Profit & Loss Appropriation A/c (practice paper)
TEST PAPER-01
(Basics of Partnership)
Topic : Profit & Loss Appropriation A/c
Q.1 Where would you record “Rent paid to Partner” while preparing P/L Appropriation A/c 1
Q.2 Why don’t we show Manager’s Commission and Interest on Partner’s Loan in P/L Appropriation Account? 1
Q.3 What should we do when appropriations are more than the profits?
Q.4 What do understand by the following: 1
(a) When ‘Interest on capital is Treated as an appropriation’
(b) When “Interest on capital is Treated as a charge”
Q.5 David and John were partners in a firm sharing profits in the ratio of 4 : 1. Their capitals on 1.4.2006 were : David Rs.2,50,000 and John Rs.50,000. The partnership deed provided that David will get a commission of 10% on the net profit after allowing a salary of Rs.2,500 per month to John. The profit of the firm for the year ended 31.3.2007 was Rs.1,40,000. prepare Profit and Loss Appropriation Account for the year ended 31.3.2007. 4
Q.6 A, B and C were partners in a firm having capitals of Rs.60,000, Rs.60,000 and Rs.80,000 respectively. Their current account balances were : A Rs.10,000; B Rs.5,000 and C Rs.2,000 (Dr.). According to the partnership deed the partners were entitled to interest on capital @5% p.a. C being the working partner was also entitled to a salary of Rs.6,000 p.a. The profits were to be divided as follows:
(a) The first Rs.20,000 in proportion to their capitals
(b) Next Rs.30,000 in the ratio of 5 : 3 : 2
(c) Remaining profits to be shared equally
The firm made a profit of Rs.1,56,000 before charging any of the above items. Prepare the profit and loss appropriation account and pass the necessary Journal entry for the appropriation of profits. 6
Q Q.7 X and Y were partners in a firm sharing profits and losses in the ratio of their capitals which were Rs.5,00,000 and Rs.4,00,000 respectively. The partnership agreement provided a salary of Rs.20,000 p.a. to Y and 10% p.a. interest on partners capital. The profit of the firm for the year ended 31st March, 2008 was Rs.1,46,000. Prepare P/L Appropriation Account of X and Y for the year ended 31st March 2008. 3
5. The fixed capitals were Angad Rs.2,00,000, Fateh Rs.2,50,000 and Kothari Rs.3,00,000 respectively. The partnership deed provided for the following
:
(1) Interest on capital @6% p.a
(ii) Salary of Rs.15,000 p.a. to Kothari.
(iii)
Interest on partner’s drawings will be charged
@12% p.a.
During the year ended
31.3.2009 the firm earned a profit
of Rs.1,35,000. Angad withdrew
Rs.5,000 on 1.4.2008,
Fateh withdrew Rs.6,000
on 30.9.2008 and Kothari withdrew
Rs.7,500 on 31.12.2008.
(i)Interest
on capital @ 9% per annum and Interest
on drawings @ 6% per annum.
(ii) Salary of Rs.6,000 per month to EK. DK Withdrew Rs.25,000 ; EK withdrew Rs.15,000 during the year and interest on FK’s Drawings was Rs.1,250 on average basis. During the year ended 31st December, 2013, the firm earned a profit of Rs.1,70,000. Prepare P/L Appropriation Account. 4
Q.10 Singh and King entered into partnership on 1st April 2013 without any partnership deed. They introduced capitals of Rs.5,00,000 and Rs.3,00,000 respectively. On 31st October 2013, Singh advanced Rs.2,00,000 by way of loan to the firm without any agreement as to interest. The profit and loss account for the year ended 31.3.2014 showed a profit of Rs.4,30,000 but the Partners could not agree upon the amount of interest on loan to be charged and the basis of division of profits.
Pass a journal entry for the distribution of the profit between the partners and prepare the capital accounts of both the partners and Loan account of Singh. 4
Q. 11. Ashok and Rohit were partners in a firm sharing profits in the ratio of 5 : 3. Their fixed capitals on 1-4-2010 were : Ashok Rs.60,000 and Rohit Rs.80,000. They agreed to allow interest on capital @12% p.a. and to charge interest on drawings @15% irrespective of time period. The profit of the firm for the year ended 31-3- 2011 before all adjustments were Rs.12,600 during the year. The drawing made by Ashok and Rohit were Rs.2,000 and Rs.4,000 during the year. Prepare profit and loss appropriation account. The interest on capital will be allowed even if the firm incurs loss. 4
Q.12. 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 partnership were as follows :
(i) Singh, Gupta and Shakti will share profits in the ratio of 2 : 2 : 1.
(ii) Interest on capital will be provided @ 6% p.a.
Due to 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.
(d) Identify any two values which the firm wants to communicate to the society.
(e) Prepare Profit and Loss Appropriation Account for the year ending 31st March, 2013. 6
Accountancy Challenge
Challenge : 1
Vinod and Kumar are partners sharing profits and losses in the ratio of 3:2. Capital of Vinod is 5,00,000 and Kumar Rs. 3,00,000. As per partnership deed partners are entitled for 12% interest on capital. The profit for the year was 60,000. Show the distribution of profit.
Challenge : 2
Vinod and Kumar were partners in a firm sharing profits in the ratio of 3:2. Their fixed capitals on 1-4- 2010 were Vinod Rs.2,00,000 and Kumar Rs.4,00,000. They agreed to allow interest on capital @12% p.a. and charge on drawings @ 15% p.a. The firm earned a profit, before all above adjustments, of Rs.60,000 for the year ended 31-3-2011. The drawings of Vinod and Kumar during the year were Rs.6,000 and Rs.10,000 respectively.
Showing your calculation clearly prepare, profit and loss appropriation account of Vinod and Kumar. The interest on capital will be allowed even if the firm incurs loss.
solution
(b) When interest on capital is treated as charge it will be paid whether there is profit or loss in the business.
5 Profit to David Rs.79,200; John Rs.19,800
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