GNG 2.
0 By RAJAT ARORA SIR
Chapter 1
Fundamentals
DAY -2 GNG 2.O By Rajat Arora Sir
Q 1. Under what circumstances, a partner can get exemption from sharing losses in a firm?
a) If he is a senior citizen
b) If he is a minor
c) If he is a retiring partner
d) All of these
Q 2. What is not the essential feature of the partnership firm?
a) Two or more persons
b) Settlement of Disputes
c) Agreement
d) Lawful Business
Q 3. Ostensible partners are those who :
a) do not contribute any capital, but get some share of profit for lending their name to the
business.
b) contribute very less capital, but get equal profit.
c) do not contribute any capital and without having any interest in the business, lend their
name to the business.
d) contribute maximum capital of the business.
Q 4. Which of the following items is not dealt through Profit and Loss Appropriation Account?
a) Interest on Partner's Loan
b) Partner's Salary
c) Interest on Partner's Capital
d) Partner's Commission
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Q 5. Ram and Shyam are partners in the ratio of 3: 2. Before profit distribution, Ram is entitled to
5% commission of the net profit (after charging such commission). Before charging
commission, firm's profit was Rs 42,000. Shyam's share in profit will be:
a) Rs. 16,000
b) Rs. 24,000
c) Rs. 26,000
d) Rs. 16,400
Q 6. Mohit and Rohit were partners in a firm with capitals of Rs 80,000 and Rs 40,000
respectively. The firm earned a profit of Rs 30,000 during the year. Mohit's share in the profit will
be :
a) Rs. 20,000
b) Rs. 10,000
c) Rs. 15,000
d) Rs. 18,000
Q 7. X and Y are partners in the ratio of 3: 2. Their capitals are Rs 2,00,000 and Rs 1,00,000
respectively. Interest on capitals is allowed @ 8% p.a. Firm incurred a loss of Rs 60,000 for the
year ended 31st March 2019.
Interest on Capital will be:
a) X Rs. 16,000; Y Rs. 8,000
b) X Rs. 8,000; Y Rs. 4,000
c) X Rs. 14,400; Y Rs. 9,600
d) No Interest will be allowed
Q 8. A' and 'B' were partners in a firm. They share profits in ratio of 2:3. They close their accounts
on 31st December every year. 'A' withdrew a fixed sum of Rs. 2,000 at the beginning of every
month starting from 1st July, 2017. You have to calculate interest on drawings while rate of
interest is 12% p.a.
a) Rs. 420
b) Rs. 720
c) Rs. 440
d) Rs. 580
Q 9. Singh and Gupta decided to start a partnership firm to manufacture low-cost jute bags as
plastic bags were creating many environmental problems. They contributed capitals of Rs
1,00,000 and Rs 50,000 on 1st April 2012 for this. Singh expressed his willingness to admit
Shakti as a partner without capital, who is specially abled but a very creative and intelligent
friend of his. Gupta agreed to this. The terms of the partnership were as follows:
Singh, Gupta and Shakti will share profits in the ratio of 2:2:1.
Interest on capital will be provided @ 6% p.a.
Due to the shortage of capital, Singh contributed Rs. 25,000 on 30th September 2012 and Gupta
contributed Rs. 10,000 on 1st January 2013 as additional capital. The profit of the firm for the
year ended 31st March 2013 was Rs 1,68,900.
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Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2013.
Q 10. Calculate the interest on drawings of Mr. Arun @ 10% p.a. for the year ended 31st
March, 2021 in each of the following alternative cases:
Case (a) If he withdrew Rs. 5,000 p.m. in the beginning of every month;
Case (b) If he withdrew Rs. 5,000 p.m. at the end of every month;
Case (c) If he withdrew Rs. 5,000 p.m. during the year;
Case (d) If he withdrew Rs. 60,000 during the year;
Case (e) If he withdrew as follows:
1st June, 2023 20,000
31st August, 2023 10,000
31st Oct., 2023 18,000
1st Feb., 2024 12,000
Case (f) If he withdrew Rs. 15,000 at the beginning of each quarter;
Case (g) If he withdrew Rs. 15,000 at the end of each quarter;
Case (h) If he withdrew Rs. 15,000 during the middle of each quarter.
Q 11. A and B entered into partnership with capitals of Rs. 4,00,000 and Rs. 2,00,000
respectively and agreed to share profits and losses in the ratio of 3:2. Their partnership deed
provided that interest on capital shall be allowed at 6% p.a. and it is to be treated as a charge
against profits. Prepare the relevant account to allocate the profit in the following alternative
cases:
i) If profit for the year Rs. 80,000
ii) If Profit for the year Rs. 20,000
iii) If Loss for the year Rs. 20,000
Q 12. A and B are partners sharing profits and losses in the ratio of 2:1. A is a non- working and
has contributed Rs. 12,00,000 as his capital. B is a working partner .The partnership deed
provides for interest on capital @10% p.a. and salary of Rs. 7,500 per month to the working
partner. The net profit for the year ended 31st March , 2023 before providing for interest on
capital and salary amounted to Rs. 70,000. You are required to show the distribution of profit.
Q 13. A and B are partners sharing profits in the ratio of 3:2, with capitals of Rs. 5,00,000 and Rs.
3,00,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary
of Rs. 60,000. During the year 2022-23, the profits prior to the calculation of interest on capital
but after charging’s B’s salary amounted to Rs. 1,80,000. A provision of 5% of the profit is to be
made in respect of commission to the manager.
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Prepare profit and loss appropriation account showing the distribution of profit and the
partner’s capital accounts for the year ending March 31, 2023
Q 14. Shiv and Hari entered into partnership on 1st April, 2022, contributing Rs. 5,00,000 and
Rs. 2,00,000 respectively. Hari also introduced Rs. 1,00,000 as additional capital on 1st July,
2022. They agreed to share profits and losses in the ratio of 3: 2. Following information is
provided regarding the partnership :
(i) Shiv and Hari, each are allowed a salary of Rs. 5,000 per quarter.
(ii) Interest is to be allowed on Capitals @ 8% p.a. and charged on drawings at 10% p.a.
Drawings of Shiv and Hari during the year were Rs. 12,000 and Rs. 10,000 respectively. Profit as
at 31st March, 2023 before the above mentioned adjustments was 1,96,000.
Prepare:
1) Necessary journal entries relating to appropriation of profits,
2) Profit and Loss Appropriation A/c, and
3) Partner's Capital A/cs.
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Answer Key
Ans 1. b) If he is a minor
Ans 2. b) Settlement of Dispute
Ans 3. c) Do not contribute any capital and without having any interest in the business, lend
their name to the business.
Ans 4. a) Interest on Partner's Loan
Ans 5. a) Rs. 16,000
Ans 6. c) Rs. 15,000
Ans 7. d) No Interest will be allowed
Ans 8. a) Rs. 420
Ans 9. Profit and Loss Appropriation Account
Dr. Cr.
Particular Amount Particular Amount
To Interest on Capital By profit and Loss A/c 1,68,900
Singh 6,750
Gupta 3,150 9,900
To profits transferred to :
Singh’s Capital A/c 63,600
Gupta’s capital A/c 63,600
Shakti’s Capital A/c 31,800 1,59,000
1,68,900 1,68,900
12 𝑚𝑜𝑛𝑡ℎ𝑠+1 𝑀𝑜𝑛𝑡ℎ 1
Ans 10. Case a) Average Period = 2
= 6 2 𝑚𝑜𝑛𝑡ℎ𝑠
10 6.5
Interest on Drawing = Rs. 60,000 x 100 x 12 = Rs. 3,250
11 𝑚𝑜𝑛𝑡ℎ𝑠+ 0 𝑀𝑜𝑛𝑡ℎ 1
Case b) Average Period = 2
=52 𝑚𝑜𝑛𝑡ℎ𝑠
10 5.5
Interest on Drawing = Rs. 60,000 x 100 x 12 = Rs. 2,750
Case c) Assuming that the drawings were made in the middle of every month:
11.5 𝑚𝑜𝑛𝑡ℎ𝑠+ 0.5 𝑀𝑜𝑛𝑡ℎ
Average Period = 2
= 6 𝑚𝑜𝑛𝑡ℎ𝑠
10 6
Interest on Drawing = Rs. 60,000 x x = Rs. 3,000
100 12
Case d) As the date of drawing is mot given, interest will be calculated for an average priod of 6
months.
10 6
Interest on Drawing = Rs. 60,000 x 100 x 12 = Rs. 3,000
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Case e)
Date Amount of Drawing Period (Months upto Products
31st March, 2024)
1st June, 2023 20,000 10 2,00,000
31st August, 2023 10,000 7 70,000
31st Oct, 2023 18,000 5 90,000
1st Feb., 2024 12,000 2 24,000
3,84,000
10 1
Interest on Drawing = Rs. 3,84,000 x 100 x 12 = Rs. 3,200
12 𝑚𝑜𝑛𝑡ℎ𝑠+ 3 𝑀𝑜𝑛𝑡ℎ 1
Case f) Average Period = =7 𝑚𝑜𝑛𝑡ℎ𝑠
2 2
Total drawings for the year = Rs. 15,000 x 4 times in a year = Rs. 60,000
10 7.5
Interest on Drawing = Rs. 60,000 x x = Rs. 3,750
100 12
9 𝑚𝑜𝑛𝑡ℎ𝑠+ 0 𝑀𝑜𝑛𝑡ℎ 1
Case g) Average Period = 2
=42 𝑚𝑜𝑛𝑡ℎ𝑠
10 4.5
Interest on Drawing = Rs. 60,000 x x = Rs. 2,250
100 12
10.5 𝑚𝑜𝑛𝑡ℎ𝑠+ 1.5 𝑀𝑜𝑛𝑡ℎ
Case h) Average Period = 2
= 6 𝑚𝑜𝑛𝑡ℎ𝑠
10 6
Interest on Drawing = Rs. 60,000 x x = Rs. 3,000
100 12
Ans 11. Case i)
Profit and Loss Account
Dr. Cr.
Particular Amount Particular Amount
To Interest on Capital By profit before Interest 80,000
A 24,000
B 12,000 36,000
To profit transferred to Profit
and Loss Appropriation A/c 44,000
80,000 80,000
Profit and Loss Appropriation Account
Dr. Cr.
Particular Amount Particular Amount
To Profit Transferred to: By Profit and Los A/c 44,000
A’s capital A/c 26,400
B’s capital A/c 17,600 44,000
44,000 44,000
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Case ii)
Profit and Loss Account
Dr. Cr.
Particular Amount Particular Amount
To Interest on Capital By profit before Interest 20,000
A 24,000 By Loss transferred to:
B 12,000 36,000 A’s capital A/c 9,600
B’s capital A/c 6,400 16,000
36,000 36,000
Case iii)
Profit and Loss Account
Dr. Cr.
Particular Amount Particular Amount
To Loss for the year 20,000 By Loss transferred to:
To Interest on Capital A’s capital A/c 33,600
A 24,000 36,000 B’s capital A/c 22,400 56,000
B 12,000
56,000 56,000
Ans 12. Profit and Loss Appropriation Account
Dr. Cr.
Particular Amount Particular Amount
To Interest on A’s capital By Profit and Loss A/c 70,000
(4/7 of 70,000) 40,000 (Net Profit)
To Salary to B (3/7 of 70,000) 30,000
70,000 70,000
Working Note
Interest on A’s capital = 10% on Rs. 12,00,000 1,20,000
Salary to B = Rs. 7,500 x 12 90,000
2,10,000
Since available profit is only Rs. 70,000 which is less than appropriations of Rs. 2,10,000, profit
will be distributed in the ratio of appropriation to be made:
Interest on capital : Salary
Or 1,20,000 : 90,000
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Or 4 : 3
Ans 13. Profit and loss account
For the year ended march 31, 2023
Dr. Cr.
Particulars ₹ Particulars ₹
To manager’s commission By profit for the year
(5% of ₹2,40,000) 12,000 (before B’s salary)
(Rs. 1,80,000 + Rs. 60,000) 2,40,000
To Net Profit Transferred to
profit & loss appropriation A/c) 2,28,000
2,40,000 2,40,000
Profit and loss appropriation account
For the year ended march 31, 2023
Dr. Cr.
Particulars ₹ Particulars ₹
To B’s salary 60,000 By profit & loss A/c 2,28,000
To interest on capitals:
A 30,000
B 18,000 48,000
To profits transferred to:
A’s capital A/c 72,000
B’s capital A/c 48,000 1,20,000
2,28,000 2,28,000
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Partner’s Capital Accounts
Date Particulars A B Date Particulars A B
2023 ₹ ₹ 2022 By balance
March To balance April 1 b/d 5,00,000 3,00,000
31 c/d 6,02,000 4,26,000
2023 By salary 60,000
March 31 By interest -
March 31 On capital 30,000 18,000
By profit &
March 31 loss appr.
A/c (share
of profit ) 72,000 48,000
6,02,000 4,26,000 6,02,000 4,26,000
Ans 14.
Journal
Date particulars L.F. Dr. (₹) Cr. (₹)
2023 Profit & loss A/c Dr. 1,96,000
March 31 To profit & loss appropriation A/c 1,96,000
(The transfer of profit to profit and loss
Appropriation account)
Partner’s salary A/c Dr. 40,000
To Shiv’s Capital A/c 20,000
“ To Hari’s Capital A/c 20,000
(salary of partners)
Profit & loss appropriation A/c Dr. 40,000
“ To partner’s Salary A/c 40,000
(the transfer of partner’s salaries to profit &
loss appropriation Account)
Interest on Capital A/c Dr. 62,000
To Shiv’s Capital A/c 40,000
” To Hari’s Capital A/c 22,000
(the interest on partner’s Capital)
Profit & loss appropriation A/c Dr. 62,000
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“ To Interest on Capital A/c 62,000
(the transfer of interest on capital to profit
and loss appropriation A/c)
“ Shiv’s Capital A/c Dr. 500
Hari’s Capital A/c Dr. 600
To interest on drawing A/c 1,100
(interest on partner’s drawings)
Interest on drawings A/c Dr. 1,100
To Profit & Loss appropriation A/c 1,100
" (the transfer of interest on drawings to profit
And loss appropriation A/c)
Profit & loss Appropriation A/c Dr. 95,100
To Shiv’s Capital A/c 57,060
To Hari’s Capital A/c 38,040
(the transfer of credit balance of profit and
loss appropriation account to partner’s
capital)
Profit and loss Appropriation account
For the year ended 31 March, 2023
Dr. Cr.
Particulars ₹ Particulars ₹
To Partner’s salary : By profit and loss A/c
Shiv 20,000 —being profit 1,96,000
Hari 20,000 40,000 By interest on drawings:
To Interest on capitals: Shiv 600
Shiv 40,000 Hari 500 1,100
Hari 22,000 62,000
To profit transferred to:
Shiv’s capital A/c 57,060
Hari’s capital A/c 38,040 95,100
1,97,100 1,97,100
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Partner’s capital account
Dr. Cr.
Date Particulars Shiv Hari Date particulars Shiv Hari
2023 ₹ ₹ 2022 ₹ ₹
March 31 To drawings 12,000 10,000 April1 By bank 5,00,000 2,00,000
March 31 To interest July 1 By bank 1,00,000
on drawings 600 500 2023 —-
March By salary 20,000 20,000
31 By interest on
March 31 To balance 6,04,460 3,69,540 March capitals 40,000 22,000
c/d 31
March By profit &
31 loss
appropriation 57,060 38,040
A/c
6,17,060 3,80,040 6,17,060 3,80,040
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GNG 2.0 Rajat Arora Sir
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