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प्रश्न
How will you deal with a change in the profit sharing ratio among existing partners?Take imaginary figures to illustrate your answer?
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उत्तर
Usually due to the admission, retirement or death of a partner or sometimes due to the general agreement among the partners, they may decide to change the profit sharing ratio. Various adjustments that should be considered during the change in the profit sharing ratio are , goodwill, reserves and accumulated profits, profit or loss on the revaluation of assets and liabilities and adjustment of capitals, etc. The general reserves and accumulated profits (if any) and profit (or loss) on revaluation on assets and liabilities should be credited (debited) in the Partner's Capital Account in their old profit sharing ratio.
But if the existing partners decide to change the profit sharing ratio then some partners gain (gaining partners) at the cost of other partners (sacrificing partners). Thus, the former should compensate the latter. Therefore, the gaining Partners’ Capital Account s are debited to the extent of their gain and sacrificing Partners' Capital Accounts are credited to extent of their sacrifice. The following Journal entry is passed.
Gaining Partner's Capital A/c Dr.
To Sacrificing Partner's Capital A/c
(Adjustment entry passed)
Example:
A, B, C are partners in a firm sharing profit and loss in 3:2:1 ratio. They decide to share profit and loss equally in future. On that date, the books of the firm shows Rs 1,20,000 as general reserve, profit due to revaluation of building Rs 30,000. The following adjustment entry is passed through the capital accounts without affecting the books of accounts.
| Particulars | A | B | C |
| Share of profit as per 3:2:1 | 60,000 | 40,000 | 20,000 |
| Profit on revaluation of building | 15,000 | 10,000 | 5,000 |
| 75,000 | 50,000 | 25,000 | |
| Share of profit as per 1:1:1 | 50,000 | 50,000 | 50,000 |
| Difference (Gain or Loss | 25000 | - | 25000 |
|
(Loss) |
(Gain) |
Hence, in this example, C gains at the cost of A, so the partner A needs to be compensated by C with the amount of Rs 25,000. The following adjustment entry is passed.
Adjustment Entry :
|
C's Capital A/c |
Dr. |
25,000 |
|
|
|
To A's Capital A/c |
|
|
25,000 |
|
|
( Adjustment entry passed) |
|
|
|
|
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संबंधित प्रश्न
Simmi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1. The profit and loss account of the firm for the year ending March 31, 2020 shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation Account by taking into consideration the following information:
- Partners capital on April 1, 2019;
Simmi, Rs 30,000; Sonu, Rs 60,000; - Current accounts balances on April 1, 2016,
Simmi, Rs 30,000 (cr.); Sonu, Rs 15,000 (cr.); - Partners drawings during the year amounted to
Simmi, Rs 20,000; Sonu, Rs 15,000; - Interest on capital was allowed @ 5% p.a.;
- Interest on drawing was to be charged @ 6% p.a. at an average of six months;
- Partners’ salaries: Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’ current accounts.
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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.
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- at the beginning of every month,
- at the middle of every month, and
- at the end of every month.
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| 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.
Illustrate how interest on drawings will be calculated under various situations.
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Harshad Claims:
(i) He should be given interest @ 10% per annum on capital and loan;
(ii) Profit should be distributed in proportion of capital;
Dhiman Claims:
(i) Profits should be distributed equally;
(ii) He should be allowed Rs 2,000 p.m. as remuneration for the period he managed the business, in the absence of Harshad;
(iii) Interest on Capital and loan should be allowed @ 6% p.a.
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The profits for year ended March 31, 2017 before making above appropriations was Rs 1,00,300. The drawings of Ramesh and Suresh were Rs 40,000 and Rs 50,000, respectively. Interest on drawings amounted to Rs 2,000 for Ramesh and Rs 2,500 for Suresh. Prepare Profit and Loss Appropriation Account and partners’ capital accounts, assuming that their capitals are fluctuating.
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| May 01, 2017 | Rs 12,000 |
| July 31, 2017 | Rs 6,000 |
| September 30, 2017 | Rs 9,000 |
| November 30, 2017 | Rs 12,000 |
| January 01, 2018 | Rs 8,000 |
| March 31, 2018 | Rs 7,000 |
Interest on drawings is charged @ 9% p.a. Calculate interest on drawings.
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.
Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs 2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings for the year 2006, assuming that money is withdrawn: (i) in the beginning of every month, (ii) in the middle of every month, and (iii) at the end of every month.
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.
Abhay, Siddharth and Kusum are partners in a firm, sharing profits in the ratio of 5:3:2. Kusum is guaranteed a minimum amount of Rs 10,000 as per share in the profits. Any deficiency arising on that account shall be met by Siddharth. Profits for the years ending March 31, 2016 and 2017 are Rs 40,000 and 60,000 respectively. Prepare Profit and Loss Appropriation Account.
Arun, Boby and Chintu are partners in a firm sharing profit in the ratio or 2:2:1. According to the terms of the partnership agreement, Chintu has to get a minimum of Rs 60,000, irrespective of the profits of the firm. Any Deficiency to Chintu on Account of such guarantee shall be borne by Arun. Prepare the profit and loss appropriation account showing distribution of profits among partners in case the profits for year 2015 are: (i) Rs 2,50,000; (ii) 3,60,000.
E, F and G are partners sharing profits in the ratio of 3:3:2. According to the partnership agreement, G is to get a minimum amount of ₹80,000 as his share of profits every year and any deficiency on this account is to be personally borne by E. The net profit for the year ended 31st March 2021 amounted to ₹3,12,000. Calculate the amount of deficiency to be borne by E?
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.
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:
What will be the interest on drawing @ 12.5% p.a. for Abhishek if he withdraws ₹ 5,000 once in month?
