TEACHING MODULE FOR REMEDIAL CLASSES

Class: XII

SUBJECT: ACCOUNTANCY

Sl. Dates Day Topic Sub-Topic to be covered Marks

No.
1 22.11.2024 Friday Fundamental of Interest on Drawings, 3,3
Partnership Profit & Loss
Appropriation A/C
2 23.11.2024 Saturday Fundamental of Guarantee of Profit to a
Partnership partner,
Past Adjustment
3 25.11.2024 Monday Admission of a Sacrificing 3,6
Partner Ratio,Treatment of
Goodwill

4 26.11.2024 Tuesday Admission of a Revaluation Account,

Partner Partners Capital Account
5 27.11.2024 Wednesday Retirement Or Gaining Ratio, Treatment 6
death of a of goodwill, Deceased
partner Partner’s Share of profit
6 28.11.2024 Thursday Dissolution of a Realisation Account, 6
partnership firm Partners Capital
including Journal
Entries.
7 29.11.2024 Friday Issue of Share Issue, Forfeiture and 3,6
Capital reissue of Shares

Manoj Kumar Gupta

PGT- Commerce

PM SHRI K.V. Jamalpur

Munger, Bihar
 Day 1: 22/11/2024

Topic: Fundamental of Partnership

Sub-Topic: (a) Interest on Drawings
Methods of Calculating Interest on drawings:
(a) Simple Method:
Interest on drawings= Amount of drawings x Rate of
Interest/100 x Month/12
(b) Product method:
Interest on drawings= Total of Products x Rate of
Interest/100 x 1/12
Q. Rishi is a partner in a firm. He withdrew the following
amounts during the year ended March 31, 2020.
May 01, 2019 Rs. 12,000
July 31, 2019 Rs. 6,000
September 30, 2019 Rs. 9,000
November 30, 2019 Rs. 12,000
January 01, 2020 Rs. 8,000
March 31, 2020 Rs. 7,000

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

Calculate interest on drawings.
 Interest on Monthly drawings (Equal Amounts)
Case Monthly drawings Average Period
1 In the beginning of 6.5 months
every month
2 In the middle of every 6 months
month
3 At the end of every 5.5 months
month
Interest= Total drawings x Rate of Interest/100 x
Average period/12

Q.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assuming that money is withdrawn: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.

Interest on Quarterly Drawings (Equal Amounts)

Case Quarterly Drawings Average Period
1 In the beginning of 7.5 months
each quarter
2 In the middle of each 6 months
quarter
3 At the end of each 4.5 months
quarter
 Interest= Total drawings x Rate of Interest/100 x
Average period/12

Q. Calculate the interest on drawings of Mr. Ram @ 10% p.a.

for the year ended 31st March, 2023 in each of the following
alternative cases:
Case 1: If he withdrew Rs. 10,000 in the beginning of each
quarter .
Case 2: If he withdrew Rs. 10,000 at the end of each quarter.
Case 3: If he withdrew Rs. 10,000 during the middle of each
quarter .
 Day 2: 23/11/2024

Topic: Fundamental of Partnership

Sub-Topic: (b) Profit and loss Appropriation Account,
C) Guarantee of Profit to a Partner

Profit and loss Appropriation Account

Dr. Cr.
Particulars Rs. Particulars Rs.
To, Salaries of By, Profit and loss A/C
Partners

To, Commission to By,Interest on drawings

partners

To, Interest on capital

To, Reserve

To, Profit transferred

to Partners’ Capital/
Current A/C

Note: Any amount payable to a partner, such as salary,

commission, interest on capital etc.(except interest on
Partner’s loan and rent payable to a partner) is treated as
appropriation of profit and not a charge against profit. Hence,
these items are debited to Profit & Loss Appropriation A/C
instead of Profit & Loss A/C.
Q. Rakhi and Shikha are partners in a firm, with capitals of
Rs. 2,00,000 and Rs, 3,00,000 respectively. The profit of the
firm, for the year ended 2016-17 is Rs. 53,200. As per the
Partnership agreement, they share the profit in their capital
ratio, after allowing a salary of Rs. 1,000 per month to Shikha
and interest on Partner’s capital at the rate of 10% p.a. During
the year Rakhi withdrew Rs. 7,000 and Shikha Rs. 10,000 for
their personal use.
You are required to prepare Profit and Loss
Appropriation Account.

Solution:
 When Appropriations are more than Profits
In case where appropriations such as interest on capital, salary of
partners etc, are more than available profits, the profits will be
distributed in the ratio of appropriations.

Q. A and b are partners sharing profits and losses in the ratio

of 2:1. A is a non-working partner and has contributed
Rs.12,00,000 as his capital. B is a working partner. The
paertnership 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,2021 before providing
for interest on capital and salary amounted to Rs.70,000. You
are required to show the distribution of profit.

Solution:
 (C) Guarantee of Profit to a Partner

Q. 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.

Solution:

Q. Amann, Babita and Suresh are partners in a firm. Their profit sharing ratio is
2:2:1. Suresh is guaranteed an 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.
Solution:
 Day 3: 25/11/2024

Topic: Fundamental of Partnership

Sub- Topic: (D)Past Adjustment
Errors or omission may be rectified in two ways:
(a) By passing a single adjustment entry with the net effect of
the errors and omission; or
(b) By passing separate adjustment entries for each error and
omission (we have to prepare Profit and Loss Adjustment A/C)
Q. Gupta and Sarin are partners in a firm sharing profits in the
ratio of 3:2.
(a) Their fixed capitals are: Gupta 2,00,000, and Sarin
3,00,000.
(b) After the accounts for the year are prepared it is
discovered that interest on capital @10% p.a. as provided
in the partnership agreement, has not been credited in the
capital accounts of partners before distribution of profits.
Record adjustment entry to rectify the error.
Solution:
Q. Azad and Benny are equal partners.
(a)Their fixed capitals are Rs. 40,000 and Rs. 80,000,
respectively.
(b) After the accounts for the year have been prepared it is
discovered that interest at 5% p.a. as provided in the
partnership agreement, has not been credited to the capital
accounts before distribution of profits.
(c) It is decided to make an adjustment entry at the beginning
of the next year. Record the necessary journal entry.

Solution:
 Day 3: 25/11/2024

Topic: Admission of a Partner

Sub- Topic:(a) Sacrificing Ratio, (b) Treatment of Goodwill on the
admission of a New Partner:

Sacrifice Ratio:
The ratio in which old partners surrender their profits is called
Sacrifice Ratio.
Sacrifice Ratio=Old Ratio – New Ratio
Use:
It is used to distribute new partner’s share of goodwill
between sacrificing partners.
Q. Sandeep and Navdeep are partners in a firm sharing profits
in 5:3 ratio.
They admit C into the firm and the new profit sharing ratio
was agreed at 4:2:1.
Calculate the sacrificing ratio.

Solution:
Q. Rao and Swami are partners in a firm sharing profits and
losses in 3:2 ratio.
They admit Ravi as a new partner for 1/8 share in the profits.
The new profit sharing ratio between Rao and Swami is 4:3.
Calculate new profit sharing ratio and sacrificing
ratio.

Solution:
 Sub- Topic: (b) Treatment of Goodwill on the admission of a New Partner:

1. When the amount of goodwill (premium) is paid privately:

No Entry is required

2. When the new partner brings his share of Goodwill

(premium) in Cash:

(i) When the amount of goodwill brought in by the new

partner is retained in the business-

(a) Cash A/C Dr.

To Premium for goodwill A/C

(b) Premium for goodwill A/C Dr.

To Old/Sacrificing Partners’ Capital A/C
(sacrifice Ratio)

(ii) When the amount of goodwill brought in by the new

partner is withdrawn by the old partners-

(a) Cash A/C Dr.

To Premium for goodwill A/C

(b) Premium for goodwill A/C Dr.

To Old/Sacrificing Partners’ Capital A/C
(sacrifice Ratio)

(c) Old/Sacrificing Partners’ Capital A/C Dr.

To Cash A/C( Amounts withdrawn)

3. When the new partner does not brings his share of

Goodwill (premium) in Cash.(As 26)
 New Partner’s Current A/C Dr.
To Old/Sacrificing Partners’ Capital A/C
(sacrifice Ratio)
Note:-
When Goodwill already appears in the books:
The following entry is passed to write off the existing goodwill-
Old Partners’ capital A/C Dr.
To, Goodwill A/C
(Old Ratio)

Day 4: 26/11/2024

Topic: Admission of a Partner

Sub- Topic: (b) Treatment of Goodwill on the admission of a New Partner:
(c) Revaluation Account and Partners Capital Account

(b) Treatment of Goodwill on the admission of a New Partner (Numerical Questions)

Q. Verma and Sharma are partners in a firm sharing profits

and losses in the ratio of 5:3. They admitted Ghosh as a new
partner for 1/5 share of profits. Ghosh is to bring in Rs.
20,000 as capital and Rs. 4,000 as his share of goodwill
premium.
Give the necessary journal entries:
a) When the amount of goodwill is retained in the business.
b) When 50% of the amount of goodwill is withdrawn.
c) When goodwill is paid privately.
Solution:
a) When the amount of goodwill is retained in the business.
b) When 50% of the amount of goodwill is withdrawn.

i)

ii)

iii)

c) When goodwill is paid privately.

Q. X and Y are partners in a firm sharing profits and losses in

4:3 ratio. They admitted Z for 1/8 share. Z brought Rs. 20,000
for his capital and Rs. 7,000 for his 1/8 share of goodwill.
Goodwill already appears in the books at Rs. 40,000.
Show necessary journal entries in the books of X, Y and Z?

Solution:
 (c)Revaluation Account, Partners Capital Account
Q. Charu and Harsha were partners in a firm sharing profits in the ratio of 3:2. On 1-4-
2024 their Balance Sheet was as follows:

Balance Sheet of Charu and Harsha as on 1st April, 2024

Liabilities Rs. Assets Rs.

Creditors 17000 Cash 6000
General Reserve 4000 Debtors 15000
Workmen Compensation Investments 20000
Fund 9000 Plant 14000
Investment Fluctuation Land and Building 38000
Fund 11000
Provision for bad debts 2000
Capitals:
Charu 30000
Harsha 20000
93000 93000
th
On the above date Vaishali was admitted for 1/4 share in the profits of the firm on the
following terms:

(a) Vaishali will bring Rs.20000 for her capital and Rs.4000 for her share of goodwill
premium.
(b) All debtors were considered good.
(c) The market value of investments was Rs.15000.
(d) There was a liability of Rs.6000 for workmen compensation.

Prepare Revaluation Account and Partners’ Capital Accounts.

Solution:
 H.W.
Q. Amar and Samar were partners in a firm sharing profits and losses
in 3:1 ratio. They admitted Kanwar for 1/4 share of profits. Kanwar
could not bring his share of goodwill premium in cash. The Goodwill
of the firm was valued at Rs. 80,000 on Kanwar’s admission. Record
necessary journal entry for goodwill on Kanwar’s admission.
 Day 5: 27/11/2024

Topic: Retirement Or Death of a Partner

Sub- Topic: (a) Gaining Ratio,
(b) Treatment of goodwill,
(c) Deceased Partner’s Share of profit.

Retirement of a Partner:
Following accounting problems arise on the retirement of a partner:
1. Calculation of new profit sharing ratio and gaining ratio of the continuing
partners,
2. Treatment of Goodwill,
3. Accounting treatment for revaluation of assets and liabilities,
4. Accounting treatment of reserves, accumulated profits and losses,
5. Payment to retiring partner,
6. Adjustment of capital.

(a) Gaining Ratio:

It is the ratio in which the remaining partners acquire the
outgoing( retired or deceased) partner’s share.

Gaining Ratio= New ratio - Old ratio

Use:
Goodwill paid to retiring partner/ executor of deceased partner is paid by the
remaining partners in their gaining ratio.

Q. Anita, Jaya and Nisha are partners sharing profits and losses in
the ratio of 1 : 1 : 1. Jaya retires from the firm. Anita and Nisha
decided to share the profit in future in the ratio 4:3. Calculate the
gaining ratio.

Solution:
Q. Ashok, Anil and Ajay are partners sharing profits and losses in
the ratio of 1/3, 2/10 and 1/5. Anil retires from the firm. Ashok and
Ajay decide to share future profits and losses in the ratio of 3 : 2.
Calculate the gaining ratio.

Solution:

Test: MCQ
1. The old profit sharing ratio among Rajender, Satish and Tejpal
were 2:2:1. The New Profit Sharing Ratio after Satish’s retirement is
3:2. The gaining ratio is–
(a) 3:2
(b) 2:1
(c) 1:1
(d) 2:2

(b) Treatment of goodwill:

Continuing Partners’ Capital A/cs Dr.( in Gaining ratio)

To Retiring/ deceased Partner’s Capital A/c ( with his share of goodwill)

Note:-

When the Goodwill already appears in the books:

The following entry is passed to write off the existing goodwill-

All Partners’ capital A/c Dr. (Old Ratio)

To, Goodwill A/c (goodwill existing in the Balance Sheet)
Q. Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2 :1.
Manisha retires and goodwill of the firm is valued at Rs. 1,80,000. Aparna
and Sonia decided to share future in the ratio of 3 : 2. Record necessary
journal entries.

Solution:

Q. Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 2 : 3 : 5.
Goodwill is appearing in the books at a value of Rs. 60,000. Sangeeta retires
and goodwill is valued at Rs. 90,000. Saroj and Shanti decided to share future
profits equally. Record necessary journal entries.

Solution:
(c) Deceased Partner’s Share of profit (share of profit
upto the date of his death):
Profit may be ascertained from any of the following methods:

(a) On Time basis

(b) On Turnover or sales basis.

Entry:

Profit and Loss Suspense A/c Dr.

To Deceased Partner’s Capital A/c

Q. A, B and C were partners sharing profits in the ratio of 3:2:1.

The profit and Sales for the year ended 31st March, 2017 were Rs.3,00,000
and Rs. 10,00,000 respectively.

A died on 30th November, 2017.

Calculate the share of deceased partner in the profits for the period from
1st April,2017 to 30th November,2017 if the same is calculated:

(i) On the basis of sales which were Rs.8,00,000 from 1 st April,2017 to 30th
November,2017.

Also pass the necessary journal entry.

Solution:

(i) On the basis of sales which were Rs.8,00,000 from 1 st April,2017 to 30th
November,2017.
(ii) On the basis of Time.

Day 6: 28/11/2024

Topic: Dissolution of a Partnership Firm

Sub- Topic: (a) Journal Entries,
(b) Realisation Account,
(c) Partners’ Capital account.

Dissolution of Partnership:
Dissolution of partnership means termination of the old partnership
agreement and a reconstruction of the firm due to admission, retirement,
death of a partner, etc.
Dissolution of partnership may or may not result into closing down of
the business as the remaining partners may agree to carry on the business
under a new agreement.

Dissolution of Partnership ‘Firm’:

Dissolution of partnership ‘firm’ means that the firm closes down its
business and comes to an end.
On the dissolution of the firm, the assets of the firm are sold
and liabilities are paid off and out of the remaining amount, the
accounts of the partners are settled.
 Test your Understanding: ( True or False)

1. A partnership is dissolved when there is a death of a partner.

2. A firm is dissolved when all partners give consent to it.

Accounting Procedure on Dissolution of Firm:

In order to close the books of the firm on dissolution the following accounts are
opened in the order given below:

1. Realisation Account

2. Loan by Firm to Partner

3. loan by Partner to Firm

4. Partner’s Capital Accounts

5. Cash or Bank Account.

Journal Entries

1. For trnasfer of assets ( except Fictitious assets such as P/L A/c(Dr.),

Advertisement Suspense A/c,etc)

Realisation A/c Dr.( only those which can be converted into cash)
To Assets (Individually) A/c

2. For transfer of liabilities (except Partner’s Loan, undistributed profits

such as General Reserve,etc)

Liabilities (individually) Dr.( relate to third parties)

To Realisation A/c

3. For sale of assets/ unrecorded assets

Bank A/c Dr.

To Realisation A/c

4. For an asset taken over by a partner

Partner’s Capital A/c Dr.

To Realisation A/c

5.For payment of liabilities/ For settlement of any unrecorded liability

Realisation A/c Dr.

To Bank A/c

6. For a liability which a partner takes responsibility to discharge

Ralisation A/c Dr.

To Partner’s Capital A/c

7. For settlement with the creditor through transfer of assets

A. when a creditor accepts an asset in full and final settlement of his account:

No journal entry needs to be recorded.

B. if the creditor accepts an asset only as part payment of his/her dues, the entry
will be made for cash payment only:

Realisation A/c Dr.

To Bank A/c

C. when a creditor accepts an asset whose value is more than the due amount
he/she pay cash to the firm for the difference for which the entry will be:

Bank A/c Dr.

To Realisation A/c

8. For payment of realisation expenses

(a) When some expenses are incurred and paid by the firm in the process of
realisation of assets and payment of liabilities:

Realisation A/c Dr.

To Bank A/c

(b) When realisation expenses are paid by a partner on behalf of the firm:

Realisation A/c Dr.

To Partner’s Capital A/c

(c) When a partner has agreed to bear the realisation expenses:

(i) if payment of realisation expenses is made by the firm

Partner’s Capital A/c Dr.

To Bank A/c

(ii) if the partner himself pays the realisation expenses,

No entry is required

9. For agreed remuneration to such partner who agrees to undertake the

dissolution work.

Realisation A/c Dr.

To Partner’s Capital A/c

10. For realisation of any unrecorded assets including goodwill, if any

Bank A/c Dr.

To Realisation A/c

11.For transfer of profit and loss on realisation (Cr. Blance)

(a) In case of profit on realization

Realisation A/c Dr.

To Partners’ Capital A/c (individually) A/c

(b) In case of loss on realization

Partners’ Capital A/c (individually) Dr. (Dr. Blance)

To Realisation A/c

12. For settlement of loan by a firm to a partner:

Bank A/c Dr.

To loan to partners A/c

13. For transfer of accumulated profits in the form of general reserve to

partners’ capital accounts in their profit sharing ratio:

General Reserve A/c Dr.

To Partners’ Capital A/c (individually)
14. For transfer of fictitious assets, if any, to partners’ capital accounts in
their profit sharing ratio:

Partners’ Capital A/c (individually) Dr.

To Fictitious Asset A/c( such as Advertisement Suspense A/c, etc.)

15. For payment of loans due to partners

Partner’s Loan A/c Dr.

To Bank A/c

16. For settlement of partners’ accounts

(a) Bank A/c Dr.

To Partner’s Capital A/c (capital account shows a debit balance)

(b) Partners’ Capitals A/cs (individually) Dr. (capital account shows a

credit balance)
To Bank A/c
Test your Understanding:

Fill in the Correct Word(s):

1. All assets (except cash/bank and fictitious assets) are transferred to
the ————— (Debit/Credit) side of ——————— Account
(Realisation/Capital).
2. If a partner takes over an asset, such (Partner’s Capital Account) is
———————— (debited/credited).
Q. What journal entries would be recorded for the following transactions on the
dissolution of a firm of Arti and Karim after various assets (other than cash) and
the third party liabilities have been transferred to Reliasation account.
1. Arti took over the Stock worth Rs. 80,000 at Rs. 68,000.
2. There was unrecorded Bike of Rs. 40,000 which was taken over by Mr.
Karim.
3. The firm paid Rs. 40,000 as compensation to employees.
4. Sundry creditors amounting to Rs. 36,000 were settled at a discount of 15%.
5. Loss on realisation Rs. 42,000 was to be distributed between Arti and Karim
in the ratio of 3:4.

Solution:

1.

2.

3.

4.

5.
 H.W.
Q. What journal entries would be passed in the books of A and B who are partners in a firm,
sharing profits in the ratio of 5:2, for the following transactions on the dissolution of the firm
after various assets (other than cash) and third party liabilities have been transferred to
Realisation Account?
a. Bank loan Rs. 12,000 is paid.
b. Stock worth Rs. 6000 is taken over by B.
c. Loss on Realisation Rs. 14,000.
d. Realisation expenses amounted to Rs. 2,000, B has to bear these expenses.
e. Deferred Revenue Advertising Expenditure appeared at Rs. 28,000.
f. A typewriter completely written off in the books of the firm was sold for Rs. 200.

Q.

Solution: