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Prepare Firm’S Profit and Loss Appropriation Account.

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प्रश्न

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

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उत्तर

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Partner’s Salary

 

 

Profit and Loss

40,000

Maneesh

 

4,800

Interest on Drawings

 

 

 

 

 

Maneesh

800

 

Partner’s commission

 

 

Girish

700

1,500

Girish {(40,000 – 4,800) × (10/100)}

3,520

 

 

 

Interest on Capital :

 

 

 

 

Mannesh

7,000

 

 

 

 

Girish

5,600

12,600

 

 

 

Profit transferred to :

 

 

 

 

Maneesh’s Current

10,290

 

 

 

 

Girish’s Current

10,290

20,580

 

 

 

 

41,500

 

 

41,500

shaalaa.com
Distribution of Profit Among Partners
  क्या इस प्रश्न या उत्तर में कोई त्रुटि है?
अध्याय 1: Accounting for Partnership Firms-Fundamentals - Exercises [पृष्ठ १००]

APPEARS IN

टीएस ग्रेवाल Accountancy Double Entry Book Keeping Volume 1 and 2 [English] Class 12
अध्याय 1 Accounting for Partnership Firms-Fundamentals
Exercises | Q 19 | पृष्ठ १००

संबंधित प्रश्न

Why is Profit and Loss Adjustment Account prepared? Explain.


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


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


Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is 2:2:1. Suresh is guaranteed a minimum amount of Rs 10,000 as share of profit, every year. Any deficiency on that account shall be met by Babita. The profits for two years ending March 31, 2019 and March 31, 2017 were Rs 40,000 and Rs 60,000, respectively. Prepare the Profit and Loss Appropriation Account for the two years.


Sukesh and Vanita were partners in a firm. Their partnership agreement provides that:

  1. Profits would be shared by Sukesh and Vanita in the ratio of 3:2;
  2. 5% interest is to be allowed on capital;
  3. Vanita should be paid a monthly salary of Rs 600.

The following balances are extracted from the books of the firm on March 31, 2017.

 

Sukesh (Rs)

Verma* (Rs)

Capital Accounts

40,000

40,000

Current Accounts

(Cr.)   7,200

(Cr.)   2,800

Drawings

10,850

8,150

Net profit for the year, before charging interest on capital and after charging partner’s salary was Rs 9,500. Prepare the Profit and Loss Appropriation Account and the Partner’s Current Accounts.


Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3 : 2 : 1, subject to the following :

i) Sona’s share in the profits, guaranteed to be not less than Rs 15,000 in any year.

ii) Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is Rs 25,000). The net profit for the year ended March 31, 2017 is Rs 75,000. The gross fee earned by Babita for the firm was Rs 16,000.
You are required to show Profit and Loss Appropriation Account (after giving effect to the alone).


X, Y and Z are in Partnership, sharing profits and losses in the ratio of 3 : 2 : 1, respectively. Z’s share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The net profit for the year ended March 31, 2020 was Rs 30,000. Prepare Profit and Loss Appropriation Account, indicating the amount finally due to each partner.


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


Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn:

  1. at the beginning of every month,
  2. at the middle of every month, and
  3. at the end of every month.

Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2019 were Rs 2,50,000 and Rs 1,50,000, respectively. They share profits equally. On July 01, 2019, they decided that their capitals should be Rs 1,00,000 each. The necessary adjustment in the capitals were made by introducing or withdrawing cash by the partners’. Interest on capital is allowed @ 8% p.a. Compute interest on capital for both the partners for the year ending on March 31, 2020.


Rishi is a partner in a firm. He withdrew the following amounts during the year ended March 31, 2020.

May 01, 2019 Rs 12000
July 31, 2019 Rs 6000
September 30, 2019 Rs 9000
November 30, 2019 Rs 12000
January 01, 2020 Rs 8000
March 31, 2020 Rs 7000

Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.


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


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

Dhiman Claims:
(i) Profits should be distributed equally;
(ii) He should be allowed Rs 2,000 p.m. as remuneration for the period he managed the business, in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.

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


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


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


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

 

Rs

February 01

4,000

May 01

10,000

June 30

4,000

October 31

12,000

December 31

 4,000

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


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


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


Raka, Seema, and Mahesh were partners sharing profits and losses in the ratio of 5: 3: 2. With effect from 1st April, 2019, they mutually agreed to share profits and losses in the ratio of 2: 2: 1.
On that date, there was a workmen's compensation fund of ₹ 90,000 in the books of the firm. It was agreed that:
(i) Goodwill of the firm be valued at ₹ 70,000.
(ii) Claim for workmen's compensation amounted to ₹ 40,000.
(iii) Profit on revaluation of assets and re-assessment of liabilities amounted to ₹ 40,000.
Pass necessary journal entries for the above transactions in the books of the firm.


On 1st September 2020, twenty students of Modern College started their Partnership Firm in the name of “Be Safe” for selling sanitizers on digital mode. Since they were good friends of each other, they were not having any explicit agreement in place. All of them have agreed to invest ₹ 15,000/- each as capital. The books were closed on 31st March 2021, on which date the following information was provided by the firm:

PARTICULARS AMOUNT (₹)
Sale of Sanitisers 1,20,000
Cost of goods sold 50,000
Total Remuneration to partners 2,000 per month
Rent to a partner 1,000 per month
Manager’s Commission 5,000
Closing Stock as on March 31,2021 9,000
6% Fixed Deposit (made on 31.3.2021) 20,000

Calculate the amount of profits to be transferred to Profit and Loss Appropriation Account.


Consider the following statements

Statement 1: "No interest is to be charged on the drawings made by the partners if there is no mention in the Deed."

Statement 2: Specified provisions are required to be mentioned in the partnership deed to charge interest on drawings.


Mohan and Sham are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

"Shyam wants interest on capital to be credited @6% per annum".


What would be the journal entry for the Share of Profit or Loss after appropriation?


Which of the following items is not dealt through Profit and Loss Appropriation Account?


When is the Profit and Loss Appropriation Account prepared?


Pick the odd one out:


Rahul and Shubham are partners in a partnership Rahul withdraw ₹ 4,000 during the year as drawings. Interest on drawings is charged @ 15% p.a. The amount of interest on drawings at the end of the year will be ______.


Identify the journal entry for transferring salaries paid to the Active Partner A to the Profit and loss Appropriation A/c.


Read the following information and answer the given question:

Krishika alumni of IIM Ahemdabad initiated her startup Krishika Ltd. in 2018. The profits of Krishika Ltd. in the year 2019-20 after all appropriations was ₹ 31,25,000. This profit was arrived after taking into consideration the following items:

S. No. Particulars Amount (₹)
1. Gain on sale of fixed tangible assets 12,50,000
2. Goodwill written off 7,80,000
3. Transfer to General Reserve 8,75,000
4. Provision for taxation 4,37,500

Additional information:

Particulars 31.3.2020 (₹) 31.3.2019 (₹)
Prepaid Expenses 7,50,000 5,00,000
Inventory 10,50,000 8,20,000
Trade Payable 4,50,000 3,50,000
Trade Receivables 6,20,000 5,90,000

Cash from operating activities before tax will be ₹ ______.


Read the following information and answer the given question:

Krishika alumni of IIM Ahemdabad initiated her startup Krishika Ltd. in 2018. The profits of Krishika Ltd. in the year 2019-20 after all appropriations was ₹ 31,25,000. This profit was arrived after taking into consideration the following items:

S. No. Particulars Amount (₹)
1. Gain on sale of fixed tangible assets 12,50,000
2. Goodwill written off 7,80,000
3. Transfer to General Reserve 8,75,000
4. Provision for taxation 4,37,500

Additional information:

Particulars 31.3.2020 (₹) 31.3.2019 (₹)
Prepaid Expenses 7,50,000 5,00,000
Inventory 10,50,000 8,20,000
Trade Payable 4,50,000 3,50,000
Trade Receivables 6,20,000 5,90,000

Cash flow from operating activities will be ₹ ______.


The Journal Entry to transfer interest on capital to Profit and Loss Appropriation Account would be:


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