Accounting for partnership firm

Accounting for partnership firm class 12

Ts Grewal solutions 2026

Q1. In the absence of Partnership Deed, state the provisions of the partnership act ,1932 relating to

Salaries of partners
Interest on partners capital
Interest on loan by partner
Division of profit
Interest on partners drawings
Interest on Loan given to Partners?

Solution –

Not allowed
Not allowed
6% p.a
Equal
Not charged
Not Charged

Q2. Mahesh, Ramesh and Suresh are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the business, they faced the following issues:

Mahesh wants that interest on capital should be allowed to the partners but Ramesh and Suresh do not agree.
Ramesh wants that the partners should be allowed to draw salary but Mahesh and Suresh do not agree
Mahesh and Ramesh want that Suresh should pay interest on loan given to him by the firm but Suresh does not agree.
Mahesh and Ramesh having contributed larger amounts of capital, desire that the profits should be distributed in the ratio of their capital contribution but Suresh does not agree.

State how you will settle these dispute if the partners approach you for the purpose.

Solution –

Mahesh’s claim is not accepted
Ramesh’s claim is not accepted
Mahesh and Ramesh’s claim is not accepted; Suresh will not pay interest in the absence of agreement
Profits or Losses should be distributed among the partners equally. The claim made by Mahesh and Ramesh is not accepted.

Q3. Barun, tarun and shivam are partners in a firm and do not have a Partnership Deed. Barun introduced further capital of 5, 00,000 on 1^st October, 2025. Whereas shivam took a loan of 50,000 from the firm on 1^st October, 2025. Disputes have arisen among them on the following issues:

Barun demands interest @ 10% p.a. on 5, 00,000 being his extra capital.
tarun desire that his son Deep should be admitted as partner and he will give him half of his share Barun and shivam do not agree.
Barun and tarun are of the view that shivam should be charges interest on loan from the firm at the lending rate of the banks, which is 12% p.a. to which Shivam objects.
tarun has withdrawn 50,000 from the firm for his personal use. Barun and shivam are of the view that tarun should be charged interest @ 10% p.a. to which Tarun objects.

Give solution to each issue of dispute.

Solution –

In the case of absence of Partnership Deed. Provisions of Indian partnership Act 1932 would apply. No interest on capital would be allowed.
tarun son’s Deep would not be admitted. As all partners are not agree .As in the case of absence of partnership deed. Provisions of Indian Partnership Act 1932 would apply.
No interest of loan to shivam from the firm is given as in the case of absence of Partnership deed. Provisions of Indian partnership Act 1932 would apply.
No interest on drawing would be charged as in the case of absence of partnership deed. Provisions of Indian Partnership Act 1932 would apply.

Q4. Harshad and Dhiman are in partnership since 1^st April, 2025. No partnership agreement was made. They contributed 4, 00,000 and 1, 00,000 respectively as capitals. In addition, Harshad had given loan of 1, 00,000 to the firm on 1^st October, 2025. Due to long illness, Harshad could not participate in business activities from 1^st August, 2025 to 30^th September, 2025. Profit for the year ended 31^st March, 2026 was 1, 80,000. Dispute has arisen between Harshad and Dhiman.

Harshad Claims:

He should be given interest @ 10% per annum on capital and loan
Profit should be distributed in the ratio of capital.

Dhiman Claims:

Profit should be distributed equally
He should be allowed 2,000 p.m. as remuneration for the period he managed the business in the absence of Harshad
Interest on Capital and loan should be allowed @ 6% p.a.

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

Solution –

Dr Profit and Loss Appropriation Account Cr

Harshad Claims:

He should get only interest on loan @ 6% p.a. as per the law.
In the absence of Partnership Deed, Profit should be distributed in equal ratio not in proportion of capital.

Dhiman Claims:

His Claim is correct and profit should be distributed in equal ratio.
He should not be allowed salary for managing business.
Payment of interest on loan will be @ 6% p.a. as per the law and no interest on capital will be allowed.

Interest on Loan by Partner to the Firm:

Q5. Sita and Geeta are partners in a firm sharing profits in the ratio of 3:2. They had given loan to the firm of 30,000 in their profit-sharing ratio on 1^st October, 2025. The partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31^st March.

Solution – According to Partnership act, 1932 absence of partnership deed. Interest on partners Loan will be allowed at 6% p.a. Ratio = 3:2

Interest on Loan Payable to Sita:

= 30,000 x 3/5 =18000

18000x 6/100 x 6/12 = 540

Interest on loan Payable to Geeta:

= 30,000 x 2/5=12000

12000 x 6/100 x 6/12 = 360

Q.6 Nimrat and Maira are partners without a Partnership Deed sharing profits in the ratio of 2:1. Nimrat gave loan of Rs.2,00,000 to the firm on 1^st October, 2025. On 1^st February, 2026, she took the loan back. Calculate the interest on loan.

Solution –

Loan given by Nimrat to the firm = Rs.2,00,000

Time period : 1^st October 2025 to 1^st February 2026

Interest on Nimrat’s Loan = 2,00,000 x 6% x 4/12

Note : In the absence of a partnership deed. Interest on Partner’s loan to the firm is provided @ 6% p.a.

Q7. Bat and Ball are partners sharing the profits in the ratio of 2:3 with capitals of 1,20,000 and 60,000 respectively. On 1^st October, 2025, Bat and Ball give loans of 2,40,000 and 1, 20,000 respectively to the firm. Bat had allowed the firm to use his property for business for a monthly rent of 5,000. Loss for the year ended 31^st March, 2026 before rent and interest amounted to 9,000. Show distribution of profit/loss.

Solution –

Interest on Loan A/c

Bat = 2,40,000 x 6/100 x 6/12 =7200

Ball = 2,40,000 x 6/100 x 6/12 =3600

Rent ( 5,000 x 12)=60,000

Distributed loss= Loss +interest on bat loan+ interest on ball loan+ rent

9000+7200+ 3600+60,000

79800

Bat share of loss =79800×2/5=31920

Ball share of loss=79800×3/5=47880

Interest on Loan to the Firm by Partner and Loan by the firm to partner

Q8. Akhil, Sunil and Parvesh are partner sharing profits in the ratio of 3 : 2 : 1. Opening balance of loan by Sunil Account was Rs.3,00,000. Interest payable was agreed @ 10% p.a. Interest was paid by cheque up to February, 2026 on 1^st March, 2026 and balance was yet to be paid. Pass the Journal entries for interest on loan by partner.

Solution –

Calculation of Interest on Loan by Sunil

1^st April to 28^th Feb. 2023 3,00,000 x 10/100 x 11/12 = Rs.27,5001^st Mar. 2023 to 31^st Mar. 2023 3,00,000 x 10/100 x 1/12 = Rs.2500

Total Interest on Sunil’s Loan to Frim = Rs.30,000

Interest on Loan to the Firm by Partner and Loan by the firm to partner

Q9. Akhil and Bimal are partners sharing profits in the ratio of 3:2. Akhil gave loan to the firm of 1,00,000 on 1^st January, 2026. On the same date, the firm gave loan to Bimal of 1,00,000. They do not have an agreement as to interest.

Akhil had also given his personal property for firm’s Godown at a monthly rent of 5,000.

Firm earns profit of 1,03,000 (before above adjustments) for the year ended 31^st March, 2026. Show the distribution of profit for the year.

Solution –

Interest on Akhi’s Loan = 1,00,000 x 6/100 x 3/12

= Rs.1500

Rent on Akhil’s property = 5,000 x 12 = Rs.60,000

Distribution Profit = Rs.103000 – 60,000 – 1500

= Rs.41,500

Akhil’s Share in Profit = 41500 x 3/5 = Rs.24900

Bimal’s Sahre in profit = 41500 x 2/5 = Rs.16600

Note – Interest on loan by firm to Bimal is not allowed as there is no aggreeement

Q10. Nirmal and Pawan are partners sharing profits in the ratio of 3:2 the firm had given loan to Pawan of 5,00,000 on 1^st April, 2025. Interest was to be charged @ 10% p.a. the firm took loan of 2,00,000 from Nirmal on 1^st December, 2025. Before giving effect to the above, the firm incurred a loss of 10,000 for the year ended 31^st March, 2026. Determine the amount to be transferred to Profit & Loss Appropriation Account.

Solution –

Interest on loan given by firm to Pawan = 5,00,000 x 10/100 x 12/12

= Rs.50,000

Interest on loan of Nirmal to firm = 2,00,000 x 6/100 x 4/12

= Rs.4,000

Net profit transferred to = Loss + Int. on loan to Pawan – Int. on loan by Nirmal

= – 10,000 + 50,000 – 4000

= Rs.36,000

Q11. Ankit, Bhanu and Charu are partners in a firm sharing profits and losses equally with capital of 2,50,000 each. On 1^st October, 2025, Ankit and Bhanu gave loans of 2,50,000 each to the firm whereas Charu took a loan of 1,00,000 from the firm on 1^st November, 2025. It was agreed among the partners that Charu will be charged interest @ 6% p.a. Interest on loan from partners was paid on 10^th April, 2026. The firm closes its books on 31^st March each year.

Pass the Journal entries in the books of the firm for the year ended 31^st March, 2026.

Solution

Journal

Calculation of Partner’s Loan

Interest on Ankit’s Loan to firm (1^st Oct – 31^st March) = 250000 x 6% x 6/12

= Rs.7500

Interest on Bhanu’s loan to firm (1^st Oct – 31^st March) = 250000 x 6% x 6/12

= Rs.7500

Interest on loan to charu (1^st Nov – 31^st March) = 1,00,000 x 6% x 5 /12

= Rs.2,500

Q12. Atul, Jetha and Tarak are partners sharing profits equally. Jetha was given loan by the firm on 1st July, 2025 of 6,00,000. Books are closed on 31st March. Pass the Journal entries if

(a) Rate of interest is not agreed; and

(b) Rate of interest to be charged is agreed @ 10% p.a?

Solution –

Case – a

As Interest on loan to Jetha is not agreed.

No Interest on loan to Partner is charged

Thus no Journal entry is passed

Note – If the Interest on the loan to the Partner by the firm is not agreed upon. As per the Provision of the Indian Partnership Act 1932, no interest is charged.

Case – b

Journal

Working Note –

Interest on loan to Jetha

1^st July to 31^st March = 6,00,000 x 10% x 9/12

= Rs.45,0000

Q.13 Parul, Paresh and Rahul are partners in a firm. Firm gave loan to Rahul on 1st February, 2026 of 6,00,000. Interest was agreed to be charged @ 6% p.a. Rahul paid interest by cheque up to February, 2026 on 5th March, 2026 and balance was paid by him on 5th April, 2026.

Pass the Journal entries for interest on loan to partner.

Solution –

Journal

Profit & Loss Appropriation Account:

Q14. Vinod and Mohan are partners. Vinod’s capital is 1,00,000 and Mohan’s capital is 60,000. Interest on capital is payable @ 6% p.a. Vinod is to get salary of 3,000 per month. Net Profit for the year is 80,000. Prepare Profit & Loss Appropriation Account.

Solution –

Dr Profit and Loss Appropriation Account Cr

Q15. X, Y and Z are partners in a firm sharing profits in the ratio of 2:2:1. Fixed capitals of the partners were: X 5,00,000; Y 5,00,000 and Z 2,50,000 respectively. The Partnership Deed provides that interest on capital is to be allowed @ 10% p.a. Z is to be allowed a salary of 2,000 per month. Profit of the firm for the year ended 31^st March, 2026 after debiting Z’s salary was 4, 00,000.Prepare Profit & Loss Appropriation Account.

Solution – Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Q16. X and Y are partners sharing profits in the ratio of 3:2 with capitals of 8,00,000 and 6,00,000 respectively. Interest on capital is agreed @ 5% p.a. Y is to be allowed an annual salary of 60,000 which has not been withdrawn. Profit for the year ended 31^st March, 2026 before interest on capital but after charging Y’s salary was 2, 40,000.

A provision of 5% of the net profit is to be made in respect of commission to the Manager.

Prepare Profit & Loss Appropriation Account showing the allocation of profits.

Solution –

Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Calculation of manager commission=240,000+60,000=300,000×5%=15000

Q17. Atul and Mithun are partners sharing profits in the ratio of 3:2

Balances as on 1^st April, 2025 were as follows:

Capital Accounts (Fixed): Atul – 5,00,000 and Mithun – 6,00,000

Loan Accounts: Atul – 3,00,000 (Cr.) and Mithun – 2,00,000 (Dr.)

It was agreed to allow and charge interest @ 8% p.a. Partnership Deed provided to allow interest on capital @ 10% p.a. Interest on Drawings was charged 5,000 each.

Profit before giving effect to above was 2,28,000 for the year ended 31^st March, 2026. Prepare Profit & Loss Appropriation Account.

Solution:-

Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Calculation of interest of partners loan

Interest on loan to Mithun 200,000×8%=16000

Interest on loan from Mithun 300,000×8%=24000

Q18. Reema and Seema are partners sharing profits equally. The partnership Deed provides that both Reema and Seema will get monthly salary of 15,000 each, Interest on Capital will be allowed @ 5% p.a. and Interest on Drawings will be charged @ 10% p.a. Their capitals were 5,00,000 each and drawings during the year were 60,000 each.

The firm incurred net loss of 1,00,000 during the year ended 31^st March, 2026.

Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2026.

Solution – Profit & Loss Appropriation Account

Dr for the year ended March 31, 2024 Cr

Q19. Bhanu and Pratap are partners sharing profits equally. Their fixed capitals as on 1^st April, 2025 were 8,00,000 and 10,00,000 respectively. Their drawings during the year were 50,000 and 1,00,000 respectively. Interest on Capital is a charge and is to be allowed @ 10% p.a. and interest on drawings is to be charged @ 15% p.a. Profit for the year ended 31^st March, 2026 before giving effect to the above was 1,20,000.

Prepare Profit & Loss Appropriation Account.

Solution –

Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Partner’s Capital Accounts:-

Fixed Capital:

Q20. Amit and Sumit entered into partnership on 1^st April, 2025 and invested Rs.1,50,000 and 2, 50,000 respectively towards capitals. The partnership Deed provided for interest on capitals @ 10% p.a. It also provided that Capital Accounts shall be maintained following Fixed Capital Accounts method. The firm earned net profit of 1,00,000 for the year ended 31^st March, 2026.

Pass the Journal entry for interest on Capital.

Solution – Journal Entries

Working Note 1:

Interest on Capital

Amit = 1, 50,000 x 10% = 15,000

Sumit = 2, 50,000 x 10% = 25,000

Q21. Kamal and Kapil are partners having fixed capitals of 5,00,000 each as on 1^st April, 2025. Kamal introduced further capital of 1,00,000 on 1^st January, 2026 whereas Kapil withdrew 1,00,000 on 1^st January, 2026 out of capital.

Interest on capital is to be allowed @ 10% p.a.

The firm earned net profit of 6, 00,000 for the year ended 31^st March, 2026.

Pass the Journal entry for interest on capital are prepare Profit & Loss Appropriation Account.

Solution – Journal Entries

Working Note 1:

Interest on Capital

Kamal = 5, 00,000 x 10/100 = 50,000

1, 00,000 x 10/100 x 3/12 = 25,00 52500

Kapil = 5, 00,000 x 10/100 = 50,000

1, 00,000 x 10/100 x 3/12 = 2500 47500

Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Q22. Simran and Reema are partners sharing profits in the ratio of 3:2. Their capitals as on 1 April, 2025 were 2,00,000 each whereas Current accounts had balances of 50,000 and 25,000 respectively. Interest on capital is to be allowed @ 5% p.a. the firm earned net profit of 3,00,000 for the year ended 31^st March, 2026.

Pass the Journal entries for interest on capital and distribution of profit. Also prepare Profit & Loss Appropriation Account for the year.

Solution – Journal Entries

Fluctuating Capital:

Q23. Anita and Ankita are partners sharing profits equally. Their capitals, maintained following Fluctuating Capital Accounts Method, as on 1 April, 2025 were 5, 00,000 and 4,00,000 respectively. Partnership Deed provided to allow interest on capital @ 10% p.a. the firm earned net profit of 2,00,000 for the year ended 31^st March, 2026. Pass the Journal entry for interest on capital.

Solution – Journal Entries

Working Note 1:

Interest on Capital

Anita = 5, 00,000 x 10% = 50,000

Ankita = 4, 00,000 x 10% = 40,000

Q24. Ashish and Aakash are partners sharing profits in the ratio of 3:2 Their Capital Accounts had credit balances of 5,00,000 and 6,00,000 respectively as on 31^st March, 2026 after debit of drawings during the year of 1,50,000 and 1,00,000 respectively. Net profit for the year ended 31^st March, 2026 was Rs.5,00,000. Interest on capital is to be allowed @ 10% p.a. Pass the Journal entries for interest on capital and prepare Profit & Loss Appropriation Account.

Solution – Journal Entries

Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Q25. Naresh and Sukesh are partners with capitals of 3,00,000 each as on 31^st March, 2026. Naresh had withdrawn 50,000 against capital on 1^st October, 2025 and 1,00,000 drawings against profit. Sukesh also had drawings of 1,00,000 Interest on capital is to be allowed @ 10% p.a. Net Profit for the year was 2,00,000 which is yet to be distributed Pass the Journal entries for interest on capital and distribution of profit.

Solution – Journal Entries

Working Note –

Calculation of opening capital of partners

Naresh opening capital = closing capital + Drawing (out of capital) + Drawing (out of profit)

= 3,00,000 + 50,000 + 1,00,000

= 4,50,000

Sukesh opening capital = closing capital + Drawing

= 3,00,000 + 1,00,000

= Rs.4,00,000

Calculation of Interest on Partner’s Capital

Interest on Naresh capital

1^st April – 30^th September = 4,50,000 x 10% x 612 = 22500

1^st Oct. – 31^st March = 4,00,000 x 10% x 6/12 = 20,000

Interest on Naresh capital = 42500

Interest on Sukesh Capital

= 4,00,000 x 10/100

= Rs.40,000

When Interest on Capital is an Appropriation and Profits are Inadequate

Q.26 Parul and Rajul and were partners in a firm, sharing profits and losses in the ratio of 5 : 3. The balance in their Fixed Capital Accoutns on 1^st April, 2023 were: Parul Rs.6,00,000 and Rajul Rs.8,00,000. The partnership deed provided for allowing interest on capital at 12% per annum. The net profit of the firm for the year ended 31^st March, 2024 was Rs.1,26,000.

Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2024. Show your working clearly.

Solution –

Dr. profit & Loss A/c for the year ended 31^st March Cr.

Working Notes : –

Interest on Parul’s capital = 6,00,000 x 12% = Rs.72,000

Interest on Rajul’s capital = 8,00,000 x 12% = Rs.96,000

Total Interest on Capital Rs.1,68,000

Total Interest on capital ˃ Net profit for the year

Rs.1,68,000 ˃ Rs.1,26,000

When Interest on capital is considered as appropriation and profit is inadequate, Interest on capital is profited in the ratio of partner Interest on capital upto the available profit.

Ratio of Interest on capital 72000 : 96,000 = 3 : 4

Interest on Parul’s capital = 126,000 x 3/7 = Rs.54,000

Interest on Rajul’s capital = 126,000 x 4/7 = Rs.72,000

Calculation of Interest on Partners Capital:-

Q27. A and B partners in the ratio of 3:2 the firm maintains Fluctuating Capital Accounts and the balance of the same as on 31^st March, 2020 amounted to 1,60,000 and 1,40,000 for A and B respectively. Their drawings during the year were 30,000 each.

As per Partnership Deed, interest on capital @ 10% p.a. on opening capitals had been provided to them .Calculate opening capitals of partners given that their profit was 90,000. Show your working clearly.

Solution – Calculation of Opening Capital

Working Note 1:

Total Capital of A and B (1, 60,000 + 1, 40,000) = 3, 00,000

Add: Drawings (30,000 + 30,000) = 60,000

3, 60,000

Less: Profit (Including Interest on Capital) = 90,000

Total opening capital include Interest on Capital = 2, 70,000

Interest on Capital = 2, 70,000 x 10%

= 27,000

Divisible Profit = 90,000 – 27,000

= 63,000

Calculation of Interest on Capital and Share of Profit

Q28. Amit and Bramit started business on 1^st April, 2025 with capitals of 15, 00,000 and 9,00,000 respectively. On 1^st October, 2025, they decided that their capitals should be 12,00,000 each. The necessary adjustments in capitals were made by introducing or withdrawing by cheque. Interest on capital is allowed @ 8% p.a. Compute interest on capital for the year ended 31^st March, 2026.

Solution – Calculation of Interest on Amit’s Capital

Interest on Capital:

Total of Product x Rate of Interest x 1/12 / 100

= 162, 00,000 x 8/100 x 1/12 = 1, 08,000

Calculation of Interest on Bramit’s Capital

Interest on Capital:

Total of Product x Rate of Interest x 1/12 / 100

= 1, 26, 00,000 x 8/100 x 1/12 = 84,000

Q29. From the following Balance sheet of Long and Short, calculate interest on capital @ 8% p.a. for the year ended 31^st March, 2026:

Balance Sheet as at 31^st March, 2026

During the year, long withdrew 40,000 and short withdrew 50,000. Profit for the year was 1, 50,000 out of which 1, 00,000 was transferred to General Reserve.

Solution – Calculation of Opening Capital

Q30. Sumit and Namit are partners sharing profits in the ratio of 3:2. They contribute Rs.1,00,000 and Rs.50,000 respectively towards capital. Compute interest on capital and show distribution of profit in the following cases:

When Partnership Deed is silent as to the interest on capital and profit for the year is Rs.50,000.
When Partnership Deed provides for interest on capital @ 10% p.a. and profit for the year is Rs.15,000.
When the Partnership Deed provides for interest on capital @ 12% p.a. and loss for the year is Rs.23,000.
When Partnership Deed provides for interest on capital @ 5% p.a. and loss for the year is Rs.8,000.
When Partnership Deed provides for interest on capital @ 5% p.a. and profit for the year is Rs.3,000.
When Partnership Deed provides for interest on capital @ 5% p.a. even if it involves the firm in loss and the profit for the year is Rs.6,000.

Solution-

Case – (i)

Sumit’s share in profit = 50,000 x 3/5 = Rs.30,000

Namit’s share in profit = 50,000 x 2/5 = Rs.20,000

Note :

In the absence of agreement regarding Interest on capital Interest on capital is not allowed.

Case (ii)

Interest on Sumit’s capital = 1,00,000 x 10% = Rs.10,000

Interest on Namit’s capital = 50,000 x 10% = Rs.5,000

Note – No profit is left after allowing interest on capital

Case – (iii)

Interest on Sumit’s capital = Rs.1,00,000 x 12% = Rs.12,000

Interest on Namit’s capital = Rs.50,000 x 12% = Rs.6,000

Divisible profit = Rs.23,000 – Rs.18,000 = Rs.5,000

Sumit’s share in profit = 5,000 x 3/5 = Rs.3,000

Namit’s share in profit = 5,000 x 2/5 = Rs.3,000

Case – (iv)

Sumit’s share in loss = 8,000 x 3/5 = Rs.4,800

Namit’s share in loss = 8,000 x 2/5 = Rs.3,200

Note : In case of loss no Interest on capital is allowed

Case – (v)

Interest on Sumit’s Capital = 1,00,000 x 5% = 5,000

Interest on Namit’s Capital = 50,000 x 5% = 2,500

Total Interest on capital = 5,000 + 2,500 = 7,500

Total Interest on capital ˃ Available profit

7500 ˃ 3000

Thus, Available profit will be distributed as interest on capital in Interest on capital ratio

5000 : 2500 i.e., 2 : 1

Interest on Sumit’s capital = 3,000 x 2/3 = Rs.2,000

Interest on Namit’s capital = 3,000 x 1/3 = Rs.1,000

Case – (vi)

Interest on Sumit’s capital = 1,00,000 x 5% = Rs.5,000

Interest on Namit’s capital = 50,000 x 5% = Rs.2,500

Divisible loss = Rs.6,000 – 7500 = 1,500

Sumit’s share in loss = 1500 x 3/5 = Rs.900

Namit’s share in loss = 1500 x 2/5 = Rs.600

Q.31 Sonia and Shruti were partners in a firm sharing profits and losses in the ratio of 5 :3. On 1^st April, 2023, the balance in their Fixed Capital Accounts were Rs.25,00,000 and Rs.15,00,000 respectively. The profit of the firm for the year ended 31^st March, 2024 was Rs.24,00,000. Calculate their share of profit if:

(i) The Partnership Deed is silent as to the payment of interest on capital.

(ii) The Partnership Deed provides for interest on capital @ 10% per annum.

Solution –

Case (i)

Sonia share in Profit = 24,00,000 x 5/8

= Rs.15,00,000

Shruti’s share in profit = 24,00,000 x 3/8

= Rs.9,00,000

Note – If partnership deed is silent as to the payment of Interest on capital No interest on capital is provided

Case (ii)

Interest on Sonia’s Capital = 25,00,000 x 10%

= Rs.2,50,000

Interest on Shruti’s capital = 15,00,000 x 10%

= 1,50,000

Distributable profit = Net profit – Interest on Sonia and Shute’s capital

= Rs.24,00,000 – Rs.2,50,000 – Rs.1,50,000

= Rs.20,00,000

Sonia’s share in profit = 20,00,000 x 5/8 = Rs.12,50,000

Shruti’s share in profit = 20,00,000 x 3/8 = Rs.7,50,000

Salary or Commission to Partners:-

Q32. Shiv, Mohan and Gopal are partners sharing profits and losses in the ratio of 2:2:1 Shiv is entitled to a commission of 10% on the net profit. Net profit for the year is 1,10,000.

Determine the amount of commission payable to Shiv.

Solution –

Net profit before charging Commission = 1,10,000

Commission to Shiv 10%

= 1,10,000 x 10/100 = 11,000

Q33. Abha, Bobby and Vineet are partners sharing profits and losses equally. As per Partnership Deed, Vineet is entitled to a commission of 10% on the net profit after charging such commission. The net profit before charging commission is 2,20,000. Determine the amount of commission payable to Vineet.

Solution –

Net profit before charging commission = 2, 20,000

After charging commission – 2, 20,000 x 10 / 100 + 10

= 20,000

Q34. A, B, C and D are partners in a firm sharing profits in the ratio of 4:3:2:1. It earned net profit of 1,80,000 for the year ended 31^st March, 2026. As per the Partnership Deed, partners will get commission @ 20% of the profit after charging such commission which they will share as 2:3:2:3.

You are required to show appropriation of profit among the partners.

Solution –

Dr Profit and Loss Appropriation Account Cr

Working Note 1:

After Charging Commission

= 1,80,000 x 20/120 = 30,000

Commission Distributed in Partners:

A – 30,000 x 2/10 = 6,000

B – 30,000 x 3/10 = 9,000

C – 30,000 x 2/10 = 6,000

D = 30,000 x 3/10 = 9,000

Distribution of Divisible Profit among partners

Divisible profit (profit after commission) = Rs.180000 – Rs.30000

= Rs.150000

Profit sharing Ratio = 4:3:2:1

A’s share = 150000 x 4/10 = 60,000

B’s share = 150000 x 3/10 = 45000

C’s share = 150000 x 2/10 = 30000

D’s share = 150000 x 1/10 = 15000

Q35. X and Y are partners in a firm. X is entitled to a salary of 10,000 per month and commission of 10% of the net profit after partner’s salaries but before charging commission. Y is entitled to a salary of 25,000 p.a. and commission of 10% of the net profit after charging all commission and partners’ salaries. Net profit before providing for partners salaries and commission for the year ended 31^st March, 2026 was 4,20,000. Show distribution of profit.

Solution –

Dr Profit and Loss Appropriation Account Cr

Working Note 1:

Calculation of X’s Commission

X’s commission = (Net profit – Partner’s Salaries) x 10/100

= (420000 – 120000 – 25000) x 10/100

= 275000 x 10/100

= Rs.27500

Calculation of Y’s Commission

X’s commission = (Net profit – Partner’s Salaries – X’s commission) x 10/100

= ((420000 – 120000 – 25000 – 27500) x 10/100

= 247500 x 10/100

= Rs.22500

Calculation of Distribution of profit among Partner’s

Distribution profit = Net profit – Partner’s salary – Partner’s Commission

= 420000 – 120000 – 25000 – 27500 – 22500

= Rs.225000

X’s share in profit = Rs.225000 x 1/2 = Rs.112500

Y’s share in profit = Rs.225000 x 1/2 = Rs.112500

Calculation of Interest on Partners Drawings & Amount of Drawings:-

Q36. Ram and Mohan partners, drew for their personal use 1,20,000 and 80,000. Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest chargeable from each partner?

Solution – Calculation of interest on drawings of both the Partners:

When the dates of drawings are not given, interest on drawings is calculated on the total amount of drawings for average period of 6 months.

Interest on Ram’s Drawings

1, 20,000 x 6/100 x 6/12 = 3,600

Interest on Mohan’s Drawings

80,000 x 6/100 x 6/12 = 2,400

Q37. Brij and Mohan are partners in a firm. They withdrew 48,000 and 36,000 respectively during the year evenly in the middle of every month. According to the Partnership Deed, interest on drawings is to be charged @ 10% p.a. Calculate on drawings of the partners using the appropriate formula.

Solution – If drawings are made in the middle of every month. It is charged for 6 months.

Interest on Brij’s Drawings

48,000 x 10/100 x 6/12 = 2,400

Interest on drawings

36,000 x 10/100 x 6/12 = 1,800

Q38. Dev withdrew 10,000 on 15^th day of every month. Interest on drawings was to be charged @ 12% per annum. Calculate interest on Dev’s Drawings.

Solution – Dev Withdrew 10,000 on 15^th day of every month. So yearly drawings is 10,000 x 12 = 1, 20 000

Then calculate Interest on Drawings for 6 months of average period

1, 20,000 x 12/100 x 6/12 = 7,200

Q39. One of the partners in a partnership firm has withdrawn 9,000 at the end of each quarter, throughout the year. Calculate interest on drawings at the rate of 6% per annum.

Solution –

Calculation of Interest on Partner’s Drawings

If Drawing is made at the end of each quarter.

The Drawing is charged for 4.5 Months

Average Month = 9 to /2 = 4.5 Months

Interest on Drawing = 9000 x 4 x 6/12 x 4.5/12

= 36,000 x 6/100 x 4.5/12

= 810

Q40. A & B are partner s sharing profit equally. A drew regularly 4,000 in the beginning of every month for six months ended 30^th September, 2025. Calculate interest on drawings @ 5% p.a. for a period of six months 30^th September, 2025.

Solution – If the drawings are made in the beginning of every month after 30^th September. Interest is charged for 3.5 months.

Average period =6+1/2=3.5

Interest on drawings x Rate/100 x 3.5 / 12

= (4,000 x 6) x 5 / 100 x 3.5 / 12

= 350

Q41. A & B are partners sharing profits equally. A drew regularly 4,000 at the end of every month for six months ended 30^th September, 2025. Calculate interest on drawings @ 5% p.a. for a period of six months 30^th September, 2025.

Solution – If fixed amount is withdraw during 6 month at end of each month

Average period = 5+0/2 = 2.5 months

Interest on Drawings x Rate /100 x 2.5 /12

A = 4,000 x 6 = 24,000

A’s Interest on Drawings = 24,000 x 5 / 100 x 2.5 /12

= 250

Q-42 B & C are partners sharing profits equally. C regularly 5,000 per month in the beginning of six months ended 30^th September, 2025. Calculate interest on drawings @ 12% p.a. for the year ended 31 March 2026.

Solution – If fixed amount is withdraw during 6 month at beginning of every month

Average period = 12+7/2 = 19/2 = 9.5 Months

Interest on Drawings x Rate / 100 x 9.5 / 12

A = 5,000 x 6 = 30,000

A’s Interest on Drawings = 30,000 x 12 / 100 x 9.5 / 12

= 2850

Q43. Calculate interest on drawings of Sanjay @ 10% p.a. for the year ended 31^st March, 2026, in each of the following alternative cases:

Case 1: If he withdrew 7,500 in the beginning of the each quarter.

Case 2: If he withdrew 7,500 at the end of each quarter.

Case 3: If he withdrew 7,500 during the middle of each quarter.

Solution – Calculating Interest on Drawings

Total Drawings = 7,500 x 4

= 30,000

Case 1: Average period =12+3/2=7.5

Interest on Sanjay’s Drawings = 30,000 x 10 / 100 x 7.5 / 12

= 1,875

Case 2: Average period = 9+0/2 =4.5

Interest on Sajay’s Drawings = 30,000 x 10 / 100 x 4.5 / 12

= 1,125

Case 3: Avg. Months = 10.5 + 1.5 / 2 = 6 months

Interest on Sanjay’s Drawing = 30,000 x 10 / 100 x 6 / 12

= 1,500

Q44. The capital accounts of Tisha and Divya showed credit balances of 10,00,000 and 7,50,000 respectively after taking into account drawings and net profit of 5,00,000. The drawings of the partners during the year ended 31st March 2026 were:

Tisha withdrew 25,000 at the end of each quarter.
Divya’s drawings were:

31^st May, 2025 20,000

1^st November, 2025 17,500

1^st February, 2026 12,500

Calculate interest on partner’s capital @ 10% p.a. and interest on partner’s drawings @ 6% p.a. for the year ended 31^st March, 2026.

Solution –

Tisha Drawings = 25,000 x 4 = 1, 00,000

Divya Drawings = 20,000 + 17,500 + 12,500 = 50,000

Calculation of Opening Capital

Interest on Trisha’s Capital

= 8, 50,000 x 10/100

= 85,000

2. Interest on Divya’s Capital

= 5, 50,000 x 10/100

= 55,000

Interest on Drawings (Quarterly Method)

(25,000 x 4) x 6/100 x 4.5/12 = 2,250

Average period =9+0/2 =4.5

2. Interest on Drawings (Product Method)

Interest on Drawings:-

= 3, 12,500 x 6/100 x 1/12

= 1,562.5 or 1,563

Q45. A, B and C are partners. During the year ended 31st March, 2026, each of the partners withdrew 10,000 regularly. A withdrew in the beginning of the first 6 months of the year, B withdrew in the middle of the month for the first 6 months of the year and C withdrew at the end of the month for the first 6 months. Calculate interest on drawings @ 6% p.a. for the year ended 31st March, 2026.

Solution –

Calculation of Interest on A’s Drawing

Average Month = 12 + 7 /2 = 9.5 Months

Interest on A’s Drawings = 10,000 x 6 x 6/100 x 9.5/12

= Rs.2850

Calculation of Interest on B’s Drawing

Average Month = 11.5 + 6.5 / 2 = 9 Months

Interest on B’s Drawings = 10,000 x 6 x 6 /100 x 9 / 12

= Rs.2700

Calculation of Interest on C’s Drawings

Average Month = 11 + 6 / 2 = 8.5 Months

Interest on C’s Drawings = 10,000 x 6 x 6/100 x 8.5/12

= Rs.2550

Q-46 Piyush, Harmesh and Atul are partners. Each partner regularly withdrew ₹ 20,000 per month as given below:

(a) Piyush withdrew in the beginning of the month;

(b) Harmesh withdrew in the middle of the month; and

c) Atul withdrew at the end of the month.

Interest on drawings charged for the year ended 31st March, 2026 was ₹ 15,600, ₹ 14,400 and ₹ 13,200 respectively.

Determine the rate of interest charged on drawings.

Ans-

Calculation of Percentage of Interest on Piyush Drawings

Average Months = 12 + 1 / 2 = 13 / 2 = 6.5 Months

Interest on Piyush Drawings = Drawings x Percentage x Avg. Month / 12

15600 = 20000 x 12 x Percentage / 100 x 6/5 / 12

Percentage = 15600 x 12 x 100 / 20000 x 12 x 6.5

= 12 %

Calculation of Percentage of Interest on Harmesh Drawings

Average Months = 11.5 + 5 / 2 = 12/2 = 6 Months

Interest on Harmesh Drawings = Drawing x Percentage x Avg. Month / 12

14400 = 20000 x 12 x Percentage/100 x 6/12

Percentage = 14400 x 12 x 100 / 20000 x 12 x 6

=12%

Calculation of Percentage of Interest on Atul’s Drawings

Average Months = 11 + 0 / 2 = 11/2 = 5.5

Interest on Atu’s Drawings = Drawings x Percentage x Avg. Month/12

13200 = 20,000 x 12 x Percentage / 100 x 5.5 / 12

Percentage = 13200 x 12 x 100 / 20,000 x 12 x 5.5

= 12%

Adjusting and Transfer Entries

Q.47. Aditi, Bobby and Krish were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. Their capitals were Rs.5,00,000, Rs.4,00,000 and Rs.2,00,000 respectively. The partnership deed provided for the following:

(a) Interest on capital @ 10% per annum.

(b) Interest on drawings @ 6% per annum.

(c) Interest on partner’s loan to the firm @ 9% per annum.

During the year, Aditi had withdrawn Rs.60,000 and Bobby Rs.50,000. On 1^st September, 2021, Krish had given loan of Rs.40,000 to the firm.

Pass necessary journal entries in the books of the firm for the following transactions for the year ended 31^st March, 2022:

Allowing interest on Bobby’s capital.
- Charging interest on Aditiy’s drawings.
- Providing interest on Krish’s loan to the firm.

Also pass transfer entries in the profit & loss account/profit & Loss Appropriation Account, as the case may be.

Solution –

Working Notes :

Interest on Bobby’s Capital = 4,00,000 x 10% = Rs.40,000

Interest on Aditi’s Drawings = 60,000 x 6% x 6/12 = Rs.1800

Interest on Krish’s loan = 40,000 x 9% x 7/12 = Rs.2100

Profit & Loss Appropriation Account and Partners Capital Account:-

Q48. Amit and Vijay started a partnership business on 1^st April, 2025. Their capital contributions were 2,00,000 and 1, 50,000 respectively. The partnership deed provided as follow:

Interest on capital is allowed @ 10% p.a.
Amit to get a salary of 2,000 per month and Vijay 3,000 per month.
Profits are to be shared in the ratio of 3:2

Net Profit for the year ended 31^st March, 2026 was 2,16,000. Interest charged on drawings amounted to 2,200 for Amit and 2,500 for Vijay.

Prepare Profit & Loss Appropriation Account.

Solution – Profit & Loss Appropriation Account

Dr for the year ended March 31, 2026 Cr

Q49. A, B and C were partners in a firm having capitals of 50,000, 50,000 and 1,00,000 respectively. Their Current Account balance were A: 10,000 B: 5,000 and c: 2,000 (Dr). According to the Partnership Deed the partners were entitled to an interest on capital @ 10% p.a. C being the working partners was also entitled to a salary of 12,000 p.a. the profits were to be divided as:

The first 20,000 in proportion to their capitals
Next 30,000 in the ratio of 5:3:2
Remaining profits to be shared equally

The firm earned net-profit of 1,72,000 before charging any of the above items. Prepare Profit & Loss Appropriation Account and Pass necessary Journal entry for the appropriation of Profits.

Solution –

Dr Profit & Loss Appropriation Account Cr

Q50. Yadu, Vidu and Radhu were partners in a firm sharing profits in the ratio of 4:3:3. Their fixed capitals on 1^st April, 2018 were 9,00,000, 5,00,000 and 4,00,000 respectively. On 1^st November, 2018, Yadu gave a loan of 80,000 to the firm, as per the partnership agreement.

The partners were entitled to an interest on capital @ 6% p.a.
Interest on partner’s drawings was to be charged @ 8% p.a.

The firm earned profit of 2,53,000 (after interests on Yadu’s Loan) during the year 2018-19. Partner’s drawings for the year amounted to:

Yadu – 80,000, Vidu – 70,000 and Radhu – 50,000

Prepare Profit & Loss Appropriation Account for the year ending 31^st March, 2019.

Solution –

Dr Profit & Loss Appropriation Account Cr

Q51. A & B are partners sharing profits and losses in the ratio of 3:1. On 1^st April, 2025, their capitals were: A 500,000 and B 300,000. During the year ended 31^st March, 2026, the firm earned a net profit of 500,000. The term of Partnership is:

Interest on capital is to be allowed @ 6% p.a.
A will get a commission @ 2% on turnover
B will get a salary of 500 per month.
B will get commission of 5% on profits after deduction of all expenses including such commission

Partner’s drawings for the year were: A 80,000 and B 60,000. Turnover for the year was 3,00,000. After considering the above facts, you are required to prepare Profit & Loss Appropriation Account and Partners Capital Account.

Solution –

Dr Profit & Loss Appropriation Account Cr

Working Note 1:

B’s Commission

= 500,000 – (4,8000+ 60,000 + 60,000)

= 33,2000

Transfer of Profit to Reserve:-

52. Amit, Binita and Charu are three partners. On 1^st April, 2025, their capitals stood as: Amit 1,00,000, Binita 2,00,000 and Charu 3,00,000. It was decided that:

They would receive interest on Capitals @ 5% p.a.
Amit would get a salary of 10,000 per month,
Binita would receive commission @ 5% of net profit after deduction of Commission
10% of the net profit would be transferred to the General Reserve.

Before the above items were taken into account, profit for the year ended 31^st March, 2026 was 5,00,000. Prepare Profit & Loss Appropriation Account and the Capital Accounts of the Partners.

Solution –

Dr Profit & Loss Appropriation Account Cr

Q53. Sajal and Kajal are partners sharing profit and losses in the ratio of 2:1 on 1^st April, 2025, their Capitals were: Sajal – 5,00,000 and Kajal – 4,00,000.

Prepare Profit & Loss Appropriation Account and the Partners’ Capital Accounts for the year ended 31^st March, 2026 from the following information:

Interest on Capital is to be allowed @ 5% P.a.
Interest on the loan advanced by Kajal for the whole year, the amount of loan being 3,00,000
Interest on Partners drawings @ 6% p.a. Drawings: Sajal 1,00,000 and Kajal 80,000.
10% of the divisible profit is to be transferred to General Reserve.

Profit before giving effect to the above, for the year ended 31^st March, 2026 is 7,02,600.

Solution –

Dr Profit & Loss Appropriation Account Cr

Q54. Ali & Bahadur are partners in a firm sharing profits and losses as Ali 70% and Bahadur 30%. Their respective capitals as at 1^st April, 2025 stand as Ali 2,50,000 and Bahadur 2,00,000. The partners are allowed interest on capitals @ 5% p.a. Drawings of the partners during the year ended 31^st March, 2026 were 35,000 and 25,000 respectively.

Profit for the year, before allowing interest on capital and annual salary of Bahadur @ 30,000 was 4,00,000 10% of divisible profit is to be transferred to Reserve. Prepare Partner’s Current Accounts and Capital Accounts recording the above transaction.

Solution –

Dr Profit & Loss Appropriation Account Cr

Appropriation more than available profit

Q55.Neeraj and Surya are partners sharing profits and losses in the ratio of 2:1. Their capitals are Rs.4,00,000 and Rs.2,00,000 respectively. Neeraj is entitled to interest on capital @ 12% p.a. and Surya is entitled to salary of Rs.6,000 per month. Profit before providing for interest on capital and partners salary for the year ended 31^st March, 2026 was Rs.50,000. Show the distribution of profits.

Solution-

Interest on Neeraj’s Capital = 4,00,000 x 12% = Rs.48,000

Surya’s salary = 6000 x 12 = Rs.72,000

Total Appropriation = Rs.48,000 + Rs.72,000 = Rs.1,20,000

Total Appropriation ˃ Available Profit

In the absence of any Agreement Appropriation of profit is done amonge partner only upto the available profit in the ratio of partner’s Appropriation amount i.e.

Ratio of Appropriation : Interest on Neeraj : Surya’s salary capital

= 48,000 : 72,000 i.e., 2 : 3

Interest on Neeraj’s capital = 50,000 x 2/5 = Rs.20,000

Surya’s salary = 50,000 x 3/5 = Rs.30,000

Q56. Kabir, Zoravar and Parul are partners sharing profits in the ratio of 5:3:2. Their capitals as on 1^st April, 2025 were: Kabir- 5,20,000, Zoravar- 3,20,000 and Parul – 2,00,000.

The partnership Deed provided as follows:

Kabir and Zoravar each will get salary of 24,000 p.a
Parul will get commission of 2% of Sales.
Interest on capital is to be allowed @ 5% p.a.
Interest on Drawings is to be charged @ 5% p.a.
10% of Divisible Profit is to be transferred to General Reserve.

Sales for the year ended 31^st March, 2026 were 50,00,000. Drawings by each of the partners during the year were 60,000. Net profit for the year was 1,55,500. Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2026.

Solution –

Dr Profit & Loss Appropriation Account Cr

Ratio of Appropriation = 50,000: 40,000: 1,10,000

= 5:4:11

Adjustments for Incorrect Appropriations in the Past (Past Adjustments):

Q57. Reya, Mona and Nisha shared profits in the ratio of 3:2:1. Profits for the last three years were 1,40,000; 84,000 and 1,06,000 respectively. These profits were by mistake distributed equally. The error is now to be corrected.

Give the necessary rectification Journal entry.

Solution – Journal Entries

Working Note 1:

Total Profit of last 3 year

= 1, 40,000 + 84,000 + 1, 06,000 = 3, 30,000

Past Adjustment Table

Q58. Atul and Gita were partners in a firm sharing profits and losses in the ratio of 3:2. Their fixed capitals were Rs.4,00,000 and Rs.2,000,000 respectively. After the accounts for the year were prepared, it was noticed that interest on capital @ 6% p.a. as provided in the partnership deed, was not credited to the capital accounts of partners before distribution of profits.

Pass the necessary adjusting Journal entry. Show your working clearly.

Solution-

Journal

Q59. Ram, Mohan and Sohan sharing profits and losses equally have capitals of 1,20,000, 90,000 and 60,000 respectively. For the year ended 31^st March, 2026, interest was credited to them @ 6% p.a. instead of 5% p.a. Give adjustment Journal entry.

Solution – Journal Entries

Working Note 1:

Calculation of Interest on Capital 6% p.a

Interest on Ram Capital – 1, 20,000 x 6% = 7,200

Interest on Mohan Capital – 90,000 x 6% = 5,400

Interest on Sohan Capital – 60,000 x 6% = 3,600

Working Note 2:

Calculation of Interest on Capital 5% p.a

Ram – 1, 20,000 x 5% = 6,000

Mohan – 90,000 x 5% = 4,500

Sohan – 60,000 x 5% = 3,000

Adjustment of Profit:-

Q60. Ram, Shyam and Mohan were partners in a firm sharing profit and losses in the ratio of 2:1:2. Their capitals were fixed at 3,00,000, 1,00,000 2,00,000. For the year ended 31^st March, 2026, interest on capital was credited to them @ 9% instead of 10% p.a. the profit for the year before charging interest was 2,50,000. Show your working notes and pass necessary adjustment entry.

Solution – Journal Entries

Working Note 1:

Calculation of Interest on Capital 10% p.a

Ram – 3, 00,000 x 10% = 30,000

Shyam – 1, 00,000 x 10% = 10,000

Mohan – 2, 00,000 x 10% = 20,000

Working Note 2:

Calculation of Interest on Capital 9% p.a

Ram – 3, 00,000 x 9% = 27,000

Shyam – 1, 00,000 x 9% = 9,000

Mohan – 2, 00,000 x 9% = 18,000

Adjustment of Profit:-

Q61. Mohan, Suhan and Adit were partners in firm sharing profits and losses in the ratio of 3:2:1. Their fixed capitals were: Rs.2,00,000, Rs.1,00,000 and Rs.1,00,000 respectively. For the year ended 31^st March, 2023, interest on capital was credited to their accounts @ 8% p.a. instead of 5% p.a.

Pass necessary adjusting Journal entry. Show your working clearly.

Solution-

Journal Entry

Q62 Ram, Mohan and Sohan were partners sharing profits in the ratio of 2:1:1. Ram withdrew 3,000 every month and Mohan withdrew 4,000 every month. Interest on drawings @ 6% p.a. was charged, whereas the partnership deed was silent about interest on drawings. Showing your working clearly, pass the necessary adjustment entry to rectify the error.

Solution – Journal Entries

Working Note 1:

Interest on Drawings Wrongly Debited

Ram – (3,000 x 12) = 36,000 x 6/100 x 6/12 = 1,080

Sohan – (4,000 x 12) = 48,000 x 6/100 x 6/12 = 1,440

Working Note 2:

(1,080 + 1,440) = 2,520

Ram – 2,520 X 2/4 = 1,260

Mohan – 2,520 X ¼ = 630

Sohan = 2,520 x ¼ = 630

Working Note 3:

Adjustment of Profit:-

Q63. Simrat and Bir are partners in a firm sharing profits and losses in the ratio of 3:2. On 31^st March, 2026 after closing the books of account, their Capital Accounts stood at 4,80,000 and 6,00,000 respectively. On 1^st May, 2025, Simrat introduced an additional capital of 1,20,000 and Bir withdrew 60,000 forms his capital. On 1^st October, 2025, Simrat withdrew 2,40,000 from her capital and Bir introduced 3,00,000. Interest on capital is allowed at 6% p.a. Subsequently, it was noticed that interest on capital @ 6% p.a. had been omitted. Profit for the year ended 31^st March, 2026 amounted to 2,40,000 and the partner’s drawings had been: Simrat – 1,20,000 and Bir – 60,000. Compute the interest on capital if the capitals are (a) Fixed and (b) Fluctuating.

Solution – Calculation of Interest on capital (Fluctuation Capital)

Simrat’s Opening Capital = Closing Capital–Additional Capital + Drawings out of Capital + Drawings out of profit

= 4, 80,000 – 1, 20,000 + 2, 40,000 + 1, 20,000

= 7,20,000 – 1,44,000

= 5,76,000

Interest on Capital of Simrat’s

1^st April – 30^th April = 5, 76,000 x 6/100 x 1/12 = 2,880

1^st May – 30^th Sept = 6, 96,000 x 6/100 x 5/12 = 17,400

1^st Oct – 31^st March = 4, 56,000 x 6/100 x 6/12 = 13,680

Interest on Simrat’s Capital 33,960

Calculation of Bir’s Interest on Capital:

Opening Capital of Bir = Closing Capital – Additional Capital + Drawing out of Capital + Drawing out of drawing – profit

= 6,00,000 – 3,00,000 + 60,000 + 60,000 – 96,000

= 3,24,000

Interest on Capital of Bir’s

1^st April – 30^th April = 3, 24,000 x 6/100 x 1/12 = 1,620

1^st May – 30^th April = 2, 64,000 x 6/100 x 5/12 = 6,600

1^st Oct – 31^st March = 5, 64,000 x 6/100 x 6/12 = 16,920

Interest on Bir’s Capital 25,140

Calculation of Bir’s Interest on Capital (Fluctuating)

Bir’s opening capital = Closing capital – Additional capital + Drawing (out of capital) + Drawing (out of profit) – profit

= 6,00,000 – 3,00,000 + 60,000 + 60,000 – 92,000

= 324000

Interest on Bir’s capital

1^st April – 30^th April = 324000 x 6/100 x 1/12 = Rs.1620

1^st May – 30^th Sept. = 264000 x 6/100 x 5/12 = 6600

1^st Oct. – 31^st March = 564000 x 6/100 x 6/12 = 16920

Interest on Bir’s Capital = 25140

Calculation of Simrat’s Interest on Capital (Fixed capital)

Opening capital of Simrat = closing capital – Additional capital + Drawing (out of capital)

= 480000 – 120000 + 240000

= 6,00,000

Interest on Simrat’s Capital =

1^st April to 30^th April = 6,00,000 x 6/12 x 1/12 = 3000

1^st May – 30^th Sept. = 720000 x 6/100 x 5/12 = 18000

1^st Oct. – 31^st March = 480000 x 6/100 x 6/12 = 14400

Interest on Simar’s Capital = 35400

Calculation of Bir’s Interest on Capital (Fixed capital)

Opening capital of Bir = closing capital – Additional capital + Drawing (out of capital)

= 600000 – 300000 + 60000

= 3,60,000

Interest on Bir’s Capital =

1^st April to 30^th April = 3,60,000 x 6/12 x 1/12 = 1800

1^st May – 30^th Sept. = 720000 x 6/100 x 5/12 = 7500

1^st Oct. – 31^st March = 600000 x 6/100 x 6/12 = 18000

Interest on Simar’s Capital = 27300

Q64. Mita and Usha are partners in a firm sharing profits in the ratio of 2:3. Their Capital Account as on 1^st April, 2015 showed balances of 1,40,000 and 1,20,000 respectively. The drawings of Mita and Usha during the year 2015-16 were 32,000 and 24,000 respectively. Both the amounts were withdrawn on 1^st January, 2016. It was subsequently found that the following items had been omitted while preparing the final accounts for the year ended 31^st March, 2016:

Interest on Capital @ 6% p.a.
Interest on Drawings @ 6% p.a.
Mita was entitled to a commission of 8,000 for the whole year.

Showing your working clearly, pass a rectifying entry in the books of the firm.

Solution – Journal Entries

Working Note 1: Adjustment of Profit:-

Q65. A, B and C were partners. Their fixed capitals were 60,000, 40,000 and 20,000 respectively. Their profit sharing ratio was 2:2:1. According to the Partnership Deed, they were entitled to interest on capital @ 5% p.a. In addition, B was also entitled to draw a salary of 1,500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the salary payable to B .The net profits for the year, 80,000 were distributed in the ratio of their capitals without providing for any of the above adjustments. Showing your workings clearly, pass the necessary adjustment entry.

Solution –

Journal Entries

Working Note:

Profit Wrongly Distributed in Capital Ratio

A – 80,000 x 3/6 = 40,000

B – 80,000 x 2/6 = 26,667

C – 80,000 x 1/6 = 13,333

Q66. Capital of Kajal, Neerav and Alisha as on 31^st March, 2026 were Rs.90,000, Rs.3,00,000 and Rs.6,60,000 respectively. Profit of Rs.1,80,000 for the year ended 31^st March, 2026 was distributed in the ratio of 4 : 1 : 1 after allowing Interest on Capital @ 10% p.a. During the year, each partner withdrew Rs.3,60,000. The partnership Deed was silent as to profit-sharing ratio but provided for interest on capital @ 12% p.a. Pass the necessary adjustment entry showing the working clearly.

Solution –

Journal (Adjustment)

Q67. On 31^st March, 2026, after the closing of the accounts, capital Accounts of P, Q and R stood in the books of the firm at 40,000; 30,000 and 20,000 respectively. Subsequently, it was noticed that interest on capital @ 5% had been omitted. Profit for the year ended 31^st March, 2026 was 60,000 and the partners drawings had been P 10,000 Q 7,500 and R 4,500. Profit sharing ratio of P, Q and R is 3:2:1. Pass necessary adjustment entry.

Solution – Journal Entries

Working Note 1:

Calculation of Opening Capital:

Working Note 2:

Adjustment of Profit:-

Q68. Mohan, Vijay and Anil are partners, the balances of their Capital Accounts being 30,000; 25,000 and 20,000 respectively .In arriving at these amounts profit for the year ended 31^st March, 2026, 24,000 had been credited to partners in their profit sharing ratio. Their drawings were 5,000 (Mohan), 4,000 (Vijay) and 3,000 (Anil) during the year. Subsequently, following omissions were noticed and it was decided to rectify the errors:

Interest on capital @ 10% p.a.
Interest on drawings: Mohan 250 Vijay 200 Anil 150

Make necessary Corrections through a Journal entry show your workings clearly.

Solution – Journal Entries

Working Note 1:

Calculation of Opening Capital:

Working Note 2: Adjustment of Profit:-

Q69. Mudit, Sudir and Uday are partners in a firm sharing profits in the ratio of 3:1:1. Their fixed capital balances are 4,00,000, 1,60,000 and 1,20,000 respectively. Net profit for the year ended 31^st March, 2018 distributed amongst the partners was 1,00,000, without taking into account the following adjustments:

Interest on capital @ 2.5% p.a.
Salary to Mudit 18,000 p.a. and commission to Uday 12,000
Mudit was allowed a commission of 6% of divisible profit after charging such commission.

Pass a rectifying Journal entry in the books of the firm. Show workings clearly

Solution – Journal Entries

Working Note 1: Adjustment of Profit:-

Q70. Piya and Bina are partners in a firm sharing profits and losses in the ratio of 3:2 Following was the balance Sheet of the firm as on 31^st March, 2026:

The profits 30,000 for the year ended 31^st March, 2026 were divided between the partners without allowing interest on capital @ 12% p.a. and salary to Piya @ 1,000 per month. During the year, Piya withdrew 8,000 and Bina withdrew 4,000. Showing your working notes clearly, pass the necessary rectifying entry.

Solution –

Journal Entries

Working Note 1:

Calculation of Opening Capital:

Working Note 2:

Adjustment of Profit:-

Q71. On 31^st March, 2023, the capital of Raghav and Diya stood at Rs.4,00,000 and Rs.3,00,000 respectively, after the necessary adjustment in respect of drawings and net profit. Subsequently, it was discovered that interest on capital @ 10% p.a. had been omitted. The Net Profit the year ended 31^st March, 2023 amounted to Rs.1,00,000.

During the year ended 31^st March, 2023, Raghave’s drawings were Rs.2,000 drawn at the beginning of each month, while Diya’s drawings were Rs.3,000 drawn at the beginning of each quarter. Pass the necessary adjustment entry.

Solution-

Journal

Calculation of Interest on Raghav’s Capital

Opening capital of Raghav = closing capital + Drawing – share in Profit

= 4,00,000 + 2000 x 12 – 1,00,000 x ½

= 4,00,000 + 24,000 – 50,000

= Rs.3,74,000

Interest on Raghave’s Capital = 374000 x 10%

= Rs.37400

Calculation of Interest on Diya’s Capital

Opening capital of Diya = closing capital + Drawing – Share in Profit

= 3,00,000 + 3,000 x 4 – 1,00,000 x 1/2

= 3,00,000 + 12,000 – 50,000

= Rs.2,62,000

Interest on Diya’s capital = 262000 x 10%

= Rs.26200

Q72. On 31^st March, 2018, the balances in the capital Accounts of Abhir, Bobby and Vineet, after making adjustments for profits and drawings were 8,00,000 6,00,000 and 4,00,000 respectively.

Subsequently, it was discovered that interest on capital and interest on drawings had been omitted. The partners were entitled to interest on capital @ 10% p.a. and were to be charged interest on drawings @ 6% p.a. The drawings during the year were: Abhir – 20,000 drawn at the end of each month, Bobby – 50,000 drawn at the beginning of every half year and Vineet – 1,00,000 withdrawn on 31^st October, 2017. The net profit for the year ended 31^st March, 2018 was 1, 50,000. The profit sharing ratio was 2:2:1.

Pass necessary adjusting entry for the above adjustments in the books of the firm. Also, show your working clearly.

Solution – Journal Entries

Working Note 1:

Adjustment Table

Working Note 2:

Calculation of Interest on Drawings:-

Average Period Method:-

Month left after first drawing + Month left after last drawings / 2

Interest on Drawings = total drawing rate of interest / 100 x average period / 12

Working Note 3:-

Calculation of Opening Capital:

Interest on Capital (10%) – 98,000 64,000 47,000

Total Interest on Capital = 98,000 + 64,000 + 47,000 = 2, 09,000

Available Profit = 1, 63,600

Interest on capital will be allow as

Abhir – 1, 63,600 x 98/209 = 76,711

Bobby – 1, 63,600 x 64/ 209 = 50,097

Vineet – 1, 63,600 x 47/209 = 36,790

Q73. On 31^st March, 2026, the balances in the Capital Accounts of Saroj, Mahinder and Umar after making adjustments for profits and drawings, etc, were 80,000 60,000 and 40,000 respectively. Subsequently, it was discovered that the interest on capital and drawings has been omitted.

The profit for the year ended 31^st March, 2026 was 80,000
During the year Saroj and Mahinder each withdrew a sum of 24,000 in equal instalments in the end of each month and Umar withdrew 36,000.
The interest on drawings was to be charged @ 5% p.a. and interest on capital was to be allowed @ 10% p.a.
The profit sharing ratio among partners was 4:3:1

Showing your workings clearly. Pass the necessary rectifying entry.

Solution – Journal Entries

Q74. Pranav, Karan and Rahim were partners sharing profit in the ratio of 3 : 2 : 1. Their capital were Rs.5,00,000, Rs.3,00,000 and RS.2,00,000 respectively as on 1^st April, 2025. According to the partnership deed, they were entitled to interest on capital @ 10% p.a. for the year ended 31^st March, 2026, profit of Rs.78,000 was distribution among the partners without probiding for interest on capitals. Pass the necessary adjusting entry an show the working .

Solution –

Adjustment Journal Entry

Working Notes :

Calculation of Interest on Capitals of the Partners:

Pranav’s Interest on Capital : – 5,00,000 x 10% = Rs.50,000

Karan’s Interest on Capital : – 3,00,000 x 10% = Rs.30,000

Rahim’s Interest on Capital : – 2,00,000 x 10% = Rs.20,000

Total Interest on capitals of all the partners = Rs.50,000 + Rs.30,000 + Rs.20,000

= Rs.1,00,000

= Total Appropriation ˃ Available Profit

= Rs.1,00,000 ˃ Rs.78,000

As appropriation (interest on capital) is more than the available profit. Thus interest on capital will be allowed upto the available profit in Interest on capital ratio.

= Rs.50,000 : Rs.30,000 : Rs.20,000

= i.e., 5 : 3 : 2

Guarantee of Minimum Profit to a Partner:-

Q75. A, B and C were in partnership sharing profits and losses in the ratio of 4:2:1. It was provided that C’s share in profit for a year would not be less than 75,000. Profit for the year ended 31^st March, 2026 amounted to 3,15,000. You are required to show the appropriation among the partners. The profit & loss appropriation Account is not required.

Solution – A: B: C = 4:2:1

Total Profit = 3, 15,000

A – 3, 15,000 x 4/7

= 1, 80,000

B – 3, 15,000 x 2/7

= 90,000

C – 3, 15,000 x 1/7

= 45,000

Deficiency of C’s Share in Profit (75000 – 45000) = Rs.30,000

This 30,000 would be borne by A & B in their profit sharing ratio (4:2)

A will contribute = 30,000 x 2/3 = Rs.20,000

B will contribute = 30,000 x 1/3 = Rs.10,000

Final share in profit of A, B & C in gaurentee

A – 1, 80,000 – 20,000 = 1, 60,000

B – 90,000 – 10,000 = 80,000

C – 45,000 + 30,000 = 75,000

accounting for partnership firm fundamentals much watch

Q.76 Ashmit, Abbas and Karman are partners sharing profits in the ratio of 3:2:1. Abbas is guaranteed minimum profit of 1,50,000 per annum. The firm incurred loss for the year ended 31^st March, 2026 of 30,000.

Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2022.

Solution –

Q-77. Asha, Disha and Raghav were partners in a firm sharing profits in the ratio of 2 : 3 : 1. According to the partnership agreement, Raghav was guaranteed an amount of 40,000 as his share of profit .the net profit for the year ended 31st March, 2022 amounted to ₹ 1,20,000. profits.

Prepare Profit & Loss Appropriation Account of the firm for the year ended 31st March, 2022.

Net profit =120,000

Asha share of profit=120,000 x 2/6=40,000

Disha share of profit=120,000 x 3/6=60,000

Ragav share of profit=120,000 x 1/6=20,000

however guarantee of profit=40,000

deficiency brone by asha 20,000 x 2/5=8000

deficiency brone by Disha 20,000 x 3/5=12000

Q78. X, Y and Z entered into partnership on 1^st October, 2025 to share profits in the ratio of 4:3:3. X, personally guaranteed that Z’s share of profit after charging interest on capital @ 10% p.a. would not be less than 80,000 in a year. Capital contributions were: X-3,00,000, Y – 2,00,000 and Z – 1,50,000.

Profit for the year ended 31^st March, 2026 was 1,60,000. Prepare Profit & Loss Appropriation Account.

Solution – P/L Appropriation Account

Dr for the year ended Cr

Working Note 1:

X – 3, 00,000 x 10% x 6/12 = 15,000

Y – 2, 00,000 x 10% x 6/12 = 10,000

Z – 1, 50,000 X 10% X 6/12 = 7,500

Working Note 2:

Profit Distribution

X – 1, 27,500 x 4/10 = 51,000

Y – 1, 27,500 x 3/10 = 38,250

Z – 1, 27,500 x 3/10 = 38,250

Z’s share of profit after charging interest on capital @ 10% p.a. would not be less than 80,000 in a year. But they have 40,000

Z – 40,000 – 38,250 = 1,750

X – 51,000 – 1,750 = 49,250

Profit – 40,000

Q79. Aman, Raj and Suresh were partners in a firm sharing profits and losses in the ratio 5:3:8. Suresh was guaranteed a minimum profit of Rs.5,00,000 per year. Any deficiency on this account was to be borne by Aman and Raj equally. The net profit of the firm for the year ended 31^st March, 2024 was Rs.8,00,000. Prepare Profit & Loss Appropriation Account of Aman, Raj and Suresh for the year ended 31^st March, 2024.

Solution –

Dr. Profit & loss A/c for the year ended 31^st March Cr.

Q80. Atul, Bipul and Charu sharing profits equally. Bipul is Guaranteed minimum profit of 2,00,000 per annum. Salary is payable to Bipul of 10,000 per month. Net Profit for the year ended 31^st March, 2026 is 6,60,000.

Prepare Profit & Loss Appropriation Account for the year.

Solution –

Dr. Profit & Loss Appropriation A/c for the year ended 31^st March Cr.

Working Notes : –

Profit for the year = Rs.660000

Less Salary = Rs.120000

Distributable Profit Rs.540000

Less Bipul share Rs.200000

Rs.340000

Remaining share would be distributed among Atul & Charu in 1 : 1

Atul’s Share = 340000 x 1/2 = Rs.170,000

Charu’s Share = 340000 x 1/2 = Rs.170,000

Q81. Parul, Prerna and Kaushal are partners sharing profits equally. Parul is guaranteed minimum annual profit of 2,00,000. Kaushal is to get commission @ 5% of Net Sales and the Commission is determined at 50,000. Net Profit for the year ended 31^st March, 2026 is 2,50,000.

Prepare Profit & Loss Appropriation Account for the year.

Solution –

Profit 2,50,000

Commission 50,000

Parul share =200,000 x 1/3=66,666

Prerna share = 200,000 x 1/3=66,667

Kaushal share= 200,000 x 1/3=66,667

Deficiency in parul share= 200,000-66,666=1,33,334

Prerna and parul borne deficiency equally=1,33,334/2=66,667

Q82. Nimrat, Maira and Kabir are partners sharing profits in the ratio of 2:2:1. Nimrat is guaranteed minimum profit of 1,60,000 per annum. The net for the year ended 31^st March, 2026 of 1,00,000.

Prepare Profit & Loss Appropriation Account for the year.

Solution

Q 83. Anand, Ridhi, and Shaym were partners in a firm sharing profit and losses in the ratio of 2:2:1. Their fixed capital were Rs.1,00,000, 60,000, and 40,000 respectively. For the year ended 31^st March, 2023, interest on capital was credited to their capital accounts @ 9% p.a. instead of 7% p.a. pass the necessary adjusting Journal entry.

Solution-

Journal

Q-84 P and Q were partners in a firm sharing profits in the ratio of 5:3 on 1st April 2025, they admitted to R as a new partner for 1/8th share in the profits with a guaranteed profit of₹ 75,000. The new profit-sharing between P and Q will remain the same but they agreed to bear any deficiency on account of guarantee to R in the ratio of 3 : 2. The profit of the firm for the year ended 31st March, 2026 was ₹4,00,000.

Prepare Profit & Loss Appropriation Account of P, Q and R for the year ended 31st March, 2025.

Ans

P/L appropriation a/c

Profit of the firm =400,000

R share 1/8

So 400,000 x 1/8=50,000

Profit for the year=400,000-50,000=350,000

P share of profit =3,50,000x 5/8 =2,18,750

Q share of profit =3,50,000 x3/8=1,31,250

R share of profit= 75000

Deficiency of R profit =75000-50,000

=25000

P contribution to R deficiency

25000 x3/5 =15000

Q contribution to R deficiency

=25000 X 2/5=10,000

Share of profit

P’s capital a/c 2,18,750-15000= 203750

Q’s capital a/c 1,31,250-10,000=121250

R’s capital a/c 75000

Q.85. Paras, Pawan and Raman are partners sharing profits in the ratio of 3:2:1. Raman is guaranteed annual profit of Rs.75,000. Profit for the year ended 31^st March, 2026 was Rs.3,00,000. Pass the necessary journal entries giving effect to the above.

Solution –

Q86. A and B are in partnership sharing profits and losses in the ratio of 3:2 they admit C, their Manager, as a partner with effect from 1^st April, 2025, for 1/4^th share of profits.

C, while a Manager, was in receipt of a salary of 27,000 p.a. and a commission of 10% of net profit after charging such salary and commission.

In term of the Partnership Deed, any excess amount, which C will be entitled to receive as a partner over the amount which would have been due to him if he continued to be Manager, will be borne by A. Profit for the year ended 31^st March, 2026 amounted to 2,25,000.

Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2026.

Solution – P/L Appropriation Account

Dr for the year ended Cr

Working Note 1:

Calculation of amount C will get

C’s Salary = 27,000

Commission

(2, 25,000 – 27,000) x 10/110 = 18,000

27000+18000=45,000

Working Note 2:

Profit Sharing Ratio of C

= 2, 25,000 x ¼ = 56,250

Working Note 3:

Deficiency met by A

C’s share in Profit as Partner = 56,250

As a manager C will get 45,000
11,250

Working Note 4:

Profit Share

2, 25,000 – 45,000 = 1, 80,000 (in 3:2)

A – 1, 80,000 x 3/5 = 1, 08,000 – 11,250 = 96,750

B – 1, 80,000 x 2/5 = 72,000

C – 45,000 + 11,250 = 56,250

Q87. The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31^st March, 2017, 80,000 in the ratio of 3:3:2 without providing for the following adjustments:

Alia and Chand were entitled to a salary of 1,500 each per month
Bhanu was entitled for a commission of 4,000.
Bhanu and Chand had guaranteed a minimum profit of 35,000. To Alia, any deficiency to be borne equally by Bhanu and Chand.

Pass the necessary Journal Entry for the above adjustments in the books of the firm. Show working clearly.

Solution – Journal Entries

Working Note:

Adjustment Table

Q88. Ajay, Binay and Chetan were partners sharing profits in the ratio of 3:3:2. The Partnership Deed provided for the following:

Salary of 2,000 per quarter to Ajay and Binay
Chetan was entitled to a commission of 8,000
Binay was guaranteed a profit of 50,000 p.a

The profit of the firm for the year ended 31^st March, 2015 was 1,50,000 which was distributed among Ajay, Binay and Chetan in the ratio of 2:2:1, Without taking into consideration the provision of partnership Deed .Pass necessary rectifying entry for the above adjustments in the books of the firm. Show your working clearly.

Solution – Journal Entries

Guarantee of profit to binay 50,000

Profit = 1, 26,000 in (3:3:2)

Ajay =47250

Binay=47250

Chetan=31500

But Guarantee of profit to Binay 50,000

Deficiency arise = 50,000-47250=2750

Which borne by Ajay and Chetan in 3:2 ratio

Ajay – 47,250 – 1,650 = 45,600

Binay – 47,250 + 2,750 = 50,000

Chetan – 31,500 – 1,100 = 30,400

Q89. Ankur, Bhavna and Disha are partners in a firm. On 1^st April, 2025, the balances in their Capital Accounts stood at 14,00,000, 6,00,000 and 4,00,000 respectively. They shared profits in the proportion of 7:3:2 respectively. Partners are entitled to interest on capital @ 6% per annum and salary to Bhavna @ 50,000 p.a. and a commission of 3,000 per month to Disha as per the provisions of the Partnership Deed.

Bhavna’s Share of profit (excluding interest on capital) is guaranteed at not less than 1,70,000 p.a. Disha’s share of profit (including interest on capital but excluding commission) is guaranteed at not less than 1,50,000 p.a. Any Deficiency arising on that account shall be met by Ankur. The profit of the firm for the year ended 31^st March, 2026 amounted to 9,50,000.

Prepare Profit & Loss Appropriation Account for the year ended 31^st March, 2026.

Solution – P/L Appropriation Account

Dr for the year ended Cr

Working Note:

Profit = 7, 20,000 (7:3:2)

Ankur – 4, 20,000 – 6,000 = 4, 14,000

Bhavna – 1, 80,000 (guarantee of profit 170,000 excluding interest on capital)

Disha – 1, 20,000 +6000=126,000(including interest on capital but excluding commission)

Disha share + Interest on capital

1, 20,000 + 24,000 = 1, 44,000

Deficiency Disha Profit – 1, 50,000 – 1, 44,000 = 6,000

Minimum Earning Guaranteed by a Partner:

Q.90. Xen, Sam and Tim are partners in a firm. For the year ended 31st March, 2026, the profit of the firm 120,000 was distributed equally among them, without giving effect to the following terms of the partnership Deed:

Sam’s guarantee to the firm that the firm would earn a profit of at least 1,35,000. Any shortfall in these profits would be met by him.
Profits to be shared in the ratio of 2:2:1.

You are required to pass the necessary Journal entries to rectify the error in accounting.

Solution

Xen’s capital a/c Dr. 40,000

Sam’s capital a/c Dr. 40,000

Tim’s capital a/c Dr. 40,000

To P/L appropriation a/c 120,000

(being wrong profit taken back)

Sam’s capital a/c Dr. 15000

To profit & loss adjustment a/c 15000

(being short fall in profit)

P/L adjustment a/c Dr. 1,35,000

To Xen’s capital a/c 54000

To Sam’s capital a/c 54000

To Tim’s capital a/c 27000

(being rectify profit distributed(2:2:1))

Q91. Three chartered Accountants Abhijit, Balajit and Charanjit form a partnership, profits being shared in the ratio of 3:2:1 subject to the following:

Charanjit’s share of profit guaranteed to be not less than 15,000 p.a
Baljit gives a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average gross fee of the preceding five year when he was carrying on profession alone, which on an average works out at 25,000

The profit for the first year of the partnership is 75,000. The gross fee earned by Baljit for the firm is 16,000. You are required to show Profit & Loss Appropriation Account after giving effect to the above.

Solution – P/L Appropriation Account

Dr for the year ended Cr

Working Note:

Profit = 84,000 (3:2:1)

Abhijit – 42,000 – 600 = 41,400

Baljit – 28,000 – 400 = 27,600

Charanjit – 14,000 + 1,000 = 15,000

Baljit New share of profit

= 27,600 – 9,000 = 18,60

Past Adjustments and Guarantee of Profits

Q.92 The partners of a firm, Alia, Bhanu and Chand distribution the profits for the year ended 31^st March, 2026, Rs.8,00,000 in the ratio of 3:3:2 without providing for the following adjustments:

(a) Alia and Chand were entitled to a salary of Rs.15,000 each per month.

(b) Bhanu was entitled for commission of Rs.40,000.

(c) Bhanu and Chand had guaranteed minimum profit of Rs.3,50,000 per annum to Alia. Any deficiency to be borne equally by Bhanu and Chand.

Pass the necessary journal entry in the books of the firm. Show working clearly.

Solution –

Rectifying Journal Entry

Working Notes :

Salary to Alia = Rs.15000 x 12 = Rs.180000

Salary to Chand = Rs.15000 x 12 = Rs.180000

Commission to Bhanu = Rs.40000

Distribution Profit = Rs.8,00,000 – 4,00,000

= Rs.4,00,000

Alia’s share in Profit = 4,00,000 x 3/8 = Rs.1,50,000

Deficiency to Alia = Rs.3,50,000 – 150,000

= Rs.2,00,000

Deficiency to be borne by Bhanu & Chand in 1 : 1

Bhanu = 2,00,000 x 1/2 = Rs.1,00,000

Chand = 2,00,000 x 1/2 = Rs.1,00,000

cash flow statement

Accounting for partnership firm Ts Grewal solution 2026 solution

1. Accounting for Partnership Firms-Fundamentals

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