month and Preet withdrew Rs 20,000 at the end of each month. Calculate the interest on drawings at 10% per annum for the year.

6.      Roopesh and Ravi are partners sharing profits and losses equally. Their capital accounts balances were Rs 3,00,000 and Rs 2,00,000 respectively on January 01,  2010. During the year, the firm earned profit of Rs 40,000. According to their partnership deed, interest on capital is provided at 10% per annum. Prepare the Profit and Loss Appropriation Account.

7.      Arpit and Manas are partners in a firm sharing profits and losses equally. They admitted Ragini as a 1/3 rd  partner with  share of profit with a minimum guarantee of Rs 1,00,000. They agreed to bear any deficiency arises on account of guarantee to Ragini in the ratio of 3:1. The net profit for the year amounted to Rs 3,70,000. Out of this profit, the firm utilised Rs 1,00,000 to organise an education campaign for the poor students of that region. The remaining profit of Rs 2,70,000 was appropriated among the partners. Prepare Profit and Loss Appropriation Account to show the appropriation of profits. Also, identify the values involved in the decision of the partners.

8.      Abhay and Litesh started a partnership business on April 01, 2011 contributing Rs 5,00,000 and Rs 2,00,000 as capital. According to their partnership deed, Litesh is entitled to salary of Rs 10,000 per month and all the partners are entitled to interest on their capitals at 10% per annum and remaining profit is distributed in their capital ratio. During the year, the firm earned Net Profit of Rs 4,00,000. On March 31, 2012, their Profit and Loss Appropriation Account (given below) showed the distribution of the Net Profit without appropriation of items in the agreement.

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars		Amount Rs
Profit transferred to			Net Profit		4,00,000
Abhay’s Capital	2,00,000		(Transferred from Profit and Loss A/c)
Litesh’s Capital	2,00,000	4,00,000
		4,00,000			4,00,000

Show the correct distribution of Net Profit by preparing Profit and Loss Appropriation Account.

9.      Anand, Rahul and Vijay are partners in a firm sharing profits and losses in the ratio 3:2:1. Their fixed capital accounts are Rs 3,00,000, Rs 2,00,000 and Rs 1,00,000 respectively. Anand is entitled to salary of Rs 5,000 per month and Rahul is entitled to commission of Rs 20,000. Interest on capital is provided at 10% per annum. Drawings made during the year by Anand, Rahul and Vijay are Rs 50,000, Rs 30,000 and Rs 20,000 respectively. Interest on drawings is to be charged at 10% irrespective of the period. Net profit for the year is Rs 4,00,000. Prepare the Profit and Loss Appropriation Account and Partners’ Current Account.

10. Enlist any two advantages and values revealed by a partnership deed.

11. Show the Journal entries related to payment of interest on a partner’s loan and for charging interest on the loan at the end of an accounting period.

12. Which of the following statements cannot be regarded as a right of partner?

o   Every partner has the right to share profits or losses with other partners as per the agreement.

o   Only active partners have a right to take part in the management of the business.

13. What is the purpose behind preparation of Profit and Loss Appropriation Account?

14. Calculate interest on drawings in the below given situations.

o   A drew Rs 2,000 during the year, interest is to be charged @ 6 %.

o   A drew Rs 2,000 during the year, interest is to be charged @ 6% p.a.

o   A drew Rs 2,000 on April 01, 2014, Interest is to be charged @ 6%. Accounts are closed on December 31, every year.

o   A drew Rs 2,000 on April 01, 2014, Interest is to be charged @ 6% p.a. Accounts are closed on December 31, every year.

o   A drew Rs 2,000 on April 01, 2014 and Rs 1,000 on Oct 01, 2014, interest is to be charged @ 6% p.a. Accounts are closed on December 31, every year.

o   A drew Rs 200 in the beginning of each month throughout the year. Interest is to be charged @ 6% p.a. Accounts are closed on December 31, every year.

o   A drew Rs 3,000 throughout the year. He drew regularly equal amount at end of every month. Interest is to be charged @ 6% p.a.

o   A drew Rs 3,000 in the beginning of each quarter. Interest is to be charged 8% p.a.

o   In above case accounts are closed on December 31, every year.

15. Show the distribution of profit or loss by preparing appropriate accounts in the following given cases. 

Case a) A and B are partners sharing profit and loss in the ratio 3:2, their partnership firm incurred a loss of Rs 20,000.

Case b) A and B are partners sharing profit and loss in the ratio 3:2, their partnership firm earned a profit of Rs 20,000.

16. Calculate Interest on Capital in each of following cases.:

(1)A and B have capital balances of Rs 20,000 and Rs 15,000 on January 01, 2014 .From October 01, 2014 they decided that capital of each partner will be Rs 12,000.

(2)On December 31, 2014, the capital accounts of A and B showed balances of Rs 30,000 and 20,000 respectively. These balances were ascertained after adjusting profit and drawings.  On January 01, 2014, drawings made by A and B amounted Rs 2,000 and Rs 4,000 respectively. Profit earned during the year 2010 was Rs 12,000.

(3)On January 01, 2010, A and B have capital balances Rs 10,000 each. On April 01, 2010, A and B withdrew capital of Rs 2,000 and Rs 3,000. On October, 01, 2010, Rs 4,000 and Rs 5,000 were introduced by A and B as fresh capitals. Interest on Capital is to be allowed at10% p.a. in each of the above cases with the assumption that accounts are closed on December 31 every year. 

17. A and B are partners sharing profits or losses in the ratio 3:2. In the beginning of the year 2010, capitals of A and B were Rs 1,20,000 and Rs 1,00,000 respectively. As per the agreement, interest on capital is to be allowed 5% p.a. and salary to be paid to A and B of Rs 2,000 per month and Rs 40,000 per annum. At the end of 2010, firm’s profit without providing interest on capital and partners’ salaries was Rs 50,000.

Show the distribution of profit in the following cases.

o   When interest capital and salaries is to be distributed only out of profit.

o   When interest on capital and salaries is to be charged against profit.

o   When interest on capital is to be charged against profit and salary is to be distributed only out of profit.

18. A and B are partners sharing profits or losses equally. Their capital on January 01, 2010 were as Rs 1,00,000 and 80,000, respectively. On December 31, 2010, profit was distributed without providing interest on capital 10% p.a. Show the effect of interest on capital by passing an adjusting Journal entry. 

19. A and B are partners sharing profits or losses equally. Their capital on January 01, 2010 were Rs 1,00,000 and Rs 80,000, respectively. After the closing of books, it was found that 10% interest on capital was debited to profit and loss appropriation account; however, there was no such clause of providing interest on capital as per their partnership deed. Make the necessary correction by passing an adjusting Journal entry.

20. A and B are partners sharing profits and losses in the ratio 1:1. On December 31, 2010, their capitals after adjustment of profit and drawings were Rs 1,50,000 and Rs 1,60,000, respectively. Having closed the accounts for the year 2010, it was found that 10% interest on capital and 5% interest on drawings were omitted while distributing profit among the partners. Profit for the year amounted to Rs 60,000 and drawings of A and B were Rs 10,000 and Rs 15,000, respectively. Make the necessary correction by passing an adjusting Journal entry.

21. A and B are partners for 2:1 ratio. Their partnership firm earned profit of Rs 24,000 and Rs 30,000 for the accounting year 2009 and 2010. On January 01, 2011, partners decided to revise their profit sharing ratio as 1:1 with effect from 2009. Make adjustment of profit through passing adjusting Journal entry. 

Also, identify the values involved in the question.