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Q26:- A and B start business on 1st January, 2012, with capitals of Rs 30,000 and Rs 20,000. According to the Partnership
Deed, B is entitled to a salary of Rs 500 per month and interest is to be allowed on capitals at 6% per annum. The
remaining profits are to be distributed amongst the partners in the ratio of 5:3. During 2012 the firm earned a profit,
before charging salary to B and interest on capital amounting to Rs 25,000. During the year A withdrew Rs 8,000and B
withdrew Rs10,000 for domestic purposes. Show the capital accounts of the partners following fluctuating capital
method.

Q27:-

Ram and Rahim started business with capital of Rs 50,000 and Rs 30,000 on 1st January, 2012. Rahim is entitled to a
salary of Rs 400 per month. Interest is allowed on capitals and is charge on drawings at 6% per annum. Profits are to be
distributed equally after the above noted adjustments. During the year Ram withdrew Rs 8,000 and Rahim withdrew Rs
10,000. The profit for the year before allowing for the terms of the Partnership Deed came to Rs 30,000. Assuming the
capitals to be fixed, prepare the Capital and Current Accounts of the partners.

Q28:-

X, Y & Z are in partnership. Y and Z are entitled to 15% commission on net profit to be shared equally for the special
service rendered by them to the partnership. However, all the partners are entitled to 8% interest on fixed capital of Rs
5,00,000 each. The business is run at the premises of Mr. X who is further entitled to get a monthly rent of Rs 2,000 to
be adjusted against his current account. They share profits and losses equally. Net profit during the year2012 was Rs
7,00,000.
During the year they were discussing to change the profit sharing ratio because X could not attend to business work.
Finally they decided to increase interest on capital to 12% p.a. with effect from 1-10-2012 and to change the profit
sharing ratio to 1:2:2 with effect from the same date. With that Y and Z would not get any commission. Prepare Profit
and Loss Appropriation Account.

Q29:-

Lee and Lawson are in equal partnership. They agreed to take Hicks as one-fourth partner. For this it was decided to
find out the value of goodwill. M/s Lee and Lawson earned profits during 2009-2012 as follows:
Year
Profit
Rs
2009
1,20,000
2010
1,25,000
2011
1,30,000
2012
1,50,000

On 31.12.2012 capital employed by M/s Lee and Lawson was ` 5,00,000. Rate of normal
profit is 20%. Find out the value of goodwill following various methods.

Q30:-

Vasudevan, Sunderarajan and Agrawal are in partnership sharing profit and losses at the ratio of 2:5:3. The Balance
Sheet of the partnership as on 31.12.2012 was as follows:
Balance Sheet of
M/s Vasudevan, Sunderarajan & Agrawal
Liabilities

Rs

Capital A/cs
Vasudevan
Sunderarajan
Agrawal
Sundry Creditros

85,000
3,15,000
2,25,000
30,000
6,55,000

Assets
Sundry fixed assets
Stock
Debtors
Bank

Partnership Accounting

Rs
5,00,000
1,00,000
50,000
50,000
6,55,000

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The partnership earned profit Rs 2,00,000 in 2012 and the partners withdrew Rs 1,50,000 during the year. Normal rate
of return 30%. Find out the value of goodwill on the basis of 5 years' purchase of super profit. For this
purpose calculate super profit using average capital employed.
Q31:-

Any and Many are partners sharing profits as to and and their capitals are Rs 90,000 and Rs 30,000 respectively. It
is decided that with effect from 1st April, 2011 the profit-sharing ratio will be: Any 5/8 and Many 3/8. The Deed states
that goodwill is to be valued at 2 years purchase of three years profits and capitals of the two partners should be
proportionate to the profit-sharing ratio. The profits for the years ended 31st March, 2009, 31st March, 2010 and 31st
March, 2011 were Rs 42,000, Rs 39,000 and Rs 45,000 respectively. Make necessary journal entries

Important Questions:
Q.1.
Alpha Manufacturing P.Ltd. is a company manufacturing articles. Beeta Marketing P Ltd. is a company engaged in
marketing activities. The two companies enter into a partnership on the following terms:
(a) Alpha Manufacturing P. Ltd is to supply goods on credit of two months to the partnership firm. The partnership is to
discharge the dues to Alpha Manufacturing P. Ltd. along with interest at 12% per annum regularly on due dates.:
(b) Beeta marketing P. Ltd is to sell the goods.
(c) Expenses of sales are to be met out of the partnership funds. Alpha Manufacturing P. Ltd, and Beeta P. Ltd, are to
introduce capital of Rs. Five lacks each for meetings the above expenses and as working capital. Interest at 15% per
annum is payable on partners capital-payment being made every month.
Accordingly the capitals are introduce on 1st April, 1999.
(d) Profits and losses are to be dealt with as follows:
(i)
10% of the profits, if any are to be credited to reserves for strengthening the working capital base;
(ii)
Balance profits are to be shared equally by credit to current A/cs;
(iii)
Losses, if any, are to be borne equally by debit to capital A/cs
(e) The firm name is to be AB Traders.
During the year ended 31st March, 2000 the following were the transactions;
(a) Purchases Rs. 150 lacks of which Rs. 30 lacks were in the first quarter; Rs. 90 lacks were in the next 6 months; the
balance Rs. 30 lacks were in the last quarter.
The purchases are evenly spread through the respectively periods.
(b) Sales were Rs. 200 lacks.
(c) Sales expenses were Rs. 10 lakhs and were paid full.
(d) Discount allowed to customers amounted to Rs. 4 lakhs. On 31 st March, 2000, amounts due from customers were
Rs. 45 lakhs and unsold inventory was worth Rs. 15 lakhs.

Q.2.
Tupp and Sedge were partners in a retail business sharing profits and losses, Tupp two-thirds, Sedge one-third. Interest
on fixed Capital was credited at the rate of 10 per cent per annum; no interest was charged on drawings. A/cs were made up to
March 31st of each year.
On January 1st 1989, Palmer was admitted as partner, and from that date all profits and losses were to be shared, Tupp
six-tenths, Sedge three-tenths, Palmer one-tenth. Before ascertaining the partners shares of profits or losses, Palmer was to be
credited with a salary at the rate of Rs. 6,000 per annum. Provisions regarding interest on Capital and drawings remained
unaltered.
It was agreed that Palmers total share of profits, including his salary and interest on capital, should be guaranteed by
Tupp at a minimum rate of Rs. 15,000 per annum. Any apportionment of profits of a particular period should be made as to gross
profit on the basis of sales and as to expenses, with the exception of general expenses, on the basis of time.
The trial balance extracted from the books on March 31st 1989, was as follows:
Rs.
Rs.
Capital A/cs :
Tupp
48,000
Sedge
24,000
Palmer (Cash paid on January 1st, 1989)
8,000
Drawings A/cs :
Tupp
30,000
Sedge
15,000
Palmer
3,000

Partnership Accounting

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Delivery Van, at cost
Provision for depreciation thereon on March 31st, 1988
Furniture and Fittings, at cost
Provision for depreciation thereon
on March 31st, 1988
Sales (nine months to December 31st 1988, Rs. 2,40,000)
Purchases
Stock, March 31st , 1988
General Expenses (nine months to December 31st, 1988, Rs. 4,550)
Salaries
Heating and Lighting
Rent and Rates
Creditors
Debtors
Balance at Bank

30,000
12,000
24,000
3,000
3,36,000

2,22,000
48,000
10,400
24,000
2,200
5,600
15,000
20,000
11,800
4,46,000
4,46,000
st
On March 31 , 1989, the stock was valued at Rs. 47,000 and rates paid in advance amounted to Rs. 600 Rs. 800 is to b
provided for electricity consumed to that date.
Included in the sales and debtors was an amount of Rs. 6000 for goods invoiced on sale or return on February 1, 1989,
which were still unsold on March 31st March 31st 1989. The cost of these goods, which were not included in the stock, was Rs.
3,000.
Depreciation is to be provided at the rate of 20 per cent per annum on the cost of the delivery van and 2.50 % per
annum on the cost of furniture and fittings.
You are required to prepare:
(b)
Trading and Profit and Loss A/cs for the year to March 31 st, 1989; and
(c)
a Balance Sheet as on that date. Ignore taxation.
Q.3.

X, Y Ltd. and Z Ltd, are partners of X & Co. The partnership deed provided that:
(a) The working partner Mr. X is to be remunerated at 15% of the net profits after charging his remuneration, but before
charging interest on capital and provision for taxation;
(b) Interest is to be provided on capital at 15% per annum;
(c) Balance profits after making provision for taxation, is to be shared in the ratio of 1:2:2 by the three partners.
During the year ended 31st March, 2002:
(i)
The net profit before tax and before making any payment to partners amounted to Rs 6,90,000;
(ii)
Interest on capitals at 15% per annum amounted to:
Rs 60,000 for X; 1,50,000 for Y Ltd. and Rs 1,80,000 for Z Ltd. The capitals have remained unchanged during the
year;
(iii)
Provision for tax is to be at 40% of total income of the firm. The total income has been computed at Rs
1,95,000.
You are required:
(a) The firm to pass closing entries in relation to the above;
(b) Y Ltd. to pass journal entries in its books pertaining to its income from the firm and show the investment in partnership
A/c as it would appear in its ledger;
(c) Z Ltd. to show, how the above information will appear in its financial statements for the year;
(d) Shri X to show the working if any, in relation to the above.

Q.4.
A and B formed a partnership on April 1, 1988 contributing Rs. 60,000 and Rs. 20,000 respectively. At March 31 st.
1990 the trial balance of the partnership was as follows:Dr. (Rs)
Cr. (Rs)
Cash on hand
21,000
Sundry Debtors
58,000
Inventories-stock in trade
46,000
Equipment, Plant & Machinery
46,500
Sundry Creditors
12,000

Partnership Accounting

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Accumulated depreciation-Provision for Depreciation
As Capital
Bs Capital

9,500
1,04,750
45,250
1,71,500
1,71,500
The only transactions in the partners Capital A/cs during two years were credits for interest at 10% per annum on
original Capital and allocations of income. At March 31, 1990 it was discovered that all drawings, Rs. 21,000 by A and Rs.
15,000 by B, had incorrectly been charged as expenses in determining net income. The partnership A/cs are to be properly
adjusted.
On April 1, 1990 A and B offered partnerships to C and D on the following terms:(1) C and D are to contribute Rs. 50,000 and Rs. 40,000 respectively to the firm.
(2) All partners are to receive 10% interest on the opening Capital balances of the new partnership.
(3) A and B are to receive salaries of Rs. 10,000 and Rs. 6,000 per annum respectively.
(4) C is to receive a minimum of Rs. 10,000 per annum, and D a minimum of Rs. 12,000 per annum as the irrespective
shares of partnership profit, including interest.
(5) Profit after interest and salaries are to be shared as follows:A-30%; B-30%; C-20%; D-20%
Required:
(a) Prepare a schedule showing the corrected balances in the Capital A/cs of A and B at March 31, 1990
(b) Calculate the amount of net income that must earned by the new partnership during the year ending 31 st March, 1991 in
order that A may receive an aggregate of Rs. 25,000 including interest, salary and share or income.
Q.5.

D, M & S carried on business in partnership as mens outfitters. The partnership agreement provided that:
(1) The partners were to be credited at the end of each year with interest at 10% per annum on the balances at the credit of
their respective Capital A/cs at the commencement of each year.
(2) No interest was to be charged on drawings.
(3) Profits and losses were to be shared in the proportions: D 50%, M 30% and S 20%. It was agreed, however, that Ss
share should be a minimum Rs. 8,500, any deficiency was to be borne by the other two partners in their profit-sharing
ratio.
The Trial Balance of the partnership on March 31, 1990 was as follows:

Debit Balances
Shop Finings, at cost
Freehold Premises
Leasehold Premises-purchased during the
year
Additions and Alterations to Leasehold
Premises
Purchases
Stock, 1st April 1, 1989
Salaries and Wages
Office and Trade Expenses
Rent, Rates and Insurance
Professional Charges
Debtors
Balance at Bank
Petty Cash
Drawings, other than monthly payments:
D
M
S

Rs.
36,000
60,000
45,000
25,000
2,80,000
42,000
64,000
45,200
10,500
3,500
20,600
42,000
1,700

Credit Balances
Partners Capital A/cs :
D
M
S
Partners Current A/cs :
D
M
S
Sales
Trade Creditors
Depreciation Provision
Provision for Doubtful Debts

7,000
6,000
4,000
6,92,500

You are given the following additional information:


(1) Stock on March 31, 1990 was valued at Rs. 44,000.

Partnership Accounting

Rs.
80,000
50,000
30,000
16,000
12,000
8,000
4,45,000
37,000
14,000
500

6,92,500

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(2) A debt of Rs. 600 is to be written off and the provision against the debtors should be 5%.
(3) Salaries and wages include the following monthly drawings by the partners : D, Rs. 500; M, Rs. 300; and S, Rs. 250.
(4) Partners had, during the year, been supplied with goods from stock and it was agreed that these should be charged to
them as follows: D, Rs. 600 and M, Rs. 400.
(5) On March 31, 1990, rates paid in advance and office and trade expenses owing were Rs. 2,500 and Rs. 2,400
respectively.
(6) Depreciation of shop fittings to be provided at 5 per cent per annum on cost.
(7) Professional Charges include Rs. 2,500 fees paid in respect of the acquisition of the Leasehold Premises.
(8) The cost of the additions and alterations to the Leasehold Premises were to be written off over 2.5 years commencing
on April 1, 1989 the period of the lease.
(9) A difference in the books has been written off to Office and Trade Expenses A/c. The difference has beat found to be
due to:
(i)
Returns Inwards Rs. 240 entered in Returns Inwards Journal had not been posted to the A/cs of the
customers; and
(ii)
The Sales Journal was overcast by Rs. 1,000.
(10) Petty cash has been controlled on the imprest system, which has been applied correctly throughout 1989-90, and a
cheque has been drawn on the 1st of each month to cover the payment of the previous month out of petty cash. No
entries have been made on the credit side of the Petty Cash Control A/c during 1989-90. Payments from petty cash
during the month of March, 1990 were Rs. 160. The amount of the imprest was Rs. 200. All payments from petty cash
are to be charged to the Office & Trade Expenses.
Prepare the Trading and Profit and Loss A/cs for the year ending March 31, 1990 and also the Balance Sheet as on that date.
Q.6.
Jack and John carried on a retail business in partnership sharing profits and losses: Jack 2/3 and John 1/3. Interest was
credited on partners fixed capitals at the rate of 10 per cent per annum, No interest was charged on drawings.
On January 1, 1990 Jackson and Johnson were admitted as partners and as from that date, profits and losses were area
Jack 6/12, John 3/12, Jackson 2/12 and Johnson, 1/12. Johnsons share was guaranteed by Jack at the minimum rate of Rs. 12,000
per Annum. In addition to his share of the profits, Johnson was to on credited with a salary at Rs. 6,000 per Annum. The
arrangements as to interest are to continue.
A Trial Balance extracted from the books as on March 31, 1990 was as follows:
Dr.
Cr.
Rs.
Rs.
Partners Drawings and Capital (Fixed) A/cs:
Jack
10,000
30,000
John
9,000
16,000
Jackson (Capital paid in on January 31, 1990)
12,000
Johnson (Capital paid in on January 31, 1990)
9,000
Stock on 1st April, 1989
Purchases
75,000
Sales (up to December 31, 1989: Rs. 3,60,000)
2,77,000
4,84,350
Direct Wages
Overheads and Trading Expenses (excluding depreciation)
Fixed Assets at cost
Depreciation of Fixed Assets-April 1, 1989
Debtors
Provision for Doubtful Debts
Creditors
Bank A/c

40,000
47,200
60,000
20,000
38,000
1,400
27,600
44,150
6,00,350

6,00350
Other information given to you is as follows:
(1) Stock was valued as on March 31, 1990 at Rs. 69,100.
(2) Trade expenses accrued but not entered in the books amounted to Rs. 1,200.
(3) Unsold goods costing Rs. 4,000 which were on sale or return had been invoiced on March 5, 1990 at Rs. 6,000 which
amount was included in sales and debtors.
(4) Rs. 8,000 is to be provided for depreciation for the year on Fixed Assets:
(5) The Provision for Doubtful Debts is to be increased to Rs. 5,000.
Prepare the Trading and Profit and Loss A/cs for the year ending March 31, 1990 and the Balance Sheet.

Partnership Accounting