NCERT Solutions for Class 12 Accountancy

Chapter 1 – Accounting for Partnership: Basic Concepts

1. Define Partnership Deed.

2. Why is it considered desirable to make the partnership agreement in writing

3. List the items which may be debited or credited in capital accounts of the partners
when:

I. Capitals are fixed

ii. Capitals are fluctuating

4. Why is the Profit and Loss Adjustments Account prepared? Explain.

5. Give two circumstances under which the fixed capitals of partners may change.

6. If a fixed amount is withdrawn on the first day of every quarter, for what period the
interest on the total amount withdrawn will be calculated?

7. In the absence of a Partnership Deed, specify the rules relating to the following:

i. Sharing of profits and losses.

ii. Interest in partner’s capital.

iii. Interest in Partner’s drawings.

iv. Interest on Partner’s loan.

v . Salary to partner.

8. What is a partnership? What are its chief characteristics? Explain.

9. Discuss the main provisions of the Indian Partnership Act 932 that are relevant to
partnership accounts if there is no partnership deed.

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10. Explain why it is considered better to make a partnership agreement in writing.

11. Illustrate how interest in drawings will be calculated under various situations.

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

13. Tripathi and Chauhan are partners in a firm sharing profits and losses in the
ratio of 3:2. Their capitals were Rs 60,000 and Rs 40,000 as on January 01, 2015.
During the year they earned a profit of Rs 30,000. According to the partnership
deed both the partners are entitled to Rs 1,000 per month as Salary and 5% interest
on their capital. They are also to be charged an interest of 5% on their drawings,
irrespective of the period, which is Rs 12,000 for Tripathi, and Rs 8,000 for
Chauhan. Prepare Partner’s Accounts when capitals are fixed.

14. Anubha and Kajal are partners of a firm sharing profits and losses in the
ratio of 2:1. Their capital, was Rs 90,000 and Rs 60,000. The profit during the
year was Rs 45,000.

According to the partnership deed, both partners are allowed a salary, of Rs 700
per month to Anubha and Rs 500 per month to Kajal. Interest allowed on capital
@ 5% p.a. The drawings at the end of the period were Rs 8,500 for Anubha and Rs
6,500 for Kajal. Interest is to be charged @ 5% p.a. on drawings. Prepare the
partner's capital accounts, assuming that the capital account is fluctuating.

15. Harshad and Dhiman have been 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 a 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. A 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 to capital.

Dhiman Claims:
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(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 a Profit and Loss Appropriation Account.

16. Aakriti and Bindu entered a partnership for making garments on April 01, 2016,
without any Partnership agreement. They introduced Capital of Rs 5,00,000 and Rs
3,00,000 respectively on October 01, 2016. Aakriti Advanced. Rs 20,000 by way of loan to the
firm without any agreement as to interest. Profit and Loss account for the year ended March
2017 showed a profit of Rs 43,000. Partners could not agree upon the question of interest and
the basis of division of profit. You are required to divide the profits between them giving the
reason for your solution.

17. 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
23,200. As per the Partnership agreement, they share the profit in their capital
ratio, after allowing a salary of Rs 5,000 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 and Partner’s Capital Accounts.

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18. 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.

19. 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.

20. 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.

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21. 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
December 31, 2016, and December 31, 2017, were Rs 40,000 and Rs 60,000, respectively.
Prepare the Profit and Loss Appropriation Account for the two years.

22. 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, 2017,

shows a net profit of Rs 1,50,000. Prepare the Profit and Loss Appropriation
Account by taking into consideration the following information:

(i) Partners capital on April 1, 2016; Simmi, Rs 30,000; Sonu, Rs 60,000;

(ii) Current accounts balances on April 1, 2016; Simmi, Rs 30,000 (cr.); Sonu, Rs
15,000 (cr.).

(iii) Partners drawings during the year amounted to Simmi, Rs 20,000; Sonu, Rs
15,000.

(iv) Interest on capital was allowed @ 5% p.a.

(v) Interest on drawing was to be charged @ 6% p.a. at an average of six months.

(vi) Partners’ salaries: Simmi Rs 12,000 and Sonu Rs 9,000. Also show the partners’
current accounts.

23. Ramesh and Suresh were partners in a firm sharing profits in the ratio of their
capitals contributed on commencement of business which were Rs 80,000 and Rs
60,000 respectively. The firm started business on April 1, 2016. According to the
partnership agreement, interest on capital and drawings are12% and 10% p.a.,
respectively. Ramesh and Suresh are to get a monthly salary of Rs 2,000 and Rs 3,000,
respectively. 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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24. Sukesh and Vanita were partners in a firm. Their partnership agreement provides
that:

(i) Profits would be shared by Sukesh and Vanita in the ratio of 3:2;

(ii) 5% interest is to be allowed on capital.

(iii) 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 Verma*

Rs 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.

Drawings 10850 8150 Balance b/d 7200 2800

Balance Interest on
1650 6050 2000 2000
c/d Capital

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 P/L

Appropriation n

3300 2200

Partners
7200
Salary

12500 14200 12500 14200

25. Rahul, Rohit and Karan started partnership business on April 1, 2016 with
capitals of Rs 20,00,000, Rs 18,00,000 and Rs 16,00,000, respectively. The profit for
the year ended March 2017 amounted to Rs 1,35,000 and the partner’s drawings
had been Rahul Rs 50,000, Rohit Rs 50,000 and Karan Rs 40,000. The profits are
distributed among partners in the ratio of 3:2:1. Calculate the interest on capital
@ 5% p.a.

26. Sunflower and Pink Rose started partnership business on April 01, 2016 with
capitals of Rs 2,50,000 and Rs 1,50,000, respectively. On October 01, 2016, they
decided that their capitals should be Rs 2,00,000 each. The necessary adjustments
in the capitals are made by introducing or withdrawing cash. Interest on capital is
to be allowed @ 10% p.a. Calculate interest on capital as on March 31, 2017.

27. 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.

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27. Following is the extract of the Balance Sheet of Neelkant and Mahdev as on March
31, 2017:

Liabilities Assets
Amou Amount

nt

Neelkant’s Capital 10,00,000 Sundry Assets 30,00,000

Mahadev’s Capital 10,00,000

Neelkant’s Current 1,00,000

Account

Mahadev’s Current 1,00,000

Account

Profit and

Loss Apprpriation

(March 2017) 8,00,000

30,00,000 30,00,000

During the year Mahadev’s drawings were Rs 30,000. Profits during 2017 is Rs
10,00,000. Calculate interest on capital @ 5% [Link] the year ending March 31, 2017.

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28. Rishi is a partner in a firm. He withdrew the following amounts during
the year ended March 31, 2018.

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.

29. The capital accounts of Moli and Golu showed balances of Rs 40,000 and Rs
20,000 as on April 01, 2016. They shared profits in the ratio of 3:2. They allowed
interest on capital @10% p.a. and interest on drawings, @ 12 p.a. Golu advanced a
loan of Rs 10,000 to the firm on August 01, 2016. During the year, Moli withdrew Rs
1,000 per month at the beginning of every month whereas Golu withdrew Rs 1,000
per month at the end of every month. Profit for the year, before the above mentioned
adjustments was Rs 20,950. Calculate interest on drawings show distribution of
profits and prepare partner’s capital accounts.

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30. Rakesh and Roshan are partners, sharing profits in the ratio of 3:2 with capitals of
Rs 40,000 and Rs 30,000, respectively. They withdrew from the firm the following
amounts, for their personal use:

Rakesh Month Rs

May 31, 2016 600

June 30, 2016 500

August 31, 2016 1,000

November 1, 2016 400

December 31, 2016 1,500

January 31, 2017 300

March 01, 2017 700

Rohan At the beginning of each month 400

Interest is to be charged @ 6% p.a. Calculate interest on drawings, assuming that book

of accounts is closed on March 31, 2017, every year.

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31. Himanshu withdraws Rs 2,500 at the end Month of each month. The
Partnership deed provides for charging the interest on drawings @ 12% p.a.
Calculate interest on Himanshu’s drawings for the year ending 31st December
2017.

32. Bharam is a partner in a firm. He withdraws Rs 3,000 at the starting of each

month for 12 months. The books of the firm close on March 31 every year. Calculate
interest on drawings if the rate of interest is 10% p.a.

33. Raj and Neeraj are partners in a firm. Their capitals as on April 01, 2017, were Rs
2,50,000 and Rs 1,50,000, respectively. They share profits equally. On July 01, 2017, 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, 2018.

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34. Amit and Bhola are partners in a firm. They share profits in the ratio of 3:2. As
per their partnership agreement, interest on drawings is to be charged @ 10% p.a.
Their drawings during 2017 were Rs 24,000 and Rs 16,000, respectively. Calculate
interest on drawings based on the assumption that the amounts were withdrawn
evenly, throughout the year.

35. 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.

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36. 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.

37. 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.

38. Amit, Sumit and Samiksha are in partnership sharing profits in the ratio of 3:2:1.
Samiksha’ share in profit has been guaranteed by Amit and Sumit to be a minimum
sum of Rs 8,000. Profits for the year ended March 31, 2017 was Rs 36,000. Divide
profit among the partners.

39. 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.

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40. 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.

41. Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is
given a guarantee that her share of profit, in any year will not be less than Rs 5,000. The
profits for the year ending March 31, 2017, amounts to Rs 35,000. Shortfall if any, in the
profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2.
Record necessary journal entry to show distribution of profit among partners.

42. 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.

43. 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 must 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.

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44. Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2:
2 : 1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than
Rs 20,000. The net profit for the year ended March 31, 2017, amounted to Rs 70,000.
Prepare Profit and Loss Appropriation Account.

45. Ram, Mohan and Sohan are partners with capitals of Rs 5,00,000, Rs 2,50,000 and
2,00,000 respectively. After providing interest on capital @ 10% p.a. the profits are
divisible as follows:

Ram 1/2, Mohan 1/3 Sohan 1/6. But Ram and Mohan have guaranteed that Sohan’s share
in the profit shall not be less than Rs 25,000, in any year. The net profit for the year ended
March 31, 2017, is Rs 2,00,000, before charging interest on capital. You are required to
show distribution of profit.

46. 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).

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47. 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).

48. The firm of Harry, Porter and Ali, who have been sharing profits in the ratio of 2:
2: 1, have existed for same years. Ali wants that he should get equal share in the profits
with Harry and Porter, and he further wishes that the change in the profit-sharing ratio
should come into effect retrospectively were for the last three year. Harry and Porter
have agreement on this account. The profits for the last three years were:

Rs

2014-15 22,000

2015-16 24,000

2016-17 29,000

Show adjustment of profits by means of a single adjustment journal entry.

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49. Mannu and Shristhi are partners in a firm sharing profit in the ratio of 3: 2. Following
is the balance sheet of the firm as on March 31, 2017.

Amount Amount

Liabilities Assets
Rs Rs

Mannu’s Capita l 30,000 Drawings

40,000
Shristhi’s Capital 10,000 Mannu 4,000

Shristhi 2,000 6,000

Other Assets 34,000

40,000 40,000

Profit for the year ended March 31, 2017, was Rs 5,000 which was divided in the agreed
ratio, but interest @ 5% p.a. on capital and @ 6% p.a. on drawings was inadvertently
enquired. Adjust interest on drawings on an average basis for 6 months. Give the
adjustment entry.

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50. On March 31, 2017, the balance in the capital accounts of Eluin, Monu and Ahmed,
after making adjustments for profits, drawing, etc; were Rs 80,000, Rs 60,000 and Rs
40,000 respectively. Subsequently, it was discovered that interest on capital and interest
on drawings had been omitted. The partners were entitled to interest on capital @ 5%
p.a. The drawings during the year were Eluin Rs 20,000; Monu, Rs 15,000 and Ahmed,
Rs 9,000. Interest on drawings chargeable to partners were Eluin Rs 500, Monu Rs 360
and Ahmed Rs 200. The net profit during the year amounted to Rs 1,20,000. The profit-
sharing ratio was 3: 2: 1. Pass necessary adjustment entries.

51. Azad and Benny are equal partners. Their capitals are Rs 40,000 and Rs 80,000,
respectively. 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. It is decided to make an adjustment
entry at the beginning of the next year. Record the necessary journal entry.

52. Mohan, Vijay and Anil are partners, the balance on their capital accounts being Rs
30,000, Rs 25,000 and Rs 20,000 respectively. In arriving at these figures, the profits for
the year ended March 31, 2017, amounting to Rupees 24,000 had been credited to
partners in the proportion in which they shared profits. During the tear their drawings
for Mohan, Vijay and Anil were Rs 5,000, Rs 4,000 and Rs 3,000, respectively.
Subsequently, the following omissions were noticed:

a. Interest on Capital, at the rate of 10% p.a., was not charged.

b. Interest on Drawings: Mohan Rs 250, Vijay Rs 200, Anil Rs 150 was not recorded
in the books.

Record necessary corrections through journal entries.

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53. Anju, Manju and Mamta are partners whose fixed capitals were Rs 10,000, Rs 8,000
and Rs 6,000, respectively. As per the partnership agreement, there is a provision for
allowing interest on capitals @ 5% p.a. but entries for the same have not been made for
the last three years. The profit-sharing ratio during there years remained as follows:

Year Anju Manju Mamta

2014 4 3 5

2015 3 2 1

2016 1 1 1

Make necessary and adjustment entry at the beginning of the fourth year i.e. Jan. 2017.

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